Business Organization Chart: What Is It and Why Is It Important?

When conveying information to another person, we see to it that we communicate it in a way that is easy to understand on the part of the recipient. Also, the key to a smooth exchange of information is always concision. Beating around the bush will never be an option when it comes to communication. That is why it is important for us to get straight to the point, regardless of who we are talking to. Aside from words, phrases, and sentences, though, one way to communicate effectively is through visual representations of information. Noting that around 65% of humans are visual learners, it is safe to say that diagrams, charts, and graphs help one convey facts and data more effectively.

One example of information that an organization can make a graphical representation of is the internal structure of a company. We refer to this type of graph as the business organization chart. This particular diagram helps govern the workflow and business process of a company. Moreover, it specifies the roles and responsibilities of each individual who works for the entity. It also indicates the reporting relationship between the employees and the management. Without a business organization chart, it would be hard for a company to have an efficient workforce due to the absence of a clear understanding of the responsibilities they have to handle. Another importance of this type of diagram is that it establishes teamwork among the employees and across various teams.


Levels of Corporate Hierarchy

In every organization, there is always one person who assumes a higher position than the other. And what would a company be without both the employers and employees, right? Hierarchy is important in organizations, especially in companies. Also, a strong organizational structure is an imperative element that leads to the success of any business. It illustrates the chain of command, and above all, establishes internal control within an organization. Listed below are the main levels of a corporate hierarchy.

Apex Level

Also known as the top-level management, this level consists of the executives or the leaders of the organization who are primarily responsible for decision-making and business planning. Those who belong in this level are the following: Chief Executive Officer (CEO), Chief Financial Officer (CFO), the President, the Vice President, and the Board of Directors. These individuals make decisions and plan out strategies that will serve as a guide to accomplish the entity’s unified goal. However, unlike those people at the managerial level, managing the company’s activities on a day-to-day basis is not part of a top manager’s obligations. Instead, they conceptualize, set goals, and make plans for a business organization.

Middle Level

The people involved in the middle level are the General Manager, Regional Manager, Divisional Manager, and Branch Manager. The middle management serves as the link between the managerial level and the apex level. Aside from that, one of the most crucial roles they have to handle is carrying out various tasks to achieve the corporate goals set by the top management. And this includes delegating duties to the company’s various departments as well as leading the first-line managers.

Managerial Level

Also referred to as first-level or first-line management, part of the managerial level’s duty is to oversee the productivity and efficiency of the workforce on a daily basis. The people on this level include supervisors, department managers, store managers, and foremen. In a company setting, the performance of the employees will reflect the leadership of their respective heads since they are the ones who usually interact with the workers. Although they are on the lower level of the hierarchical structure, these professionals play a significant role in the success of a business since they are directly involved with how the workforce performs their duties.

Organizational Chart and Its Structures

While we mostly picture out organizational charts as a top-down structure, there are actually different types of organizational models that serve different purposes to various entities. Some types of organizational structures include hierarchical, matrix, and horizontal. In this section, we will walk you through the different structures mentioned beforehand.

Hierarchical Structure: Of all the other types of organizational charts, the hierarchical structure is the most common. This model presents the internal chain of command of a particular organization, which begins with the apex level down to the managerial level and the employees. In this type of structure, each employee belongs to a specific group under one supervisor. Note that an employee’s function, geography or location, and products they are responsible for can affect their classification.Matrix Structure: This type of organizational structure provides a visualization of cross-functional groups within the organization. It means that in a particular organization, the members whose skills are similar and relevant to the work assignment at hand are grouped to complete a specific task. As a result, they get to report to more than one manager. For the graphical representation of this structure, solid dots represent a direct relationship between the workers and the project manager, while the dotted ones represent an indirect relationship. Moreover, this also has a grid-like structure for a more comprehensible visualization of dual relationships.Horizontal Structure: The horizontal structure works best for start-up companies or small businesses since there are only a few people involved in such arrangements. Furthermore, the middle management is not a part of the horizontal or flat structure—enabling the workforce and the higher-ups to collaborate and brainstorm for the success of the business. In this arrangement, the employees still have to report to their managers and those on the apex level. However, both parties share the responsibility of decision making and planning for the corporate entity.

How to Illustrate a Business Organizational Structure

As of 2018, data from Statista revealed that Walmart holds the largest number of employees all over the world. With over 2 million employees, it was considered as the largest company in the world based on the total number of workforce. No matter how big or small your business is, bear in mind that a strong organizational structure is crucial in achieving success. Now, if you’ve already established a definite structure for your organization, it is time to illustrate your business’ organizational structure. Follow these steps provided below.

Step 1: Know What Information to Collect

Before creating any type of chart, one needs to have a complete list of data or information to incorporate in its design. For this reason, you should know the essential details your business organization chart should reflect. This includes the names of those who work in the company, each of their job titles, and the departments your organization has. Make sure that the information you gather is correct and complete—from the apex level to the entry-level employees.

Step 2: Classify

Now that you have the details you need, the next thing you will do is to classify these employees in accordance with your company’s current needs. As previously mentioned, you can categorize them based on the similarity of their duties, location, or the products they manufacture. It is crucial to group these employees first before creating the chart so that you won’t have a hard time illustrating the relationships and internal chain of command in your business.

Step 3: Focus on the Duties

After classifying the employees, you can already start your chart-making process. In doing so, it would be of great help if you highlight the responsibilities and job descriptions or titles of every individual instead of their names. You have to turn your focus on the duties of each individual within the company. This means that it is not necessary to put an emphasis on their names on the chart, as long as it indicates the job titles, departments, and levels.

Step 4: Get Some Help

The process will be less of a hassle if you download one of the templates and sample documents provided in this article. In making use of an organizational chart template, you won’t have to start from scratch in designing the diagram. All you have to do is choose the template that would best suit your preferences, insert necessary information, and you’re good to go.

Step 5: Disseminate

Presuming that you have accomplished steps one to four, the last thing you need to do is to make sure that everyone in your organization knows about its internal structure. That is why you have to disseminate the information not just to the entry-level employees but also to the management. In doing so, they will know who they will report to, which will ultimately help regulate the workflow in your business.


What is the best organizational structure for a small business?

Small businesses don’t usually include hundreds or thousands of employees. For this reason, their organizational structure need not be comprehensive. It would be an advantage for small businesses to implement a horizontal organizational structure. This type of arrangement motivates teamwork amongst the employees and the management to achieve the organization’s goal efficiently. It also enhances the workplace’s culture, which is one of the factors that could increase the productivity of employees. However, as your business grows over time, there may be a need for you to make changes in your organizational structure for it to remain effective.

What are the types of business structures?

The most common types of business structures include corporations, non-profits, partnerships, and sole proprietorship. The structure of a particular business determines its workflow, the delegation of tasks, coordination, and supervision that will eventually lead to the accomplishment of the entity’s goal.

Why is it important to recognize expansion opportunities?

One factor professionals look into when evaluating the success of a business is how effective it is in increasing its revenue. And when your business has accomplished this type of success, it will open doors to new opportunities like expansion. It is important to recognize expansion opportunities because it gives an avenue for your business to provide new products or services that would draw your customer’s attention. Aside from that, you can also cater to more customers, not just in the place where your business currently operates.

A definite plan sets the path that leads to the attainment of the company’s goal, and a collaborative workforce fuels an entity’s success. Running a business is not a one-man responsibility; it calls for synergy and cooperation between the employees and the management. While it is true that an efficient workforce is the backbone of a company’s success, we could not deny that without proper guidance and planning, the business might drastically flop. That is why an organization needs to have a strong structure above all else.