5 Compelling Ways a Good Org Chart Helps Your Small Business

The traditional org chart has been a corporate staple for over a century. Yet business structures and management practices have changed dramatically. 

Companies with a flat hierarchy and cross-trained employees that move between projects may think the org chart is obsolete. 

Does an org chart still have value for modern small businesses that don’t have a traditional hierarchy?

We would argue that all companies–even those with a horizontal structure–need a hierarchical organizational chart. Certainly, it’s a foundational document from which all processes stem. 

5 Benefits of a Small Business Organizational Chart

Keep in mind that you need the right org chart for your company. There are a plethora of diagrams and templates online for all types of organizational structures and supervisory relationships.

Equally important is keeping it current, because it should be a dynamic, living document–regardless of the level of complexity.

Now, let’s discuss the benefits of small business organizational charts:

1. Each employee can see their role in the context of the entire company

Picture a newly hired employee attending her first project meeting. We’ll call her Kim. Though she met her supervisor during employee onboarding, she hasn’t yet met everyone on her team nor anyone outside of the team.

During the meeting, her colleagues say things like. “I talked to Cathy about X. They are waiting for Kevin to do Y at which point Ruth will approve Z.” 

Of course, Kim has a lot of questions. Who are these people? Do they work in my department? What are their positions?

Did you have a similar experience when you started your job?

An Organizational Chart has a Goldmine of Information

Imagine if Kim could look at a visual diagram in the company HR system and quickly see each name and job title along with reporting relationships. She sees that Cathy heads the department of which Kim’s team is one of five. Kevin is a contractor whose agency is handling part of the project and Ruth is the project manager.

Some companies include contact information on the org chart. That way, if an employee consults it to learn the reporting structure, they have the details to communicate with the appropriate person.

A new employee who knows where they fit in the organization and the chain of command can focus on learning their role. One who has to search for basics like contact information can quickly lose enthusiasm at a critical time. 

Furthermore, an organization chart isn’t just for new hires. A chart that has a function that shows date of hire and promotion history is especially important. If employees can see their colleagues progressing in their careers, they are more likely to believe they can progress as well. Lack of advancement opportunities is a common reason employees quit. If your business owner makes talent development a priority, an org chart can showcase this for current employees. In this way, it can entice good employees to stick around.

2. You can make quicker decisions about allocating labor resources 

Every piece of data you track is used in the context of the business structure. Therefore, an org chart is the foundation of data driven decision making. This is true for small business owners, Human Resources professionals and hiring teams.

Here is an example of using HR metrics from a Swipeclock article on employee reports and HR analytics:

Suppose you discover that 60% of overtime occurs with one manager. Now it’s time to dig into the data and figure out why. Perhaps the production goals are unrealistic. Maybe the team is understaffed. Or perhaps the manager simply doesn’t know how to build shift schedules.

To solve the problem, you need context. What team does the manager lead? How many staff members are on the team? What are the specific functions of each team member? Does the team include full-time employees, part-time employees, contractors, interns, or temps?

You get the idea. By all means, the company organizational chart is the first place to start when using employee reports and HR analytics.

3. It helps prevent silos and duplicated work

A silo is a subset of data or processes that exist within one functional area or system. Tearing down silos is the low-hanging fruit when it comes to improving efficiency. Silos are absurdly inefficient and opaque, and thereby stifle both innovation and morale.

You can’t defeat an enemy you don’t understand. To break down silos, start with your org chart. Scrutinize the processes and functions owned by each team and department. In companies with a common structure, they may be overlap between HR and Finance, Operations and IT, and Sales and Marketing.

4. It improves communication and collaboration (especially for distributed teams)

Teams that are no longer in the same physical location can struggle to collaborate effectively. Resilient companies have adopted smart tech and created new processes to collaborate during pandemic-induced disruption. A digital org chart that employees and department managers can access 24/7 is indispensable, especially for companies with virtual teams and asynchronous work.

“An organizational structure is the method that an organization employs to delineate lines of communication, policies, authority and responsibilities. It determines the extent and nature of how leadership is disseminated throughout the organization as well as the method by which information flows.” Colette L. Meehan, “Flat vs. Hierarchical Organizational Structure,” Chron

5. It helps the company hire and develop talent

Talent management includes recruiting, hiring, onboarding, learning and development, and succession planning. Creating a hiring plan, careers path program, and succession strategy all starts with a highly-detailed functional structure. After all, if you don’t know where you are right now, how can you plan for the future?

WorkforceHub now has an org chart tool!

Now that we’ve made the case for small business org charts, we are excited to announce that our WorkforceHub HR system now has an organizational chart tool! You don’t need separate org chart software when it’s included in your HRMS. To see the new feature in action, schedule a demo at Swipeclock WorkforceHub.

Note: You can read about the first known organizational chart in this fascinating article by Caitlin Rosenthal in the McKinsey Quarterly: “Big Data in the Age of the Telegraph”.