Organizational Chart
An organizational chart is a visual representation of an organization’s structure and serves primarily to simplify the complex hierarchies and relationships among the various organizational levels. The term is a combination of the words “organization” and “diagram.” The first organizational chart was created in 1855 by Daniel Craig McCallum, a Scottish railroad executive who was living and working in New York at the time.
What types of organizational charts are there?
Organizational charts are used in a wide variety of fields in practice. Most often, however, they are created for corporate or project-related management purposes. A distinction is generally made between functional (hierarchical), divisional, horizontal, and matrix organizational charts.
Functional Organizational Chart
Functional (hierarchical) organizational charts are those that describe the classic organizational structures of traditionally structured companies. In such cases, senior management is usually positioned at the very top of the organization. Below that are the respective departments, such as Purchasing, Research and Development, Marketing, Sales, and so on. The respective subdivisions are also shown under each department, enabling a visual representation of responsibilities and tasks from top to bottom.
Business Unit Organizational Chart
A business unit organizational chart (also known as a departmental organizational chart) provides a general overview of an organization’s various products or locations.
Business Unit Organizational Chart by Product Line
For a beverage manufacturer, for example, a division organizational chart could be structured into the following product lines: alcoholic beverages, non-alcoholic beverages, soft drinks, etc. Under these divisions would be the corresponding functional areas, such as Purchasing, Production, Sales, or Marketing. The company’s management oversees all of these divisions.
Business Unit Organizational Chart by Region
Such organizational charts are also frequently used to clearly illustrate a company’s regional operations. For example, in the case of an internationally active company, a geographic breakdown could be made into Europe, Asia, Africa, and North and South America.
Horizontal Organizational Chart
Organizations represented by a horizontal (flat) organizational chart are also known as lean organizations. This term is rooted in the business philosophy of “lean management” and aims to make an organization as flat as possible by, among other things, eliminating unnecessary hierarchies. The individual organizational units are to be downsized, and employees within these units are to be given more responsibility. According to this concept, organizations ultimately benefit from a more efficient and effective value chain.
Consequently, horizontal organizational charts ideally consist of only two levels. At the very top is senior management, and below them are the individual managers with their respective team members.
Matrix Organizational Chart
Matrix organizational charts typically describe more complex organizational structures in which the employees of a team are often reporting to multiple managers. In addition to the team leader, it is therefore possible that, for example, a project manager may also be assigned to oversee the employees.