Organizational Chart

How to Create an Organizational Chart: Expert Tips

An organizational chart is a visual diagram that represents the structure of an organization, outlining the hierarchy of roles, departments, and the relationships between them. Also known as organigram, organogram, or organizational breakdown structure (OBS), it graphically displays the relation of one official to another, or of one department to another, within a company. 

This visual representation helps employees and stakeholders understand the hierarchy and chain of command within the organization.

The primary purpose of an organizational chart is to provide an easy-to-understand visualization of how authority flows within the organization, from top leadership to individual contributors. It serves as a communication tool that answers fundamental questions such as:

• Who is responsible for what?
• Who reports to whom?
• How do teams fit together within the broader organization?

Organizational charts contain several key components that work together to effectively illustrate a company’s structure:

• Boxes representing individuals or departments – Each box typically contains the name and title of the person or department, providing a clear overview of the organizational structure
• Lines indicating relationships and hierarchies – These connect the boxes, showing reporting relationships and the chain of command. Vertical lines usually represent direct reporting relationships, while horizontal lines can illustrate collaboration between roles
• Job titles clarifying roles – These provide clarity on the responsibilities associated with each position, helping employees understand their place within the hierarchy
• Additional details – Some charts include contact information, tenure, or specific responsibilities for quick reference

The usefulness of organizational charts extends to both management and employees. For management, these charts facilitate planning and decision-making processes. For employees, they clarify roles and responsibilities while demonstrating how different departments and teams interact. Furthermore, these charts are valuable for new hires who need to understand the company structure quickly.

Organizational charts can vary in scope and focus. They can be broad-based, depicting the overall company structure, or department-specific, focusing on one particular area of the organization. Most commonly, org charts follow a hierarchical model, showing management or high-ranking officials at the top and lower-level employees beneath them. However, alternative structures exist to accommodate different organizational designs.

Though the hierarchical model is most common, other types include matrix charts, flat (horizontal) charts, and divisional org charts. Each type serves different organizational needs and reflects different management philosophies. The choice of chart type depends largely on the company’s size, industry, and operational structure.

Regardless of type, organizational charts remain essential tools for visualizing bureaucracy and helping employees understand their relative position within the company. When effectively designed and regularly updated, they enhance transparency, improve communication, and provide clarity on reporting relationships throughout the organization.

Types of Organizational Charts

Organizations structure their reporting relationships in various ways to meet their strategic needs. Each type of organizational chart reflects different management philosophies and operational approaches.

Hierarchical structure

The hierarchical organizational structure resembles a pyramid with the most authority at the top (CEO or manager) and lower-level employees beneath them. This pyramid-shaped chart is the most common type, where each employee has a supervisor and clear lines of authority flow from top to bottom. 

The structure establishes a definite chain of command, showing who reports to whom throughout the organization.

The hierarchical model offers several advantages:

• Clearly defines levels of authority and responsibility
• Shows explicit reporting relationships
• Motivates employees with visible career advancement paths
• Creates departmental camaraderie and specialization

Nevertheless, this structure has limitations. It can slow innovation due to increased bureaucracy and may cause employees to prioritize departmental interests over company-wide goals. Additionally, lower-level employees might feel they have less ownership and limited opportunities to express ideas for the company.

Matrix structure

A matrix organizational chart displays a grid-like formation showing cross-functional teams formed for specific projects. In this structure, employees report to multiple managers simultaneously, typically both a functional manager and a project manager.

For instance, an engineer might belong to the engineering department while temporarily working on a project led by a project manager.

The matrix structure provides unique benefits:

• Allows supervisors to select individuals based on project needs
• Presents a more dynamic view of the organization
• Encourages employees to utilize skills in various capacities
• Facilitates cross-disciplinary collaboration

Conversely, this structure can create conflicts between department and project managers due to competing priorities. Furthermore, matrix charts tend to change more frequently than other types as projects evolve.

Flat or horizontal structure

The flat organizational structure features few or no middle management levels between executives and staff-level employees. This model is often used by startups before they grow large enough to build distinct departments, although some organizations maintain this structure intentionally to foster involvement from all employees.

Primary advantages of flat structures include:

• Greater employee responsibility and autonomy
• More open communication channels
• Improved coordination and faster implementation of new ideas

Despite these benefits, flat structures can create confusion since employees lack clear supervisors. They may also produce workers with more generalized rather than specialized skills and can become difficult to maintain as companies grow beyond startup size.

Divisional structure

In divisional organizational structures, company divisions operate like independent entities within the larger organization. Each division controls its own resources and may have its own marketing, sales, and IT teams. This approach works well for large companies, empowering divisions to make decisions without reporting to just a few executives.

Divisional structures typically take three forms:

• Market-based: Divisions separated by market, industry, or customer type
• Product-based: Divisions organized around specific product lines
• Geographic: Divisions established by regions or territories

The divisional approach helps large companies stay flexible and respond quickly to industry changes or customer needs. Moreover, it promotes independence and customized approaches. 

However, it can lead to duplicate resources, insufficient communication between headquarters and divisions, and occasionally result in internal competition.

Why Organizational Charts Matter

Organizational charts serve as vital tools that provide significant benefits beyond merely displaying company structure. Their importance lies in facilitating clear understanding and communication within an organization, making them essential for businesses of all sizes.

Fundamentally, organizational charts enhance operational efficiency by establishing transparent reporting structures. They enable employees to identify exactly whom to approach for specific problems or inquiries, subsequently reducing misunderstandings and increasing communication efficiency. 

This clarity is particularly valuable in large corporations with multiple departments, as it streamlines interdepartmental communication and speeds up decision-making processes.

For new hires, organizational charts function as invaluable onboarding tools. According to research, these visual representations help new employees quickly learn their position in a company, understand their role, and identify reporting relationships without extensive training.

This accelerates the orientation process and allows newcomers to focus on mastering their primary responsibilities rather than navigating complex organizational relationships.

From a management perspective, organizational charts serve as strategic planning instruments. They assist leaders in:

• Identifying gaps in the organizational structure
• Allocating resources more effectively
• Visualizing workloads across teams and departments
• Planning for staffing changes and restructuring

Accordingly, these charts enable executives to make more informed decisions about organizational design and resource distribution.

Organizational charts specifically contribute to improved transparency throughout the company. They illustrate how decisions flow through the organization, clarify accountability for specific functions, and demonstrate who holds responsibility for different aspects of operations. 

This transparency fosters a work culture of accountability and helps prevent tasks from being duplicated or overlooked.

As companies expand, particularly across international boundaries or diverse business segments, organizational complexity inevitably increases. Under these circumstances, organizational charts become even more crucial, providing stakeholders with a clear overview of how different components interrelate.

They help manage this complexity by visualizing relationships between departments and identifying potential bottlenecks before they become problematic.

Essentially, organizational charts support career development and succession planning. According to a Mercer survey, 78% of respondents indicated they would remain with their current employer if they could see clear growth opportunities and career paths. By displaying potential advancement routes, charts motivate employees who wish to progress within the organization.

During periods of growth or reorganization, organizational charts function as essential planning tools. They allow leadership teams to visualize current structures and map future changes with minimal disruption. This capability is particularly important for accommodating business growth across various stages of organizational evolution.

Through establishing clear channels for communication and accountability, properly designed organizational charts create transparency that ultimately helps employees understand how their individual contributions align with broader company objectives. This alignment of efforts in a unified direction fosters greater engagement and organizational cohesion.

How to Create an Organizational Chart Step-by-Step

Creating an effective organizational chart requires a systematic approach. Following these eight steps ensures that your chart accurately represents your company’s structure and serves its intended purpose.

1. Define the purpose of the chart

The initial step involves determining why you’re creating the chart and who will use it. Consider whether the chart will function as an employee directory, showcase high-level structure, or serve as a reference for external stakeholders. This clarification helps establish the appropriate scope and detail level for your organizational chart.

2. Collect employee and role data

Once the purpose is established, gather accurate information about positions, reporting relationships, and departmental structures. Work with your HR department to collect current data on all positions, including job titles and team assignments. Verify information with department heads to ensure both formal and informal reporting relationships are captured correctly.

3. Choose the right organizational structure

Based on your company’s needs, select the most appropriate organizational structure type. Consider whether a hierarchical, matrix, flat, or divisional structure best represents your organization’s actual functioning. The selected structure should reflect how decisions flow through your company and how teams interact in practice.

4. Select a chart format or template

Numerous tools exist for creating organizational charts, ranging from specialized software to templates in familiar programs. Options include:

• Microsoft programs (Excel, PowerPoint, Word) with SmartArt functionality
• Google Sheets with chart insertion capabilities
• Dedicated org chart software
• Online diagramming tools like LucidChart
• Collaborative platforms with chart-making features

Select a format that allows for easy updates and sharing across your organization.

5. Arrange roles and reporting lines

Start building your chart from the top position (typically CEO or President) and work downward. Create boxes representing positions and connect them with lines showing reporting relationships. For hierarchical charts, place higher-level positions above those reporting to them. For matrix organizations, illustrate dual reporting relationships with appropriate connecting lines.

6. Add names, titles, and departments

Populate each position box with relevant information, which typically includes:

• Employee name
• Job title
• Department
• Contact information (if appropriate)
• Brief role description (depending on chart purpose)

Maintain visual consistency by using the same format for similar positions throughout the chart.

7. Review and revise for accuracy

Prior to finalizing your chart, have stakeholders review it for accuracy and completeness. Make necessary corrections based on feedback to ensure the chart correctly reflects your current structure. This verification process helps prevent misunderstandings about reporting relationships or responsibilities.

8. Share and update regularly

Upon completion, share the organizational chart through appropriate channels such as your company intranet, knowledge sharing platform, or employee handbook. Importantly, establish a regular update schedule as organizational charts quickly become outdated with personnel changes. Consider designating an “owner” (typically someone in HR) responsible for maintaining the chart’s accuracy.

An organizational chart serves as a valuable reference only when it contains current, correct information. As employees join or leave the organization and structures evolve, updating the chart ensures it remains a reliable tool for understanding company hierarchy and relationships.

Tools and Templates to Build Your Org Chart

Numerous specialized software options and templates exist to simplify the process of creating organizational charts. These tools vary in complexity, features, and integration capabilities, catering to different organizational needs.

Microsoft Visio stands out as a comprehensive solution with dozens of ready-to-use templates and thousands of customizable shapes that make creating org charts straightforward and engaging. Visio offers specialized features like the Organization Chart Wizard dialog box that automatically connects shapes and creates hierarchies. For Microsoft 365 users, the Visio Data Visualizer add-in for Excel allows automatic diagram generation from spreadsheet data, enabling seamless synchronization between the chart and its data source.

SmartDraw provides an intuitive drag-and-drop interface where the software automatically aligns and arranges elements as you add, move, or remove employees. Notably, SmartDraw can generate organizational charts directly from data sources including Excel, Workday, BambooHR, or Microsoft Entra ID, eliminating manual drawing altogether. The platform also supports breaking large organizations into smaller sub-charts with just one click, making complex structures more manageable.

Lucidchart offers similar data import capabilities, allowing users to upload employee information from CSV files, Excel documents, or Google Sheets to auto-generate diagrams. With over 1,000 templates available, users can either adopt existing designs or customize them according to specific requirements.

Canva presents a more design-focused approach with editable organization chart templates that help assign roles, communicate structure, and streamline reporting. These templates range from simple business organization charts with a few boxes to complex hierarchical structures with detailed descriptions. Canva’s intuitive interface enables customization of colors, fonts, and the addition of photos or vectors to match company branding.

When selecting an org chart tool, consider these essential features:

• Data integration capabilities for automatic chart generation
• Collaboration options for team input and review
• Export and sharing functionalities across platforms
• Template variety to match organizational structure
• Customization options for branding consistency
• Update and maintenance ease for long-term utility

Many general-purpose office applications like Microsoft Office (Word, PowerPoint, Excel) offer built-in SmartArt graphics for creating basic organizational charts. This functionality allows users to select hierarchical layouts such as “Organization Chart” or “Picture Organization Chart” without requiring specialized software.

Presently, most modern organizational chart tools offer cloud-based collaboration, enabling teams to work on charts simultaneously and share them easily across the organization. This capability is particularly valuable during restructuring processes or for teams working remotely.

Common Mistakes to Avoid When Creating an Org Chart

Many executives invest considerable resources in restructuring their companies only to be disappointed by the results. Effective organizational charts avoid common pitfalls that can undermine their utility.

Overcomplicating the structure

Chart complexity frequently becomes counterproductive. Organizations sometimes create excessively elaborate charts with too many sub-layers or cryptic code names for teams, making them confusing rather than clarifying. Inconsistent information presentation causes further complications, with some boxes containing sparse details while others overflow with information. 

The fundamental mistake often occurs when executives begin the restructuring process by drawing organizational charts before articulating the work that needs to be done. Instead, the process should start by identifying key activities the organization must perform, then determining relevant dimensions for arranging teams.

Using outdated information

Organizational charts rapidly become obsolete without regular maintenance. Many companies treat their charts as static documents, updating them only annually, rendering them effectively outdated within months. This problem persists especially in companies with high turnover rates. 

Furthermore, traditional charts fail to demonstrate how authority is exercised internally or how work happens in practice. Organizations require charts that update immediately as personnel changes occur, with easy accessibility for all employees.

Ignoring informal relationships

Much of the real work in companies happens through informal networks that cut across functions and divisions. Conventional org charts don’t account for these crucial informal relationships, such as social links and committee memberships. 

Taking the chart at face value leads to ineffective decisions around work allocation and responsibilities. By focusing exclusively on formal reporting structures, companies miss understanding actual communication patterns and how teams genuinely interact. Learning to map these social networks helps managers harness the organization’s real power.

Not planning for updates

Without a dedicated owner responsible for maintaining the chart, shared responsibility often means zero responsibility. Many HR professionals struggle with constantly working on documents requiring perpetual updates. Establishing a formal plan for communicating changes as they occur prevents surprises or confusion about responsibilities during transitions. Without such planning, companies risk losing talented individuals who feel uncertain about their future within the organization. In dynamic business environments, multi-dimensional charts that accurately represent cross-functional relationships become essential.

By avoiding these common mistakes, organizations can develop charts that genuinely reflect their structure and facilitate effective communication.

Key Takeaways

Creating an effective organizational chart requires strategic planning and ongoing maintenance to truly serve your organization’s communication and operational needs.

• Start with purpose: Define why you’re creating the chart and who will use it before collecting data or choosing formats
• Choose structure wisely: Select hierarchical, matrix, flat, or divisional formats based on how your company actually operates, not just formal titles
• Keep it current: Establish a regular update schedule with a designated owner to prevent charts from becoming outdated within months
• Avoid overcomplication: Focus on clarity over complexity—too many layers or inconsistent information presentation defeats the chart’s purpose
• Map real relationships: Include informal networks and cross-functional connections that reflect how work actually gets done in your organization

When done correctly, organizational charts become powerful tools that enhance transparency, streamline communication, and help employees understand their role within the broader company structure. The key is treating them as living documents that evolve with your organization rather than static displays of hierarchy.

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