Organizational Chart (OC): Why is it important for the Small & Start-Up Organization?

When we establish an organization there are a lot of aspects that need to be considered – various business strategies, operating costs, number of employees, products/ services offered, etc. Among these various aspects one of the most important aspect to be consider is an organizational chart (OC). This is especially required when an organization is small and taking a baby-steps.

In a simpler sense, OC is nothing more than a mere graphical representation of the organizational structure. However, it’s very important for an organization to develop the proper organization chart. Organization Chart helps to provide a specific direction and specifies a clear chain of command. The benefits of the OC will be discussed later in subsequent paragraphs but before that I would like to highlight upon the organizational structure.

Organizational structure refers to the grouping and segregation of tasks/jobs within an organization so that the expected roles from the employees are clear. There are various types of organizational structure, which an organization may follow.

  • Functional Organizational Structure

The functional structure is developed on the basis of different functions that need to be performed in an organization. The OC of functional structure looks as below:


  • Divisional Organizational Structure

Division structure has multiple divisions of an organization and each division has a separate division head that has the authority to operate that division. The OC of divisional structure looks as below:


  • Matrix Organizational Structure

Matrix organizational structure is developed with the grouping of specialist from different functional areas for a specific project/s. The OC of matrix structure looks as below:


  • Network Organizational Structure

This organizational structure uses its own employees and networks of external parties to perform the tasks and achieve its objectives. The OC of network structure looks as below:


Note: Dotted lines signifies the linkage to the external parties

  • Virtual Organizational Structure

This organizational structure is based on the use of technology and no physical presence of employee is necessary. An employee may operate from anywhere to achieve the organizational objectives. This organizational structure may not have any physical attributes as other types of organizational structures.

Organizational structures like network do not have defined organizational chart and virtual organizational structure may not have any physical organizational chart as it may not have any physical presence. And, organization with matrix structures have very complex organizational charts. However, the author here have focused only on small and start-up organization and have made efforts to clarify the importance of OC in these organizations.

As mentioned before, organizational chart is a mere graphical representation of the orgnizational structure. OC is important for any and every types of organization but for small and start-up organization it has greater significance. The arguments are presented below in support of the relevance OC in small and start-up organizations.

  1. OC helps to clarifies who is responsible for whom i.e. supervisor – subordinate relationship. Imagine the organization where the clear distinction about the line of authority is not made and every employee is responsible for all the supervisors. For example: Mr. A is an HR Officer and carries out the job assigned by Mr. Z who’s his supervisor (HR Manager). At the same-time Mr. A also performs the job assigned by Mr. Y & Mr. X who are from different department. What a nightmare for Mr. A? A total hotch-potch scenario.
  2. OC specifies who does the performance appraisal for whom. In above case who will appraise Mr. A. According to a simple logic, Mr. Z should appraise him because he’s his immediate supervisor. But this means the task performed for Mr. Y & Mr. X will not be counted and Mr. A shall be demotivated. However, if there was an OC then the problem would not have arised because it would give a clear picture of who’s the supervisor of Mr. A no matter how many others assign him the tasks.
  3. OC helps to reduce dual accountability and confusion for/among employees. In the above example, Mr. A is responsible to perform job ordered by three different person (Mr. Z, Mr. Y & Mr. X). In absence of clear OC, it becomes diffcult to figure out who is the supervisor of Mr. A. However, if there was an OC it would have been easier to identify the supervisor of Mr. A and also the human resource requirement of the other two departments.
  4. OC also helps to clarify the overall organizational structure. In most of the organization they generally tend to prepare two types of OC –
    • Departmental OC – which defines on organizational structure of a particular department
    • Organization’s OC – which defines an organizational structure of an organization as a whole.
  5. OC helps to replicate whole organizational structure in a diagrammatic form and helps to understand the complex organizational structure with an ease.
  6. OC clarifies the expected roles of the employees. This is the indirect benefit of OC because as mentioned above in point number ‘c’, it helps to identify the supervisor. When the supervisor is identified it becomes easier to flow the instructions and the tasks given by the supervisor. Thus, these helps to clarify the expected roles from an employees
  7. OC builds up confidence, increases motivation and enhances performance among the employees. This is because when the expected roles are clear, the employees tend to perform well in the job and it provides a sense of accomplishment among the employees. This sense of accomplishment helps to motivate the employees to take new and greater challenges and inspire them to perform better. This ultimately leads to the enhanced performance of the employees.

OC has many benefits to the organization especially, the small and start-ups because it helps to define employee roles, keep them motivated, enhance their performance and increase the overall performance of organization because if employees do well, organizations automatically do well, but if the employees do hell then organizational do worst than the hell.