Any business larger than a partnership has some sort of organizational structure. An organizational chart is a graphical illustration of the formal chains of command within a company. Organizational charts can be a useful means of outlining some aspects of how an organization works. However, an organizational chart is not enough to fully describe how things actually get done within the company.
Definition
The organizational chart shows the official job title in relationship to job titles on the same hierarchical level to superiors and to positions that report to that job title. There are three types of organizational charts: hierarchical, matrix and flat. Hierarchical charts are the most common and show several layers of command. Flat organizational charts show only a few layers of command, with most staff members considered to be equals. Matrix organizational charts are a hybrid, with managers on the same hierarchical level listed horizontally on the chart, while staff members who report to each manager are listed vertically underneath the manager's name.
Advantages
An organizational chart provides an efficient, concise means to incorporate and represent information about the formal organization of a company for both insiders and outsiders. Many large businesses develop elaborate organizational charts to illustrate and synthesize a large amount of information in a visual picture, which is often much easier to comprehend than lengthy lists of names and numbers. Organizational charts are also useful for planning company strategy, especially budgeting and workforce modeling.
Disadvantages
Organizational charts are limited by their very conciseness -- they only show what they show. Organizational charts omit important aspects of how a company works, such as whether the organizational style of a company is democratic or more "top-down" oriented. Organizational charts also do not supply details of the duties of each staff member or hierarchical level of a company. Especially with large companies or companies with frequent turnover, organizational charts quickly become out-of-date.
Organizational Chart vs Work Process
Knowledge of both the organizational chart and the work process are important aspects of understanding the structure and functioning of a company. An organizational chart shows the formal structure of an organization, which often differs greatly from how a company actually works. Nothing in an organizational chart shows what Stephen Baker of "Bloomberg Businessweek" describes as "those pathways where the grass has been worn away," that is, how things actually get done in a company. The work process of a company often works horizontally through departments by means of formal and informal alliances, rather than by top-down commands.
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