Imagine a new construction crew member who was tasked with framing a section of a building. When he realized he didn’t have the right tools to get started, he bypassed his foreman and went straight to the owner to request what he needed. This mistake, stemming from not understanding the org chart, annoyed the owner and embarrassed the foreman. It also highlighted the critical need for a clear and effective org chart to make sure everyone knows the proper channels for addressing problems.
Organizational charts, or “org charts,” are the backbone of any well-structured company. They define who reports to whom, streamline communication, and make sure key performance indicators (KPIs) align across the hierarchy.
However, when org charts are done wrong, they can create chaos instead of clarity.
The Purpose of Org Charts
Org charts serve two primary purposes:
- Problem Resolution: They let your team know who they need to talk to when issues arise.
- Metric Alignment: They make sure that KPIs and scorecards at each level support those above them, creating accountability and support throughout your company.
For example, when designed correctly, org charts make sure that everyone on the crew knows to go to their foreman, not the owner, when a problem arises. Additionally, the construction crew’s metrics should roll up into the foreman’s metrics, which roll up to the Superintendent’s, all the way up to the owner’s metrics.
This alignment means everyone cares more about their numbers and are more willing to help mentor, support, and train each other.
Common Mistakes in Org Charts
It’s easy to create an org chart when you’re starting out. Your team is small and it’s very clear who reports to whom. But as time goes on and new roles are added, it can start to look like a tangled spider web.
A well-designed org chart should only have one line to each box. Multiple reporting lines create confusion. The more options people have, the harder it is to make a decision.
70 percent of business leaders would prefer to have a robot make their decisions. –The Decision Dilemma study
People are overwhelmed with options and it’s exhausting.
The bottom line: confused people don’t take action. The more options people have, the harder it is for them to make a decision. A clear, hierarchical org chart structure avoids this issue by providing a straight path for problem resolution and accountability.
Flat Organizations – Trendy or Terrible?
On the other hand, some companies are leaning toward the trendy flat org structure where roles are less defined and team members collaborate across departments. While this sounds new and exciting, the reality is it just doesn’t make sense for most blue collar businesses.
Research shows that flat organizations don’t grow. Promotion opportunities are rare. Engagement is low. The majority of the workforce does the bare minimum to get by. What people really need is clarity, predictability, and the ability to make decisions.
Basics of a Clear Org Chart
The reality is, regardless of trends, a hierarchical org chart structure is still the most productive option for businesses looking to grow. Follow these steps to design an effective org chart for your company:
- Start With a Clean Slate: Map out your organizational structure with one line from each position. Avoid dotted lines, dashes, or multiple lines to any box.
- Define Reporting Relationships: Clearly show who reports to whom to make sure every team member knows their go-to person for issues.
- Align Metrics: Make sure the KPIs for each role align with the metrics of the next level of management, up to the owner. This develops accountability throughout your company.
- Avoid Complexity: Simplify your org chart to prevent confusion and decision paralysis.
- Embrace Hierarchy: Recognize the importance of a hierarchical structure for clarity, predictability, and accountability.
Once you’ve simplified your org chart, periodically review it to adjust for any changes in roles or relationships.
Why You Need an Org Chart
A well-crafted org chart is more than just a visual representation of your company’s structure. It’s a tool for creating clarity, accountability, and efficient decision-making.
By avoiding common pitfalls, you can create an org chart that supports your company’s growth and success. Remember, the key is simplicity and alignment – when everyone’s metrics impact each other, the entire organization benefits from increased attention, support, and collaboration.
And the org chart is just the beginning. Once it’s done and your people know who to go to for answers, you’ll need accurate job descriptions for each box on the org chart. This way people know what they’re responsible for and the activities they need to complete to hit those KPIs. But’s that for another article.
