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Creating an organizational structure is critical for every business. This is not just a task for large establishments. Even small companies and start-ups benefit from building a functional structure for their business.
A company’s structure is usually visualized through an organizational flowchart. However, if you are not familiar with designing an organizational chart, it can be a challenge.
In this post, we will explain what an organizational structure is and share organizational chart templates that you can customize for your business.
Start building your organizational structure with Venngage’s Organizational Chart Maker. Choose a template for free and visualize your business in minutes.
Click to jump ahead:
- What is an organizational structure?
- What are the key elements of organizational flowcharts?
- 9 common types of organizational structure
- How do you choose the best organizational structure for your business?
- What is a modern organizational structure?
- How to create organizational charts with Venngage
What is an organizational structure?
An organizational structure outlines how activities are directed in a company. This helps provide a clearer picture of how the business can complete tasks to achieve its goals.
When visualizing the entire organization, it is important to note that the organizational structure must include the roles and responsibilities of all employees, managers, and executive teams.
The structure should allow everyone to identify reporting relationships between employees and managers, and see how the information flows among different levels, like in this example.
This organizational chart visualizes the chain of command. You can see who leads the entire company, the different functions of managers, and lower-level employees.
This allows people to understand the roles of each person, which is crucial for faster decision-making. As the company grows, the organizational structure and chart will adapt to include new roles.
What are the key elements of organizational flowcharts?
There are a few common elements that appear in all organizational flowcharts. When you visualize your organizational structure, whether it is to include project managers or a marketing team, these are the sections you must include.
Departmentalization
Departmentalization is the way an organization arranges its teams according to their functions. It is often categorized based on the required performance and deliverables from the team members of multiple departments, like in this example.
In other scenarios, departments can be divided based on geographic areas.
Chain of command
Businesses usually have several supervisors and managers. Without a clear-cut organizational structure, employees will not know whom to report to. That is why the chain of command must be obvious in organizational charts.
Employees need to know who their immediate supervisor is, and how they can raise their concerns or get information from.
The organizational chart below shows a functional org structure. All the vice presidents report directly to the president, while the managers report directly to their respective VPs.
Span of control
This indicates the number of employees that each manager should supervise. There is no hard and fast rule for this, but typically, a manager should handle between three to 15 people.
But it’s not just the headcount that matters when identifying the span of control. The workload and business goals should be factors, as well.
In this organizational chart example, each VP runs a team of two, with a manager and an assistant manager. As companies grow, they can expand the chart to add support staff and product line managers.
Related: Creating an Organizational Chart for a Small Business
Centralization and decentralization
Centralization and decentralization are related to the decision-making processes of businesses.
Traditional organizations use a centralized structure where only C-level executives make business decisions. This leaves little to no room for middle managers and lower-level employees to share their ideas.
Today, many companies follow a decentralized system, where all managers share their inputs and make decisions for their departments. However, for company-wide decisions, C-suite executives still have the final say.
Related: 11 Types of Charts and How Businesses Use Them
9 common types of organizational structure
There are different types of organizational structures that suit a variety of businesses. Some are more suitable for a flat organization structure, for businesses with multiple departments, or for small businesses.
Hierarchical
This is the most common type of organizational structure, where employees are grouped together under centralized leadership. These org structures usually take the form of a pyramid to visualize multiple levels of authority.
Divisional
A divisional structure is often used by large companies that divide teams based on services, products, and geographic areas. The structure allows each separate department to have its own leadership team and resources.
Line
With a line structure, the authority flows from top to bottom. It is considered one of the simplest types of organizational structure. The departments are usually overseen by a general manager.
Functional
An organizational chart based on functions focuses on the specialties of each department. The functional structure groups different departments according to their tasks., such as a marketing team, finance, human resources department, or sales team.
Here’s a simple template that outlines this type of organizational structure. You can add functional managers
Process-based
When designing a process-based structure, one must work around the processes in the company and how employees perform and interact with one another.
Instead of visualizing a chart from top to bottom, a process-based structure works from left to right. This helps make the organization more linear and efficient.
Team-based
This is a flexible org structure where employees are grouped together to form specific tasks. Employees are allowed to move from one team to another once they have completed a project.
The team structure encourages cooperation and collaboration among members of various departments under a project manager. Plus, it gives employees the opportunity to improve their skills.
Flat
The flat structure is also referred to as a horizontal structure because the middle management is removed. A small business with a lower headcount will usually adopt this organizational structure.
This type of internal structure gives employees a lot of autonomy to make their own decisions, allowing them to be analytical and responsible for their actions. However, there is generally little room for growth in a flat organization.
Matrix
For a matrix structure, employees with similar skills are grouped together. They can report to different managers but reporting relationships depend on the type of company.
The matrix organizational structure is used by big corporations. It encourages sharing of skills and knowledge to achieve business goals.
Circular
Lastly, the circular organizational structure positions leaders in the inner rings of the corporate circle. On the other hand, the employees are on the outer rings.
In most organizational structures, different departments work independently. In circular organizational structures, the objective is to remove this type of separation so employees and leaders can feel part of the same whole.
How do you choose the best organizational structure for your business?
The sheer number of organizational structures available to businesses can feel overwhelming.
The best way to decide on the right org structure for your own company is to look at a few aspects of your organizational behavior.
Think about your strategic needs, your current employees, new employees you might hire, business technology, and future business goals.
Choose a more rigid and straightforward structure if your products and services follow a strict process. It’s also recommended for large corporations where several managers and supervisors are assigned to ensure everyone is working on their tasks. Here’s one you can use right now.
On the other hand, circular structures are best for industries where changes could happen overnight. These are industries that need to adapt their change management strategy quickly. Think advertising companies or consulting firms where tasks differ depending on the client.
Since the organizational structures for this type of environment are more relaxed, employees can pitch fresh ideas, which help create better proposals for your clients.
What is a modern organizational structure?
A modern organizational structure does not support a hierarchy. These new divisional structures remove the boundaries between departments so everyone can work together to achieve business objectives.
This is the kind of structure that is exemplified in Netflix culture, as you can see in the chart below.
While this encourages open communication and sharing of skills, it does have its own disadvantages. Employees can become confused about whom to report to directly for internal issues or concerns.
Despite this, modern organizational structures empower employees at all levels, fostering an environment of learning and growth that removes divisions based on status.
How to create organizational charts with Venngage
What makes an effective organizational chart? It should be an accurate reflection of your company. The chart should also have room to expand as your company grows.
But creating an organizational chart from scratch can be time-consuming when you have other responsibilities.
It’s best to use editable templates instead. Venngage has a library of organizational chart templates that will suit any type of organizational structure.
Choose a template and sign up for free to start creating. Our smart templates make it easy to add or remove sections of the chart. Click on the ‘+’ or ‘-‘ button and the node gets duplicated.
When you add text, images, or icons, the nodes automatically resize, so you can design faster. Once you’re done, you can share the chart online or on social media.
Unlock more features with a Venngage business account. Access real-time collaboration to invite team members and share instant feedback.
You also get priority support with Venngage for business, plus download options. Download in a variety of formats including PNG, PNG HD, PDF, Interactive PDF, and even PowerPoint presentation.
In conclusion: visualize your organizational structure according to your business needs, now and in the future
Now you know the organizational structure that will best suit your company and your growth plan. This will help your employees stay aligned, understand who they need to report to, and help your company handle change management processes.
You can also visualize organizational structures using chart templates from Venngage. With a simple yet smart editor, you can easily design charts that your teams can follow and will be an ideal addition to a new employee’s onboarding document.