Organizational Structure
Read each of the four sections of this chapter on organizational structure. Having a basic understanding of organizational design will help you strategize risk management, project initiation, leadership, and more. What is the most important aspect of understanding organizational design you would take away from this section? Why?
The Organizational Chart
An organization chart is a diagram that illustrates the structure of an organization.
Learning Objectives
Compare the various types of organization charts that describe company structuresKey Takeaways
Key Points
- Organization charts are a vital tool of management and can be classified into three broad categories: hierarchical, matrix, and flat (or horizontal).
- Organization charts illustrate the structure of an organization, the relationships and relative ranks of its business units/divisions, and the positions or roles assigned to each unit/division.
- Before working with an organization, employees should procure a copy of its organizational chart. A new employee or manager can then understand how authority is distributed within the organization and with whom to consult about various concerns.
Key Terms
- decentralized: Dispersed rather than concentrated in a single, central location or authority.
The Purpose of Organization Charts
An organization chart (sometimes called an organizational chart, an org chart, or an organogram) is a diagram that illustrates the structure of an organization, the relationships and relative ranks of its business units/divisions, and the positions or roles assigned to each unit/division.Examples of such roles include managers of various departments, subordinates within these departments, directors, and chief executive officers. When an organization chart grows too large, it can be split into smaller charts that show only individual departments within the organization.
Prior to applying for a job or beginning work with an organization, a prospective employee should procure a copy of the organization chart. New employees or managers can then know with whom to consult about particular issues, as well as understand the distribution of authority within the company. The org chart can also provide insight into the broader strategy of the company - such as the degree of innovation versus process control being pursued, the flexibility of project management, the degree of autonomy, and the broader company culture.
The different types of organization charts include hierarchical, matrix,
and flat (also known as horizontal). These are described briefly below.
Hierarchical Organization Charts
A hierarchical organization is an organizational structure with several reporting layers. Every entity within the organization - except for the owners - is subordinate and reports to a higher level entity.Matrix Organization Charts
A matrix organizational chart displays how people with similar skills are pooled together for work assignments.
Matrix organizational chart:
In a matrix structure, the organization is grouped by both product and
function. Product lines are managed horizontally and functions are
managed vertically. This means that each function - e.g., research,
production, sales, and finance - has separate internal divisions for each
product.