Every employee manual I've seen contains an organizational chart that shows who is in charge and who reports to whom. Usually, the names of executive employees and managers are in boxes with connectors cascading down to the front lines of the organization.
Many of those charts are out of date.There may be names that have changed or reporting lines that are no longer relevant. There could even be entire departments that have been removed or added.
The problem with these charts is that they are trying to capture the wrong information and are not being used correctly. Here are six things that I focus on when coaching leadership teams on creating organizational charts in order to make them a useful and productive tool for everyone in the company.
1. Focus on functions.
The main purpose of an organizational chart is to show the functional divisions of a company and how they work together. Your organizational chart is a map for how to navigate your business. A good chart will tell employees who needs to be aware of specific issues and information.
At a basic level, a good chart shows the vertical divisions between departmental functions and horizontal levels of reporting and management structure. An organizational chart will clarify questions like "is shipping part of operations or customer service?" and "do the software developers report to head of product or head of technology?"
Done well, a chart should clearly indicate who is on the executive team, who the middle managers are, and who is handling the front line execution.
2. Ditch the names.
I always suggest to erase all of the names on the chart. It is more important to see the functional roles and how they report and relate to one another. Names change quickly, but roles do not.
If you prefer to use names, make a separate table listing names and contact information by role or put the name in small print under the functional role. I suggest you include a phone number or email and the date they took on the role. Pro tip: it is great to see a history of the roles a person has filled and when they began each.
3. Support the business.
A well-designed organization and well-written organizational chart should show how the employees support the business operations. The departments and role names should relate to the nature of the business and operational model.
For example, a manufacturer will have departments and roles in supply management, manufacturing, facilities, and shipping. A technology SAS company will have marketing, product design, software development, and dev-ops. Don't just copy a generic organizational chart from a textbook. It is important to design one that truly supports your business model and operations.
4. Indicate performance metrics.
I like to add performance metrics to each of the key roles in an organizational chart. I look at one to three of the core measures of success and suggest one leading indicator and one lagging indicator. The leading indicator measures the activities and tasks and the lagging indicator measures the outputs and outcomes.
For example, for a Director of Sales, I will list metrics such as pitch meetings or proposals for leading indicators, and metrics such as conversion rates and closed sales dollars per week as indicators of output.
5. Align your core processes.
In addition to functional divisions between departments, you can also map out your core processes across the horizontal access and indicate who is accountable and involved in each process. The goal here is to recognize that some processes cut across the functional division of the company and someone needs to be responsible for aligning and coordinating activities to ensure the process is successful.
Safety is a great example of a cross-cutting process. HR must ensure people are trained properly, facilities need to make sure that the physical environment is safe, and operations must ensure that safety measures are backed into the standard operating procedures.
6. Define your terms.
Your organizational chart is a map of your business. It is a tool that any employee can use to learn who to go to with questions, key information, and concerns. In order to do this well, people need to use the same language to refer to roles and departments.
For example, if some people call it lead generation and others call it marketing it will get confusing. Also, you want to make sure that your titles are consistent between departments. Don't label someone as director of product development and call them sales director in another department.
These suggestions will help make your organizational chart a living, breathing tool for helping people understand and manage the company structure. Most importantly, keep your organizational chart updated frequently and make sure everyone has access to the most current version.