Lee Rust, Owner, Florida Corporate Finance
If you don't have an organization chart for your company, you should. In fact, you should have two, one showing the way the organization functions today and another showing its lines of authority and responsibility as they might look a year or two from now.
You don't need some fancy computer program to draw those charts. When I'm compiling organization charts for
my clients, I just use an Excel spreadsheet to draw the blocks for each position and the lines between the blocks. I also shade all of those blocks representing positions which are vacant. The charts, particularly the future projection, can then be used for manpower planning, setting hiring priorities, and employee compensation budgeting.
I also put a legend on each chart saying, "Note: Vertical positions on the chart do not indicate levels of responsibility:' Many people think that the higher you are on the chart, the higher is your position within the company. While virtually all organization charts start with the Board of Directors or President at the top, farther down on the chart, convenience and the ability to draw the chart with reasonable dimensions might dictate different vertical placement for positions with similar responsibilities. In addition, a lower level employee in one department might be shown higher on the chart that a more responsible position lower on the chart but in another department with more people. The important element is not vertical position but the accuracy of both the reporting lines and the relationships between positions.
Once your current and projected organization charts are complete, copies should be given to all management
level employees with a request for comments. You might be surprised how many of your managers don't share your understanding as to how the organization functions. The charts are an effective method of uncovering misconceptions and misunderstandings. All employees should understand the reporting lines and relationships shown on the organization charts. More importantly, they should also agree with you and among themselves as to how the organization functions.
In regard to the projected organization chart, it should also show both you and your management group how they might advance within the organization over time. That alone can be an incentive to work toward a position of greater responsibility.
When developing an organization chart, I try to avoid dotted lines. In general, all departments and all levels are
expected to cooperate with the others. You don't need a plethora of dotted lines between departments to show
these less formal relationships.
I also don't use round charts or other unconventional methods of describing organizational relationships. Keep
the chart in conventional format, simple, and easy to understand.
You should also avoid horizontal organizations. If your chart shows a long horizontal line just beneath the Chief
Executive Officer or any other manager, he or she isn't delegating enough responsibility and authority to others in the organization. In general, no person in a corporate environment should have over six or eight people reporting directly to them. If they do, they're probably overloaded.
Organization charts can also be used to identify other areas of particular strength, weakness, or inappropriate
relationships between departments. There may, for instance, be individuals or managers with too many job titles. I recently developed an organization chart for a client company that showed the Sales Manager as also having responsibilities and titles for Marketing, International Sales, IT Manager, Graphics Manager, Customer Service Assistant Manager, and Assistant to the General Manager. Just listing the titles showed that drastic changes needed to be made. The projected organization chart then showed how those changes would be made and how the Sales Manager's job would be divided among additional people.
Reviewing your current and projected organization charts is a convenient way to think about the various
managerial positions in your company, which individuals are performing well, and who might do better. Rather than terminate an under-performer, study where they are on the chart. Consider what changes could be made in the reporting lines to better support that individual, give them additional training, or define a job for which they might be better qualified or suited.
Then update your organization charts each time a change is made in your management group. You should
periodically use your organization charts to examine, question, and refine how you company functions and how
its managers and other employees interact. In that regard, current and projected organization charts are particularly effective in helping you maintain or improve the efficiency within your organization. Higher efficiencies, better communications within and between departments, and an understanding of reporting lines and responsibilities will lead to higher profits.
By the way, if you would like to see an example of a current and projected organization chart I compiled for a client company, just let me know. I'll be glad to e-mail them to you. That will also give you my Excel spreadsheet format for such charts.
Lee Rust, owner of Florida Corporate Finance, specializes in Mergers & Acquisitions, Corporate Sales, Strategic Planning, Financing and Operations Audits. He can be reached by phone at 407-841-5676 or by email at hleerust@att.net.
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