Organisation charts are an important communication tool. They can be used to:
- Ensure managers explicitly understand and agree who is responsible for what.
- Streamline communication by helping employees identify where to direct requests and questions to the people with the authority to help them get things done.
- Obtain better advice from boards and external advisers by helping those people quickly understand and appreciate how work is currently distributed.
- Plan for growth by showing how additional work could be handled and / or reorganised (by developing one or more alternative organisation charts).
An organisation’s structure defines three kinds of activities directed toward the achievement of that organisation’s aspirations:
- Task Allocation: the process of managing tasks through their life cycle involves planning, testing, tracking, and reporting. An organisation’s structure reveals how people organise the work that needs to be done into logical groups of tasks.
- Coordination: complex outcomes require coordinated efforts. An organisation structure shows whether its approach to coordination is based on functional, geographical or product dimensions, for example.
- Supervision: an organisation’s structure determines which positions (held by individual people) get to participate in which decision-making processes, and thus to what extent their views shape the organisation’s actions.
Each organisation has a structure. However, not all organisations have taken the time to document an organisational chart that represents their organisation structure. I write “represents” as an important reminder of four important observations:
- An organisation chart depicts how one or more people interpret and / or agree work is organised (or should be organised)
- An organisation chart depicts how things work in theory – in practice, things sometimes get done both according to the organisation structure and at other times, despite the organisation structure
- An organisation chart is a simplification of the organisation structure – people are often required to work on projects that extend themselves beyond their formal roles, across functional areas, to help support others and coordinate their efforts.
- An organisation chart may not be current – things change rapidly in some organisations so it is important to remember that the “current” version may no longer be a reflection of how people are actually working together.
An organisation’s structure is just one of the things that determine how effective an organisation is at achieving its aims. Other things like strategy, management, leadership and culture are likewise important determinants of success.
The Basic Organisation Chart
Fundamentally, all organisation have the same core structure because they all have the same function – to create value. The value creation process has three primary functions:
- Service (or Operations)
To wear the marketing manager’s hat, one asks “how can we best reach and communicate our superior value proposition to the kind of people who are most likely to buy and use our products and services, in a way that is most meaningful to them?”. Said another way, how can we creatively increase our marketing budget and where should we invest our marketing budget to generate more leads?
To wear the sales manager’s hat, one asks “how can we best match a customer’s needs and wants to our products and service, whilst providing them with a WOW experience that shortens the sales cycle, simultaneously maximising the gross margin we can achieve, without encouraging the customer to invest beyond their needs?”. Said another way, how can we creatively increase our sales team / budget and where should we invest our sales budget to train and incentivize staff / customers to sell / purchase more?
To wear the service manager’s hat, one asks “how can we make it easier for people to order, pay, receive, install, setup and maximise the longevity of their enjoyment from our products and services?” Said another way, how can we creatively increase our service budget and where should we invest our service budget to improve the quality of our customers’ experience so they are more likely to refer themselves and others to our business to meet their current and future needs?
Beyond these three primary functions, there are a range of support functions that need to happen in an organisation, to help keep things moving, capture and share the value created plus support and leverage the efforts of the customer facing people who work in an organisation to perform at their best. These include (but are not limited to):
- Finance: accounting for the money that gets exchanged in the value creation process
- Human Resources (HR): taking care of the welfare of the people
- Information Technology & Communications Manager (IT&C): augmenting the capabilities of the people who work in the organisation
- Quality Assurance (QA): ensuring product quality through testing and customer feedback
So, the most basic organisation chart looks like this:
- I recommend listing the positions left to right, using the above order, to reflect the three primary functions of the value creation process first, in the correct order.
- If the same person is doing multiple roles, e.g. they serve in both the HR Manager and IT&C Manager positions, then it is helpful to show the full time equivalent (FTE) in each box, where 0.4 for example equals 40%, ~2 days/week, as follows:
- A common mistake some managers make is designing the organisation chart around the people they already have. The converse should apply – first design the ideal organisation structure without concern for the people you already have, next allocate your labour budget to the different roles (i.e. perhaps you can only afford / justify a HR Manager for two days versus five per week) and then finally, identify who would be best suited to each of those positions.
- This also translates into simple things like writing the name of the position first and the person employed to fill that position second, inside of any given box, as in the above example for John Smith.
- Showing the FTE in brackets (for any part-time positions) helps people immediately understand how much time is being allocated to different positions.
- I find its better to show the FTE in brackets next to the position title rather than next to the name of the person who is currently assigned to that position.
- A3 can be a good formal for printing organisation charts for smaller organisations or sub-sets of an entire organisation chart.
- A separate organisation chart can be developed for each functional area and electronically linked to a management organisation chart (like the one presented above) using hyperlinks for convenient access when an organisation becomes too large to represent on a single page.
- If you have people outside of your organisation that you’d like to include in your organisation chart, such as your Accountant, consultants, outsourced marketing agency, or freelancers that regularly work on projects, consider using a different coloured box and / or text, plus a dotted coloured line to help delineate core versus ancillary resources.
Documenting and maintaining a current representation of an organisation structure as an organisation chart is an important management function and tool.
Decoding your organisation structure or upgrading the approach you use to maintaining your organisation chart can be difficult when you work in an organisation. It is one of those projects that can easily remain on the “important but not urgent” list for years.
However, make it a priority and you’ll enjoy a greater sense of clarity and order that can be used to focus on taking a more strategic approach to enlivening your organisation.
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