What is an Organisation Chart, what types exist and what are the advantages and disadvantages?
Organisation Chart Definition
An organisation chart – also known as organigram – is the diagram of an organisation. It shows the structure of companies or parts of companies and thus the organisational units with their tasks or functions, their superiors and often the formal communication channels.
The term Organigram, which is made up of the words organisation and diagram, was first used around 1855 by Daniel Craig McCallum¹, a railway manager from Scotland who worked in New York. Although the organisation chart was invented more than 160 years ago, it is still the preferred representation for organisational structures today.
Alternative terms for the organigram or the organisation chart are for example organisation plan or organogram.
Different Organisation Chart Types
There are different types of organisation charts that are used in business and project management practice:
- the hierarchical organigram,
- the flat organigram and
- the matrix organigram.
A hierarchical organisation chart shows hierarchies including responsible managers, employees and, if applicable, the basic tasks of the units. It is the most common form and is also known as a hierarchy chart or line employee structure. In practice, the classification is based on functions such as development, marketing, sales, or on products or services. Regional divisions are also common, for example, in sales organisations that have a central unit and regional branches such as North, South, East, West.
The flat organigram is a special form of the hierarchy diagram in which two levels – the managers and the assigned employees – are usually visualised.
The matrix organigram shows mixed forms, e.g. the affiliation of employees to a department and at the same time the participation in projects or the work for individual product lines. In such a mixed form, employees often have two different superiors: one technical and one disciplinary. As a consequence, this often leads to dual reporting lines.
The Look of the respresentation
Visually, the representations correspond to an abstract tree diagram, even if the connections between individual nodes of the units (locations, areas, departments) – drawn as rectangles – are not visualized as branches but as horizontal and vertical lines.
Some organigrams use single-line systems (as shown above) and multi-line systems, where subordinate units receive instructions from several higher-level units. The lines in a multi-line system are drawn horizontally, vertically and diagonally.
Advantages and Disadvantages of Organisation Charts
Working with an organigram offers some significant advantages:
- The structure of an organisation with its organisational units and tasks can be presented easily and is basically easy to understand.
- The responsibilities and responsibilities within an organisation or organisational unit are easy to read.
- The communication and formal exchange of information along the documented hierarchies is easy to understand.
But there are also some disadvantages:
- Organisational charts are very simplistic. In many companies, hierarchies and communication channels are often formed independently of organisational units. Especially in times when networks are seen as an essential component for an exchange at eye level, the organisation chart serves as a kind of “enemy image”. One reason for this is the interpretation of the organigram as a structure of authority, power and decision-making.
- Temporary organisational units such as project organisations are difficult to represent.
- Complex organisational forms require additional information; otherwise information is interpreted. Example: A policy unit – usually represented as an ellipse in a staff line system as shown in the diagram above – supports a department or a department manager. Whether or not the employees of this staff unit are authorized to give instructions to the employees of the department cannot be deduced from the representation. The situation is similar with cross-sectional functions such as purchasing, logistics, etc.
- Organisation plans must be maintained, because they are a snapshot of a key date. This is obvious when presenting a project organisation, because the project organisation usually dissolves when the project is completed. But even company organisations are usually not permanent, e.g. when employees take on new tasks, new departments are created or company divisions are sold.
Many companies today are dealing with topics such as agile or hybrid transformation, with learning and virtual organisations. It therefore remains to be seen to what extent the organisation chart will be used in the future.
The Customer in the Oganisation Chart
Does “the customer” belong in an organisation chart? Opinions vary as to whether customers (and also suppliers, service providers, etc.) should be shown. Customers in an organigramm express that
- employees should focus more on customers and less on the organigram.
- organisations should think from “outside inwards and outwards again” and not from “top to bottom”.
- the organisation primarily serves the customers and not the top of the company.
As an argument against customers in the organization chart, it is argued that the representation depicts the
- organisational structure,
- formal power relations and communication channels,
- authority to issue instructions and information flows.
Furthermore, it is argued that
- there are departments that explicitly deal with customers,
- customers can not be collected in a box like any department,
- customers belong to the environment of the organisation.
The organisation chart is therefore not the appropriate tool to express customer focus.
An impulse to discuss:
Organisation plan equals hierarchy. Hierarchy does not equal organisation plan.
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