How to create an organisational structure for your small business

Whatever the size of your business, you’ll need an organisational structure that clarifies the roles and responsibilities of everyone who works for you. It’s how you make decisions and run things.

And as your small business grows, you’ll need to introduce more structure to make sure everyone knows their roles and responsibilities.

A good starting point is to create an organisation chart, a diagram that gives a clear overview of your employee framework and how the business is structured.

Read on for an overview of the purpose of an organisation chart, the different types of company structure, and how to create an org chart for your business.

What is an organisational structure?

Your organisational structure is how you run your business. It’s how you’ve set up things like:

• roles and responsibilities
• departments and job functions
• who’s accountable for what
• key decision makers

This can be an evolving structure as your business grows. For example, if you need to hire someone to look after your finances then you’ll need to map out a clear job description and how their role fits with the rest of your organisation.

This is where an org chart can be useful.

What is an organisational chart?

An organisational chart, also known as an org chart, is a diagram that shows the hierarchy and structure of a business. It’s the visualisation of your organisational structure.

An org chart usually includes an overview of a company’s employees and relevant information about their position in the business.

It’ll show who reports to who and which employees and teams interact with each other. For example, it might show that the company’s marketing director reports directly to the CEO and that the marketing team works closely with the sales department.

Org charts usually include a box for each employee and arrows showing how each department interacts.

They’ll often include the following information about each employee:

• job title
• the department or team they work in
• how long they’ve been working for the company
• their line manager or who they manage
• basic contact details

What is the purpose of an organisational chart?

An org chart gives employees and people from outside the business a quick, visual overview of the company.

There are plenty of benefits for new employees, including seeing how the business is structured, as well as understanding who they’ll be working with, and what they’re responsible for.

Meanwhile, an organisation structure chart gives employees an indication of future opportunities to move teams or get promoted.

Senior staff and managers can get an overview of their team, as well as those they interact with regularly. This can help them to manage resources for big projects, such as a new product launch.

Here are some more benefits of having an org chart:

• increased efficiency, making sure no work is duplicated
• clearer communication between teams
• engaged staff who understand the structure of the business
• all employees working in the same direction, aligned to the same goals

Does your business need an organisation structure chart?

Whether you’re a small building firm, an IT consultancy, or a hair salon owner, an organisation chart could be useful for your business.

If you’re a sole trader, it might not be necessary. However, drawing a diagram that shows how you work with suppliers and clients could be beneficial.

Org charts are especially useful for companies with employees, as well as smaller firms that are experiencing fast growth.

To work out whether you need an organisational chart for your company, ask yourself the following questions:

• is there a lack of clarity over who’s responsible for what and who manages who?
• is the business growing, with the need for new staff in the short and medium-term?
• does the business have several departments or teams, such as marketing, HR, and finance?
• are you considering looking for outside investment, such as venture capital or crowdfunding?

If your answer to one or more of these questions is yes, it’s likely your business could benefit from an org chart.

The different types of company organisation chart

Depending on the structure of your business, there are different types of organisation charts you could use.

All charts can be tweaked to fit your company, but using a well-known structure as a template for your chart is a good starting point for small businesses.

When researching org charts, you may come across phrases like tall, flat, centralised, and decentralised. These all relate to the company hierarchy and how an organisation makes key business decisions.

Read on for an overview of four of the most common types of org chart.

Hierarchical organisational structure

A hierarchical structure has a clear chain of command from the top to the bottom. Biggest decisions will be made by the people at the top – CEOs, CFOs, etc. – and then department managers will make decisions at a team level.

This type of structure is common for larger businesses as it’s clear how decisions are made and who’s responsible for what in the organisation.

Flat organisation

Also known as horizontal, this compact structure is often used by small businesses. It has fewer levels of middle management, with more emphasis on line managers and the staff directly below them to make decisions.

A flat structure increases opportunity for collaboration, while junior members of staff are likely to have more responsibility.

Matrix organisation

This structure is more complex. It works for businesses that have different divisions, meaning a member of staff may report to two or more managers. For example, a graphic designer working for an agency may report to a project manager, as well as a senior stakeholder, such as a design lead.

This flexible structure is effective when team members with different skills need to work on the same project. Its downsides include confusion over hierarchy and increased potential for conflict between managers.

Divisional organisation

This is a type of hierarchical structure but with individual divisions operating independently. This structure is most commonly used by larger companies – for example factories and manufacturers – or those that work across different regions.

The hierarchy is split into departments, such as HR, finance, legal, operations, marketing, and product development. As a result, there’s less opportunity for collaboration as each department works independently. However, the responsibilities of each team are clear, which helps to increase accountability.

How to create an organisational chart

First off, you’ll need to think about which structure is closest to how your business operates and use this as a starting point.

The next stage requires you to create a list of all your employees, their roles, and who they report to.

After this, you can organise the employees and different teams into a hierarchy. It should look similar to a family tree, with arrows pointing to different team members and departments. However, the shape of the chart will depend on the type of organisational structure you’re working to.

Once you have a basic outline of your org chart, you can think about how you want to present it and the information about each employee you want to include.

Remember, the chart needs to be clear and easy to understand. Making it visually appealing, using graphics or photos of your staff, can help bring it to life.

Before creating a team organisation chart for your business, it’s important that you have a very clear idea of how your company is structured, the chains of command, and the responsibilities of each department.

Organisation chart templates

As mentioned already, an organisational chart is an effective tool for showing the structure of your company clearly.

If you’re not sure how to create your own, there are plenty of organisation chart templates that you can edit to fit your own business.

Here are some templates that can help you to create your own org chart:

• free org chart template from Factorial HR
• unconventional organisation chart ideas on Pinterest
• downloadable org chart templates on TemplateHub

Remember to use these templates as a guide and customise them with your own hierarchy and departmental structure.

Useful resources for developing your small business

• What is business turnover?
• How to value a business
• How to write a business proposal
• How to write a business plan

What are your tips for creating business organisation charts? Let us know in the comments below.