Understanding Organizational Charts: Types, Functions, and How to Design

Definition of Organizational Chart – A chart that shows the interconnectedness of various positions in an organization in terms of authority and responsibility. Every institution or business has a position that shows the position of each person in it. Each position or position has authority and responsibility that are interrelated with one another.

Basically, there are three organizational patterns, namely line organization, functional organization and line and staff organization (organization chart). In an organization, it is very important to have an organizational chart. Then, what exactly is meant by the notion of an organization chart? Come on, see the following explanation of the Definition of an Organizational Chart, Matobers!

Definition of Organization Chart

An organizational structure or organizational chart is a diagram that visually conveys the internal structure of a company by explaining roles, responsibilities and relationships between individuals in an institution or organization.

The definition of an organizational chart broadly describes the entire company or traces to a particular department or unit regarding roles, responsibilities and relationships between individuals in an institution or organization.

Another definition of organizational structure is the system used to define hierarchies within an organization. This identifies each job, its function and where it reports to within the organization.

An organizational structure is not standard but can be developed according to the implementation needs of the organization concerned. Because there are many types of organizational structures, each has its own advantages and disadvantages.

The Importance of Organizational Chart Overview

The organizational chart plays an important role in running an organization to avoid role confusion. Because the organizational chart provides information on each person’s position, duties and responsibilities to whom he has to report his work.

Ultimately, it is important to improve the organizational structure of the group in order to achieve its goals. The following illustrates the importance of an organizational chart, including:

  • Explain the responsibilities of each person or member in the organization.
  • Explain position and coordination to facilitate the flow of communication between teams.
  • Explaining the path of relationships between individuals in the organization so that the work process is more efficient.
  • Seeing the portion of leadership in controlling and supervising employees.
  • Organizational chart elements.

Organization Chart Functions

A good organizational chart can broadly describe all parts of the company down to each particular department or unit. So that the organizational chart has the following important functions:

1. Structure allows for better communication

Communication is very important in the success of an organization, with an organizational structure designed with clear lines of communication that can help improve good communication. For example, interrelated departments such as planning and financial analysis departments. Both communicate and report to the Chief Finance Officer and Marketing Officer.

2. Clear reporting relationships

Everyone in the organization needs to understand clear reporting relationships in order to also understand their respective responsibilities and to whom they are accountable. A clear relationship helps each party carry out their duties.

For superiors, it can make it easier to monitor the performance of everyone under them. As for employees, it makes it easier to know who to ask for directions or assistance. Besides that, everyone can be aware of their position and authority, so they don’t cross the line and don’t interfere with each other’s positions, yes Matobers.

3. Growth and Expansion

Companies or organizations can grow rapidly if every position is occupied by the right people. So, the function of an organizational chart or structure to regulate how a company utilizes its resources appropriately in terms of managing is a management talent.

Structure can reveal weak points in an organization’s team, because a good structure puts the right people in the right positions. Over time, the organizational structure can undergo changes, both development and downsizing according to needs.

4. Efficiency in completing tasks

With a good organizational structure designed to facilitate project completion, it helps project managers identify available human resources to carry out the responsibilities of each department.

So the formation of the team also needs to measure the ability of each team member to be in the right position. In this case, the project manager manages the needs of the team and places them according to their expertise.

5. Knowing what went wrong

When a project or work of an organization is going badly, it can be checked because most likely the organization is poorly structured. For example, work that is not in accordance with the target, completed past the deadline and so on. It could be because the tasks given are not in their portion so that they conflict with other managers.

6. Customize the needs of the company

Every company or organization has a different structure according to the company’s needs, so the structure must be made to meet the needs of both structuring, developing and so on. So, not all organizations can be considered the same because the resources needed by each industry can vary.

Organization Chart Elements

Organizational chart elements include:

1. Job specialization

To see how far the tasks in the organization are divided into several separate jobs.

2. Departmentalization

The basis used to group jobs together. This can be process, product, geography and customer.

3. Chain of command

An unbroken line of authority that extends from the top of the organization to the very bottom and defines who is accountable to whom.

4. Span of control

The number of subordinates a manager can efficiently and effectively direct.

5. Centralization and decentralization

Centralization refers to the extent to which levels of decision making are concentrated at a single point within the organization. Decentralization is the opposite of centralization.

6. Formalization

The degree to which jobs within the organization are standardized.

Types of Organizational Structure in Companies


There are 6 types of organizational structures known in a company, including the following:

1. Functional Organizational Structure (Functional Structure Organization)

Functional organizational structure as the most common type of organizational structure used by a company or organization. In a functional organizational structure, division of labor is then carried out based on the function of each management.

Among them are financial management, marketing management and human resources, production management and others. Every employee who has the same skills and skills will be grouped into one work unit. This is what causes this type of organizational structure to be very appropriate to be applied to an organization or company that only produces several types of products or services.

The advantages of this type of organizational structure can reduce company operational costs and make it easier for the managerial team to monitor and evaluate employee performance.

However, implementing this type of organization also has an impact on difficulties in discussing and communicating between one work unit and another. In addition, general management training for employees also has its own limitations.

2. Divisional Organizational Structure (Divisional Structure Organization)

The divisional organizational structure is a type of organizational structure that groups together based on similarities in products, services/services, markets and geographic location.

This type of organizational structure is usually applied to a medium-sized company to a large company because the operational costs incurred will be higher when compared to a functional organizational structure.

By implementing a divisional organizational structure, your company will have more ease of management because it breaks divisions within the company into smaller parts. While the weakness lies in the problem of resource allocation, as well as the distribution of costs that must be incurred by the company.

3. Line Organizational Structure

In a line organizational structure, the relationship between superiors and subordinates occurs directly and vertically. Where from the highest leadership to employees with the lowest position in the organizational structure is connected by a line of command or line of authority.

Therefore, this type of organizational structure is also better known as the military organizational structure. The advantage of using a line organizational structure is that the leadership unit lies in one person. while the weakness is the existence of dependence on one person in the hierarchical structure. This type of organization is very appropriate when applied to small organizations such as rice shops, tegal stalls, workshops and neighborhood associations.

4. Line and Staff Organizational Structure

This organizational structure combines several combinations of line organizational structures with a command principle, but the leadership’s duties will be assisted by several staff. Each staff in the line and staff organizational structure has a role in providing suggestions, input, thoughts, new ideas and ideas as well as information data needed by their leaders.

Line and staff organizational structures are very suitable when applied to small-scale companies because they have the advantage of being sure of the high moral discipline of employees according to their respective job descriptions. However, the solidarity of employees is still lacking because many of them do not know each other.

5. Matrix Organizational Structure (Matrix Structure Organization)

The matrix organizational structure is an organizational structure which is a combination of a functional organizational structure and a divisional organizational structure with the aim of complementing each other and covering the deficiencies found in the two organizational structures. This type of organizational structure is often known as the project organizational structure because each employee in the work unit of the functional organizational structure must work on the organizational projects assigned to him.

The application of this type of organizational structure causes a command system in which an employee is required to provide reports to two leaders, namely leaders in divisional and functional work units.

The matrix organizational structure is very suitable for large-scale companies to multinational level companies because of its ability to achieve the level of coordination that is needed in responding to the multiple demands on the corporate environment.

However, this structure also has weaknesses. Where sometimes because of the double demands it can cause confusion.

6. Committee or Project Organizational Structure

This type of structure is used by companies, each leadership task and other special tasks must be carried out and accounted for collectively by a group of officials in the form of a board or committee.

Organizational committees usually consist of a committee leader (Executive Committee) who is a leader with line authority and a staff committee who are employees with staff authority.

The advantage of this type of organizational structure is the implementation of decision making that goes well through joint deliberations between shareholders and the board. Meanwhile, the weakness lies in avoiding responsibility in the event of a problem.

Examples of Positions in the Organizational Structure

There are several names of positions that will at least always be displayed in an organizational structure. But not limited to the following four positions:

1. Directors

The Board of Directors is a person who is responsible and has the authority to manage a limited liability company. The board of directors is an important part, its position is at the very top of all positions.

In general, a company has one president director, three vice president directors and six directors. However, this can follow according to the type of company and its needs. The board of directors has the authority to make decisions about the company.

Directors must also be able to account for every company decision. The function of the board of directors as a determinant of the company. For example, what type of business to develop and what types of products to produce. Directors are also the people who arrange the schedule of company activities.

2. Manager

The position of manager is a position that is responsible for integrating various variables and characteristics of its employees in achieving company goals. The task of the manager is to make directions and decisions, policies, and develop the potential of employees in order to advance the company.

Managers are usually positioned in each division or department and become the main manager. For example, marketing manager, HRD manager, production manager and so on. Managers will receive reports from team leaders and other members and then convey them to higher ranks.

3. Division or Department

This section is led by the division head who has the duty to lead the field of work of the department. There are various departments or divisions in a company’s organizational structure according to the characteristics of the company. Among them are the marketing and sales department, the HRD & GA department, the production department and so on.

4. Administration and Warehouse

This position consists of accounting, CMT and cashier. His job is to manage the company’s finances and record every expense and income and even take care of matters related to outsourcing .

Steps to Design an Organizational Structure

1. Design an organizational structure according to the vision and mission

Before making a company organizational structure, make sure there is a clear vision, mission and goals or objectives of the organization. Not infrequently several parties, especially startup companies , rush to create a structure without paying attention to clarity about what is expected of the company organization they are building.

2. Design the organizational structure after formulating the business

In making the company’s organizational structure it is very important to know the business goals to be achieved. Formulate what kind of business will be undertaken and what are the goals.

3. Consider the talents and talents of workers

It is mandatory to carry out analysis and observation of the possibility of storing skills in workers. It is possible that all this time your organization has a lot of talent stored away, but not found for the company’s growth.

4. Consider the age of the worker

In forming the company’s organizational structure, the age factor is one that should be considered. That way, you can put them in a position that has been designed.

5. Positions or positions that are not in accordance with the competence of employees

Forming the right organizational structure by taking into account the talents and abilities possessed by workers is something that is ideal. However, when this does not always materialize and creates problems in the field, it is necessary to evaluate the existing structure.

Well, that’s about the meaning of the organization chart and its functions. A good organizational structure greatly influences the success of work in an organization.