An organization structure refers to the reporting relationships between employees within an organization. It establishes authority, responsibility, and accountability. Giving an organization structure makes it easier for everyone to figure out who will report to whom, whose instruction they can take, who they can delegate to, etc.
On the other hand, an organization chart is the graphical representation of an organization’s structure. Companies use organizational charts to clarify their structure so that all employees can understand it. These charts make it easier for every employee in the company to learn their roles, their immediate supervisors, and their responsibility and accountability.
Why are Organizational Structures so important?
Organizations must be structured so that each company member understands authority lines and individual jobs and obligations. Whether a giant department store or a small store, every business must be structured to best suit its needs and make it a success. Following are some of the advantages that make organizational structures unique:
Significance of Formal Structure
The organizational structure increases operational efficiency by offering clarity to personnel at all levels of the organization. Employees may find it challenging to determine who they formally report to in certain scenarios without a formal organizational structure. It may become unclear precisely who has the final responsibility for what.
The organizational structure guides all employees by laying out the official reporting relationships that govern the company’s workflow. A formal outline of a company’s design makes it easier to add new positions in the company, providing a flexible and ready means for growth.
The efficient flow of information within a company can make decision-making quicker. Having a well-defined organizational structure improves inter-departmental communication, which enhances your company’s overall productivity.
A well-defined structure may also serve as a road map for internal promotions, allowing businesses to develop excellent growth tracks for entry-level employees.
For example, an entry-level marketing assistant may rise to the roles of a marketing expert, social media marketer, digital marketing supervisor, marketing manager, and, finally, director of marketing. Seeing your organization’s structure in this way can be an excellent motivator for employees who want to know that they can develop their careers inside their company.
Differences Between an Organizational Structure and Organizational Chart
On the surface, organizational charts and organizational structures may seem very similar. However, they have significant differences. Following are some of the key differences between them:
- An organizational structure is a plan that defines the roles, links, and flow of information within an organization. On the other hand, an organizational chart visualizes this structure.
- Companies design their organizational structures around the various functional departments within a company—for example, Finance, Marketing, Sales, etc. In contrast, an organizational chart is designed around individuals within the company and their titles.
- The organizational structure defines the goal, accountability, and key performance indicators (KPIs) for each functional group and job within a company. In contrast, an organizational chart displays each person’s job title and may contain the information required by HR, such as job description, contact information, etc.
- Once defined, an organization’s structure does not change unless the company takes a new initiative to upscale or change its strategy. However, Organizational charts become outdated very quickly. People join and leave companies quite frequently, which makes an org chart outdated almost as soon as it is created.
Organizational structures and charts are similar in that the charts are a graphical representation of the structure. However, the structure stays in place, even if the chart becomes outdated after promotions or resignations. Having a well-defined organizational structure is the key to successfully pulling off a new initiative.