Don’t Churn Your Org Chart!
When your organization chart isn’t optimal, your organization isn’t optimized
Your chart shows the best way to distribute work among people with complementary knowledge and skills—it’s how you leverage all your expensive talents. But when the chart isn’t optimal, the organization isn’t optimized and margins shrink.
There are good reasons to change how you’re organized:
- New market focus
- A merger or acquisition
- Rapid growth
- Leveraging new technologies (AI, here we come!)
- Cost reduction
But changes shouldn’t be made lightly because they break up many manager-employee relationships.
What matters most to front-line staff is who they report to. The chart shows who has power over whom. The stability of the manager-employee relationship holds everything together. Please reflect on the ethics here, The Pledge of Managerial Power.
Fundamental Truths
- Frontline employees want to have only one boss. Getting a new boss is scary.
- Just saying, “It’s a matrix” does nothing to address critical issues of reporting.
- Managers, not employees, must establish workload. See The Dotted Line to Hell.
- No theme—by geography, discipline, or product line—eliminates confusion
- Titles must complement, not confuse the chart.
What an Org Chart Is
- A map of how everyone contributes to mission
- A diagram of reporting and delegation
- A hierarchy of authority (see Pledge)
- A career path
- The web of collaboration
What an Org Chart Isn’t
- A solution to the problems of multiple reporting
- A way to resolve personal conflicts
- A way to break down silos
Mistake Checklist
- Have we ever used the org chart to avoid a conflict or conflicts?
- Have we rewarded people with titles, instead of responsibilities or compensation?
- Have managers and senior managers broken discipline about reporting structures?
- Do we have hidden power centers?
The Best Practice Checklist
Choose the organization design that’s best for the customer and that’s one you want to grow into, even if you don’t have the right people yet. See Approved Resources at Index 5.2 Organization design for details on these and other schema:
- By discipline
- By geography
- By product line
How to choose? If you sell mostly online, then geography doesn’t matter. But if you sell to and service customers in small territories, then go with the geographic scheme. If you want to sell all product lines to global customers—and if culture differences don’t matter—then organize by management discipline.
Very large organizations often use several themes. Per 4 Week MBA:
“General Motors employs a divisional organizational structure with multiple regional divisions to account for variations in different markets. The divisions include GMNA (North America), GME (Europe), GMSA (South America), GM AMEO (Africa & Middle East), and GMAP (Asia-Pacific).”
Documents and Reports
The organization chart cannot stand alone. Because of the issues described above, they need several accompanying programs and documents.
- Schedule of Authority, a chart of who can decide what and their spending authority
- Title definitions. Strive for consistency!
- Relationship-building activities, to deal with multiple roles
- Clarify “temporary” reporting roles, i.e., for projects
- Development program (i.e., how to move up the chart)
Chart Design & Maintenance
- Put the customer (or client or patient) at the top
- Include 3-5 descriptors of what each person does
- Include “groups of power,” e.g., a committee of senior managers
- Update it on a regular schedule. It’s OK to update assignments in real time.
Cross-Functional Competence
Development as a manager depends on knowing how different functions and units work together. Use The Index to ask informed and interesting questions of people outside your box. Those conversations become the relationships that can let you be the manager of the next big thing.
