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Organograms

Showing how an organization fits together.

By the Mind Tools Content Team

It's Micah's first day on the sales team, and his manager, Leah, thinks he's settling in well. He's logged onto the system, knows how to dial an outside line and transfer calls, and has even answered a few inbound calls. Leah feels pleased with his progress.

However, she isn't looking forward to the next part of his training: explaining the organization's labyrinthine and often-changing structures and reporting lines. Leah wishes that the company had a visual representation of its structure, so that she could communicate it more effectively to new hires. This is where an up-to-date organizational chart, or organogram, would be useful.

In this article, we'll explore how you can use different organograms to represent the structure of an organization visually.

Understanding Organograms

An organogram is also known as an "organizational chart," and is a simple representation of a company's structure. The concept of organizational charts dates back to the mid-19th century; one of the first was by Daniel McCallum, a railroad engineer. Engineers began to use them widely in the first half of the 20th century, and other areas of business gradually followed.

The term "organogram" was first used in the 1960s – it combines the words "organization" and "diagram," and is sometimes spelled "organigram." Another term for the idea is "Organigraph" - a concept made popular thanks to the Harvard Business Review article written by Henry Mintzberg and Ludo Van der Heyden.

An organogram can represent a whole organization, or just part of it. You might use one to show the different physical elements of a company, such as its regional offices, as well as how departments or functions relate to one another. And, you can also use one to illustrate an organization's hierarchies and relationships, including the seniority of different roles, and how these interlink.

Different Types of Organograms

There are four common types of organograms: hierarchical, matrix, tree structure, and horizontal/flat. Let's look at how you can use them:

1. Hierarchical (Top Down)

As its name suggests, this particular organogram shows the hierarchy within an organization, including the ranked relationships between different people. You start with the most senior employee at the top and work downwards from there. For example, you might put the CEO at the top, followed by the vice presidents, the department heads and supervisors, and so on. (See figure 1, below, for an example.)

Figure 1 – A Hierarchical Organizational Organogram

You can also use a hierarchical organogram to illustrate the relationships within a specific team, as shown in figure 2, below.

Figure 2 – A Hierarchical Team Organogram

Hierarchical organograms are also useful for illustrating an organization's regional or geographic structure, and they can show how a company is structured to deliver a specific product or service.

However, they can feel stuffy and rigid, and they can embed autocratic attitudes in organizations, which can be problematic.

In a Matrix Organization , people may report to more than one manager. In this type of company, or in one where people with similar skills are grouped together, you may find that a matrix organogram is the most useful organizational chart.

For example, imagine that a manufacturing company employs a large number of engineers around the world who report to product managers for different products. However, these people also work under country managers. In this situation, the reporting relationships can be presented as a grid or matrix, as shown in figure 3, below.

Figure 3 – A Matrix Organogram

3. Tree Structure (Horizontal)

This type of organogram is essentially a tree diagram , based around an organization's structure. Unlike a hierarchical organogram, you start with the most senior team member on the left, and draw branches coming off to show the organization's structure. Tree structure organograms usually fit better on a piece of portrait paper, compared with hierarchical organograms, particularly when a manager has many reports.

For example, let's assume that you're leading a project management team within a small video games development company. Each of the project managers who report to you manage several developers. You could represent this structure effectively in a tree organogram. See figure 4, below, for an example.

Figure 4 – A Tree Structure Organogram

4. Horizontal/Flat

A horizontal or flat organizational structure has relatively few management layers and is generally less hierarchical. It is a popular structure within smaller companies and startups, because they tend to be less complex than bigger organizations.

For example, imagine that you manage a small, flatly structured real estate agency, with three regional offices. Your organogram might look like our example in figure 5, below.

Figure 5 – A Horizontal/Flat Organogram

Horizontal or flat organizations can also be presented as less hierarchical "bubble diagrams," as shown in figure 6, below.

Figure 6 – A Bubble Diagram

Benefits of Using Organograms

There are a number of benefits to using organograms, including:

Simplicity. The key benefit of using an organogram is that it allows you to present complex organizational structures in a visually straightforward way, and then communicate them easily.

Problem-solving. Organograms can show the reporting structures within your organization, so they can help people understand who they should approach to raise an issue. This can be particularly useful when your organization is large or complex, or when it has a range of different departments, functions or locations.

Onboarding. An organogram can be a useful onboarding tool, as we demonstrated in our opening example with Micah and Leah. You can use one to show a new hire how the organization works, and who he will be working with and reporting to.

Planning and project management. An organogram can help you to decide how to allocate resources, or map out future projects, because it allows you to visualize how your organization's structures interlink.

Disadvantages of Using Organograms

Despite the potential benefits, using organograms can also present several disadvantages. Let's explore these in more detail.

Lack of flexibility. An organogram can quickly become outdated, particularly if your organization is fast-changing, has a high employee turnover, encourages team members to switch departments, or is restructured regularly in response to projects beginning or ending. Regularly rewriting and communicating an organogram can also become a time-consuming, bureaucratic burden.

An organogram is a simplified depiction of an organization, which means that it won't show any informal channels or structures, and it may simplify the complexities or nuances of the relationships or dynamics that operate within it.

Overly rigid. Organograms are a relatively rigid representation of how your organization works. You tend to read them from the top down, which can make an organization appear inflexible or hierarchical, and this can hamper innovation , problem-solving , team creativity , or effective communication .

It's important to consider whether using another type of diagram would be more appropriate. For example, you might prefer to use an interrelationship diagram , a bubble diagram, spider diagram, or a blob diagram to convey the same information in a less visually hierarchical or structured way.

Alternatively, you might find that an organigraph is a more effective illustration of how the people, functions and processes within your organization link together. It is essentially a map of an organization's structures or functions, rather than a chart.

An organogram is a visual representation of an organization's structures, functions and relationships.

It can be an effective way of showing how an organization works, and help with problem-solving, onboarding, and project or process management.

However, an organogram may not be suitable for fast-changing organizations, or those with high employee turnover. It can become an administrative burden if you need to update and re-communicate it regularly, and it can crystallize a hierarchical feel in your organization, which you may not want.

Mintzberg, H. and Van der Heyer, L. (1999). 'Organigraphs: Drawing How Companies Really Work,' Harvard Business Review . Available here .

Stinson, E. (2014). 'The First Org Chart Ever Made Is A Masterpiece Of Data Design,' Wired Magazine . Available here .

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The Organizational Chart

Visualize organizational structures.

Company organization charts are designed to clearly and transparently depict organizational structures, hierarchies, and relationships. Here you will learn what an organization chart is, what types of organization charts there are, what data is relevant for visualizing a company, and how to create a professional organization chart.

What Is an Organizational Chart?

What are the different types of organizational charts.

• What Contents Does a Good Organization Chart Contain?

Why Should Companies Work with Organizational Charts?

Using word, excel, or powerpoint better not, examples of professional organizational charts.

The word “organization chart” is a graphical representation of the structure of an organization. Specifically, it is the visualization of roles, responsibilities, hierarchies, and reporting lines within companies. As early as 1855, the manager Daniel McCallum created the first modern organizational chart, which referred to the New York and Erie Railroad.

Until the 1920s, organizational charts were mainly used in engineering. However, it did not take long for them to become established in the business world and human resources management. Today, it is impossible to imagine businesses without them. In the future, organizational charts will increasingly have to reflect flexible structures that are constantly changing due to agile working methods. Companies are also increasingly interested in simulating potential organizational structures and workflows in organizational charts and weighing them against each other. Only when this is possible do organizations fully exploit their potential, which lies in the combination of flexible organizational design and data-supported future planning.

An organization chart is always a vertical or horizontal representation of the company structure . Visual stylistic devices such as boxes, arrows, and lines make connections and relationships in the company visible. Generally, there are three types of organizational charts.

The Hierarchical Organization Chart

In the hierarchical organization chart, one person or group is at the top. All other elements represented have less authority or power. Due to the visual representation from top to bottom, this organization chart variant is similar to a pyramid.

The Flat Organization Chart

The flat organization chart is sometimes also called a horizontal organization chart. It has few or no middle management levels and usually consists only of the areas of managers and employees. It is often the case that the latter is given an exceptionally high level of responsibility in the company. For example, they are also directly involved in important strategic decisions.

The Matrix Organization Chart

The matrix organizational chart is always used when employees have more than one superior. For example, a company may have a team of programmers assigned to a single senior programmer. At the same time, each works on projects for individual business units within the company. These are usually led by a line manager or project manager, so the programmers report to at least two managers.

When considering what type of org chart your business needs, the type of organizational structure must be taken into account. For example, there are person hierarchies, job hierarchies, department hierarchies, and other forms of company organization. Therefore, an agile representation is becoming increasingly important, and the time dimension must also be planned for more and more. The question is: what does my organizational structure look like yesterday, today, and tomorrow? The latter, in turn, requires the ability, as mentioned above, to simulate.

More on the Topic?

How has the way the org chart is used changed over the years? Learn more in our blog post “The Evolution of the Organigram”!

What Contents Does a Good Organizational Chart Contain?

In addition to the data on the structure of the organization, the contents of an organizational chart differ individually depending on the company. By default, the organization chart includes name, function, and often contact information such as phone numbers and email addresses. Depending on the company’s size, photos of employees may also be part of the organizational chart. Particular task profiles such as first aiders and data or fire protection officers, as well as special absences, for example, due to parental leave, can also be shown in the organization chart. In addition, information on individual employees’ birthdays, company affiliations, or hobbies may also be included – depending on whether it makes sense and adds value. The more structured data is represented in the organization chart, the more profitable it will be for the company. Nevertheless, it should remain clear and comprehensible.

Overview of the current state

Organizational charts help companies to visualize, analyze and permanently optimize themselves. In this context, they contribute significantly to a better understanding of the current state

Secured Governance

If responsibilities and reporting lines are transparent, governance requirements – especially those resulting from rating standards such as ESG (“Environmental, Social, Governance”) – are reliably met.

Better planning

The visualization and analysis of the current state reveals the need for action at an early stage and simplifies the planning of resources and personnel.

Bringing potential to life

The visualization of HR and organizational data helps to identify and leverage previously undiscovered potential. In this way, companies become more efficient and secure their competitiveness.

Positive influence on communication

An organizational chart visualizes structures, responsibilities and development opportunities. This high level of transparency in turn has a positive effect on communication within the company.

Before the implementation comes the strategy! This means you first need to consider the purpose of your company’s organizational chart. In the past, organization charts were primarily intended to show hierarchies, but today they should serve much more for visual HR control. Of course, simple variants of organizational charts can be created with Word or Excel.

However, these quickly become outdated because they are not linked to data sources. The trick is to automatically incorporate updates in the master data into the organizational chart. Anything else will increase manual effort. This may still be feasible in smaller organizations, but it becomes an avoidable Herculean task in larger companies.

With the help of special software solutions , organizational charts can be created and maintained much more easily and quickly. The advantages of organizational chart software such as Ingentis org.manager are apparent:

You can save time.

Updates in the master data are automatically added to the organization chart. The manual effort is nearly zero.

The org chart is always up to date

Outdated organization charts are a thing of the past. Automatic updates result directly from changes in master data. The organization chart is directly linked to data sources such as HR systems.

The data quality is significantly higher

Manual modifications are often not only time-consuming, but also error-prone. The use of professional software significantly increases the overall data quality.

You can share content

The organization chart can be easily shared with other employees. Thus, export as PDF and exchange via Inter- and Intranet with authorized colleagues is possible.

You will be informed in good time

Automated email reports point out grievances or need for action.

Data protection is a top priority

Sophisticated rights concepts and access protection allow administrators to determine which employees need which information and access for their work.

Analyze the current state

Well-maintained and equipped with various visualization options such as dashboards, charts, and Big Data graphics, the organization chart is a valuable basis for HR controlling and people analytics.

Design target states

Simulations and re-organizations are no longer a problem with innovative software solutions

Looking for an Org Chart Solution?

In our practical guide on the topic “Power Tool Org Chart” you will learn everything you need to know about the right implementation of org chart software.

General Contact Request

7.1 Building Organizational Structures

• What are the traditional forms of organizational structure?

The key functions that managers perform include planning, organizing, leading, and controlling. This module focuses specifically on the organizing function. Organizing involves coordinating and allocating a firm’s resources so that the firm can carry out its plans and achieve its goals. This organizing, or structuring, process is accomplished by:

• Determining work activities and dividing up tasks (division of labor)
• Grouping jobs and employees (departmentalization)
• Assigning authority and responsibilities (delegation)

The result of the organizing process is a formal structure within an organization. An organization is the order and design of relationships within a company or firm. It consists of two or more people working together with a common objective and clarity of purpose. Formal organizations also have well-defined lines of authority, channels for information flow, and means of control. Human, material, financial, and information resources are deliberately connected to form the business organization. Some connections are long-lasting, such as the links among people in the finance or marketing department. Others can be changed at almost any time—for example, when a committee is formed to study a problem.

Every organization has some kind of underlying structure. Typically, organizations base their frameworks on traditional, contemporary, or team-based approaches. Traditional structures are more rigid and group employees by function, products, processes, customers, or regions. Contemporary and team-based structures are more flexible and assemble employees to respond quickly to dynamic business environments. Regardless of the structural framework a company chooses to implement, all managers must first consider what kind of work needs to be done within the firm.

Division of Labor

The process of dividing work into separate jobs and assigning tasks to workers is called division of labor . In a fast-food restaurant, for example, some employees take or fill orders, others prepare food, a few clean and maintain equipment, and at least one supervises all the others. In an auto assembly plant, some workers install rearview mirrors, while others mount bumpers on bumper brackets. The degree to which the tasks are subdivided into smaller jobs is called specialization . Employees who work at highly specialized jobs, such as assembly-line workers, perform a limited number and variety of tasks. Employees who become specialists at one task, or a small number of tasks, develop greater skill in doing that particular job. This can lead to greater efficiency and consistency in production and other work activities. However, a high degree of specialization can also result in employees who are disinterested or bored due to the lack of variety and challenge.

Traditional Structures

After a company divides the work it needs to do into specific jobs, managers then group the jobs together so that similar or associated tasks and activities can be coordinated. This grouping of people, tasks, and resources into organizational units is called departmentalization . It facilitates the planning, leading, and control processes.

An organization chart is a visual representation of the structured relationships among tasks and the people given the authority to do those tasks. In the organization chart in Exhibit 7.4 , each figure represents a job, and each job includes several tasks. The sales manager, for instance, must hire salespeople, establish sales territories, motivate and train the salespeople, and control sales operations. The chart also indicates the general type of work done in each position. As Exhibit 7.5 shows, five basic types of departmentalization are commonly used in organizations:

• Functional departmentalization , which is based on the primary functions performed within an organizational unit (marketing, finance, production, sales, and so on). Ethan Allen Interiors, a vertically integrated home furnishings manufacturer, continues its successful departmentalization by function, including retail, manufacturing and sourcing, product design, logistics, and operations, which includes tight financial controls. 1
• Product departmentalization , which is based on the goods or services produced or sold by the organizational unit (such as outpatient/emergency services, pediatrics, cardiology, and orthopedics). For example, ITT is a diversified leading manufacturer of highly engineered components and customized technology solutions for the transportation, industrial, and oil and gas markets. The company is organized into four product divisions: Industrial Process (pumps, valves, and wastewater treatment equipment), Control Technologies (motion control and vibration isolation products), Motion Technologies (shock absorbers, brake pads, and friction materials), and Interconnect Solutions (connectors for a variety of markets). 2
• Process departmentalization , which is based on the production process used by the organizational unit (such as lumber cutting and treatment, furniture finishing, and shipping). For example, the organization of Gazprom Neft , a Russian oil company, reflects the activities the company needs to perform to extract oil from the ground and turn it into a final product: exploration and research, production (drilling), refining, and marketing and distribution. 3 Pixar, the animated-movie company now part of Disney , is divided into three parallel yet interactive process-based groups: technology development, which delivers computer-graphics tools; creative development, which creates stories and characters and animates them; and production, which coordinates the film-making process. 4
• Customer departmentalization , which is based on the primary type of customer served by the organizational unit (such as wholesale or retail purchasers). The PNC Financial Services Group offers a wide range of services for all of its customers and is structured by the type of consumer it serves: retail banking for consumers; the asset management group, with specific focus on individuals as well as corporations, unions, municipalities, and others; and corporate and institutional banking for middle-market companies nationwide. 5

Ethics in Practice

Panera’s Menu Comes Clean Making a strategic change to a company’s overall philosophy and the way it does business affects every part of the organizational structure. And when that change pertains to sustainability and “clean food,” Panera Bread Company took on the challenge more than a decade ago and now has a menu free of man-made preservatives, sweeteners, colors, and flavors.

In 2015, Ron Shaich, company founder and CEO, announced Panera’s “no-no” list of nearly 100 ingredients, which he vowed would be eliminated or never used again in menu items. Two years later, the company announced that its menu was “100 percent clean,” but the process was not an easy one.

Panera used thousands of labor hours to review the 450 ingredients used in menu items, eventually reformulating more than 120 of them to eliminate artificial ingredients. Once the team identified the ingredients that were not “clean,” they worked with the company’s 300 vendors—and in some instances, a vendor’s supplier—to reformulate an ingredient to make it preservative-free. For example, the recipe for the company’s popular broccoli cheddar soup had to be revised 60 times to remove artificial ingredients without losing the soup’s taste and texture. According to Shaich, the trial-and-error approach was about finding the right balance of milk, cream, and emulsifiers, like Dijon mustard, to replace sodium phosphate (a no-no item) while keeping the soup’s texture creamy. Panera also created a new cheddar cheese to use in the soup and used a Dijon mustard that contained unpreserved vinegar as a substitute for the banned sodium phosphate.

Sara Burnett, Panera’s director of wellness and food policy, believes that the company’s responsibility goes beyond just serving its customers. She believes that Panera can make a difference by using its voice and purchasing power to have a positive impact on the overall food system. In addition, the company’s Herculean effort to remove artificial ingredients from its menu items also helped it take a close look at its supply chain and other processes that Panera could simplify by using better ingredients.

Panera is not yet satisfied with its commitment to clean food. The food chain recently announced its goal of sourcing 100 percent cage-free eggs for all of its U.S. Panera bakery-cafés by 2020.

• How does Panera’s approach to clean eating provide the company with a competitive advantage?
• What kind of impact does this commitment to preservative-free food have on the company’s organizational structure?
• Does “clean food” put additional pressure on Panera and its vendors? Explain your reasoning.

Sources: “Our Food Policy,” https://www.panerabread.com, accessed July 24, 2017; Emily Payne, “Panera Bread’s Sara Burnett on Shifting Demand for a Better Food System,” Food Tank, http://foodtank.com, accessed July 18, 2017; Julie Jargon, “What Panera Had to Change to Make Its Menu ‘Clean,’” The Wall Street Journal, https://www.wsj.com, February 20, 2017; John Kell, “Panera Says Its Food Menu Is Now 100% ‘Clean Eating,’” Fortune, http://fortune.com, January 13, 2017; Lani Furbank, “Seven Questions with Sara Burnett, Director of Wellness and Food Policy at Panera Bread,” Food Tank, https://foodtank.com, April 12, 2016.

• Geographic departmentalization , which is based on the geographic segmentation of organizational units (such as U.S. and Canadian marketing, European marketing, and Latin American marketing).

People are assigned to a particular organizational unit because they perform similar or related tasks, or because they are jointly responsible for a product, client, or market. Decisions about how to departmentalize affect the way management assigns authority, distributes resources, rewards performance, and sets up lines of communication. Many large organizations use several types of departmentalization. For example, Procter & Gamble (P&G), the multibillion-dollar consumer-products company, integrates four different types of departmentalization, which the company refers to as “four pillars.” First, the Global Business Units (GBU) divide the company according to products (baby, feminine, and family care; beauty; fabric and home care; and health and grooming). Then, P&G uses a geographical approach, creating business units to market its products around the world. There are Selling and Market Operations (SMO) groups for North America; Latin America; Europe; Asia Pacific; Greater China; and India, the Middle East, and Africa. P&G’s third pillar is Global Business Services division (GBS), which also uses geographic departmentalization. GBS provides technology processes and standard data tools to enable the GBUs and SMOs to better understand the business and to serve consumers and customers better. It supports P&G business units in areas such as accounting and financial reporting, information technology, purchases, payroll and benefits administration, and facilities management. Finally, the divisions of the Corporate Functions pillar provide a safety net to all the other pillars. These divisions are comprised of functional specialties such as customer business development; external relations; human resources; legal, marketing, consumer, and market knowledge; research and development; and workplace services. 6

Line-and-Staff Organization

The line organization is designed with direct, clear lines of authority and communication flowing from the top managers downward. Managers have direct control over all activities, including administrative duties. An organization chart for this type of structure would show that all positions in the firm are directly connected via an imaginary line extending from the highest position in the organization to the lowest (where production of goods and services takes place). This structure, with its simple design and broad managerial control, is often well-suited to small, entrepreneurial firms.

As an organization grows and becomes more complex, the line organization can be enhanced by adding staff positions to the design. Staff positions provide specialized advisory and support services to line managers in the line-and-staff organization , shown in Exhibit 7.6 . In daily operations, individuals in line positions are directly involved in the processes used to create goods and services. Individuals in staff positions provide the administrative and support services that line employees need to achieve the firm’s goals. Line positions in organizations are typically in areas such as production, marketing, and finance. Staff positions are found in areas such as legal counseling, managerial consulting, public relations, and human resource management.

Concept Check

• How does specialization lead to greater efficiency and consistency in production?
• What are the five types of departmentalization?

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BUS402: Project Management

Organizational Structure

Read each of the four sections of this chapter on organizational structure. Having a basic understanding of organizational design will help you strategize risk management, project initiation, leadership, and more. What is the most important aspect of understanding organizational design you would take away from this section? Why?

Characteristics of Organizational Structures

Important characteristics of an organization's structure include span of control, departmentalization, centralization, and decentralization.

Learning Objectives

Key takeaways.

• Organizational structures provide basic frameworks to help operations proceed smoothly and functionally.
• Span of control refers to the number of subordinates a supervisor has; it is used as a means of ensuring proper coordination and a sense of accountability among employees.
• Departmentalization is the basis by which an organization groups tasks together. There are five common approaches: functional, divisional, matrix, team, and network.
• Centralization occurs when decision -making authority is located in the upper organizational levels. Centralization increases consistency in the processes and procedures that employees use in performing tasks.
• Decentralization occurs when decision-making authority is located in the lower organizational levels. With decentralized authority, important decisions are made by middle-level and supervisory-level managers, thereby increasing adaptability.
• span of control : The number of subordinates a supervisor has.

Span of Control

Departmentalization.

• Functional - departmentalization by common skills and work tasks
• Divisional - departmentalization by common product, program, or geographical location
• Matrix - a complex combination of functional and divisional
• Team - departmentalization by teams of people brought together to accomplish specific tasks
• Network - independent departments providing functions for a central core breaker

Centralization

Centralization allows for rapid, department-wide decision-making; there is also less duplication of work because fewer employees perform the same task. However, it can limit flexibility and natural synergies. Autonomy in decision-making is reserved for only a small number of individuals within the workforce, potentially limiting creativity .

Decentralization

What is an Organizational Chart

What do you want to do with organization charts.

An organizational chart shows the internal structure of an organization or company. The employees and positions are represented by boxes or other shapes, sometimes including photos, contact information, email and page links, icons and illustrations. Straight or elbowed lines link the levels together.  With our org chart software, this creates a clear visual depiction of the hierarchy and ranks of different people, jobs, and departments that make up the organization.

Organization Charts, Org Charts, Organograms, Organogram Charts

Organigrams, organigrammes, hierarchy charts.

8 minute read

Do you want to create your own organization chart? Try Lucidchart. It's fast, easy, and totally free.

In 1855, railway general superintendent Daniel McCallum (1815-1878) designed what is thought to be the first modern organizational chart. It was an illustrated diagram of the New York and Erie Railway. McCallum had it drawn up by draftsman and civil engineer George Holt Henshaw (1831-1891). McCallum, born in Scotland, also served as a Union major general in the Civil War. Henshaw, a Canadian, worked for waterworks and railway companies in Canada, the United States and Denmark.

The term “organizational chart” took another 50 to 60 years to come into common use. Consulting engineer Willard C. Brinton used the term in his 1914 textbook, Graphic Methods for Presenting Facts. He touted the value of the charts and said they should be more widely used. The charts were mainly used in engineering circles until the 1920s, when they began to find their way into the business world.

The lesser-known synonyms “Organigram” and “Organogram” came into use in the 1960s.

Organigraph

Types of organizational charts, hierarchical, matrix, hierarchical org chart, hierarchy chart, matrix org chart.

Flat Org Chart

Horizontal org chart, line relationships, chain of command, lateral relationships, solid lines, dotted lines, pros and cons of different organization types.

The types of organizations reflected in these chart types have advantages and disadvantages.  In a nutshell:

hierarchical, vertical, top-down organization

Matrixed organization, flat, horizontal structure, uses of org charts.

What is the best use for an organizational chart? No matter which layout you choose to use, Org Charts are useful for laying out relationships in your organization and ensuring that everyone knows how to communicate essential information.

You can use org charts for:

Organizational and supervisory communication

Restructuring, workforce planning, resource planning, getting more visual with organizational charts.

There are few rules with org charts, so any visual elements that help to communicate are fair game.

Using photos

Using different shapes and/or colors, using company logos or icons, using animations in powerpoint, using 3d shapes.

Limitations of org charts

They can quickly become out of date,, they show only formal relationships, they don’t reflect management style, organigraphs, the close relative of org charts, how to plan and draw a basic organizational chart / organogram, define your purpose and scope, gather the information, determine what platform you plan to use to build your chart, and how you plan to display it., plan for ongoing updates to the chart., more tips for organizational charts / organograms, try breaking down your org chart, the details of people or departments, you might use colors or shapes, use lucidchart's  org chart import  , how to make an org chart with lucidchart.

Want to create org charts that highlight your company’s culture? Choose a layout that works best for your structure, update a design with your company colors, and add employee photos to each role. You can even add links and videos to your document for some extra pizzazz. Try clicking on our  org chart templates and make it your own.

For a truly dynamic experience

Helpful resources.

• What is an org chart and how to create one
• How to make an org chart in Excel
• How to make an organizational chart
• How to make an org chart in Word

With drag-and-drop shapes, real-time collaboration and advanced sharing features, Lucidchart makes it easy to create your own org chart.

Module 14: Organizational Structure

What is organizational structure, learning outcomes.

• Discuss the elements of organizational structure

Organizational structure defines how job tasks are formally divided, grouped, and coordinated. The structure of an organization usually features six different elements:

• Work specialization

Departmentalization

• Chain of command
• Span of control
• Centralization and decentralization

Formalization

Practice question.

Now that we understand just what organizational structure is, let’s take a look at each one of its elements, so we can better understand how organizations choose to structure themselves to maximize productivity.

Work Specialization

Earlier, we studied Frederick Winslow Taylor, who researched time and motion and determined the most efficient ways for workers to do their tasks. Taylor’s “one right way” was the birth of work specialization. When Henry Ford conceived the assembly line, he tossed aside “one best way” and viewed work specialization with an eye toward continued improvement. Work specialization describes the degree to which activities in the organization are divided, and then subdivided, into separate jobs.

If you put one worker on the task of building an automobile, he might still be building it a month or two later. But if you have one worker that’s focused on installing right front tires, and another who is focused on left front fenders, then those tasks become standardized. Employees learn to do them quickly with practice.

By the 1940s, most manufacturers were practicing work specialization, or “division of labor” as it’s sometimes called. Work specialization was ideal from a task point of view—easy tasks could be done by unskilled labor, and those tasks that required more skill could be separated out and addressed by employees that possessed those skills. Those skilled employees weren’t wasting their time on tasks they didn’t have to be doing.

Work specialization was also ideal from a productivity point of view. Installation of brake pads requires different tools than the installation of a tire, and when workers were assigned to one of those tasks instead of both, tools didn’t need to be taken out and put away. Employees could cheaply be trained to do one specific task, and many employees, each trained to do their specific task, could assemble highly complex machinery quicker and easier than one highly trained employee that possessed all the skills to complete the assembly.

Manufacturers continued to tinker with and fine-tune worker specialization to increase productivity until the 1960s, when it became clear that a good thing could be taken too far. Boredom, stress, low productivity, increased absenteeism and turnover offset higher productivity. Manufacturers responded by enlarging worker specialization, including more tasks within a position to increase engagement.

Once jobs are divided up through work specialization, those jobs need to be combined together to coordinate common tasks. Departmentalization is the basis by which jobs are grouped together. Jobs can be grouped in the following ways.

• Function. This is among the most popular way to group activities. Corporations might have a supply chain function, a finance function, a human resources function. All the worker specializations for those areas are grouped together, and people with common skills work in common units.
• Product. A large manufacturing company might group its common tasks together by product. A paper products manufacturer might have a department for office paper, and other department for bathroom tissues, and yet another for cartons. The major advantage of organizing common tasks this way is to increase employee accountability for the success of those products.
• Geography. If an organization’s customers are scattered over a geographic region, an organization might choose to group common tasks geographically. A company that has a South, Midwest, and Eastern sales function is organizing around territory, or geography.
• Process. A manufacturing plant might choose to organize common tasks around process. A tubing plant might organize departments around casting, pressing, finishing, packaging, etc. Each department specializes in one particular part of the manufacturing process. The same kind of departmentalization is true of the Department of Motor Vehicles, where you proceed from one area to another to renew your license plates or your driver’s license.
• Customer. A business might choose to combine tasks around the type of customer it serves. For instance, a service like Dropbox.com has free file sharing and cloud storage for its individual users, but there is also a department of Dropbox that services business clients.

Large corporations can use any or all of these types of departmentalization to organize themselves. They might have a manufacturing area that organizes itself around process, but then a sales department that is organized geographically and a corporate support center that’s organized functionally.

Chain of Command

Two additional concepts go along with the idea of chain of command. The first, authority, describes the rights inherent in a managerial position to give orders and to expect the orders to be obeyed. The second, unity of command, describes the concept that a subordinate should only have one superior to whom he or she is directly responsible. If unity of command doesn’t exist, there’s a likelihood that a subordinate will be responding to commands from different people and experiencing a dilemma of competing priorities, which isn’t productive.

We learned about Henri Fayol and his theories around management, particularly chain of command and unity of command. These principles used to be a cornerstone of organizational structure, but advancements in technology and the trend toward empowering employees makes this less relevant today, but the chain of command element is not going to disappear any time soon.

Span of Control

Span of control deals with the number of subordinates a manager can effectively direct. The wider an organization can make its managers’ spans of control the more efficient it will be. Wider spans of control save money.

Consider the span of control of the company represented in the drawing above in blue. The blue company has 5,461 employees and six levels of managers to manage them (all but the bottom layer of 4,096). Let’s say those managers make $50,000 apiece. The total payroll for 1,365 managers making $50,000 apiece is $68,250,000.

If we look at the green company, we still have a bottom layer of 4,096, but less managers overall managing them. If the green company’s 585 managers each make $50,000, the green company’s total payroll for those managers is $29,250,000. That’s a huge savings.

Small spans of control are not only expensive, but they tend to complicate communication up and down the organization. The more layers, the more the message has to travel from manager to manager. Narrower spans of control also encourage overly tight supervision and less employee creativity and empowerment. In recent years, the trend has been toward wider spans of control.

Centralization and Decentralization

Centralization refers to the degree to which decision making is concentrated at a single point in the organization.

In a decentralized organization, employees are empowered to make decisions, so action can be taken quickly to solve problems, and employee input is considered. The more lower-level employees have the power to make decisions, the more decentralized an organization is.

In a centralized organization, upper management makes all decisions and lower management is there to carry those decisions out.

Formalization refers to the degree to which jobs within the organization are standardized. An employee in a highly formalized job has little input as to how that job is done, when it’s done or how it should be done.

A worker on the assembly line is probably in a highly formalized job, where he doesn’t have much say in how he does his job. An accounts payable associate also doesn’t have a lot of say in how those many invoices are processed, but her job is probably a little less formalized than the assembly line worker. A sales associate, out calling on customers, may have very little formalization in his job.

Now that we understand the six elements that figure into organizational structure, let’s take a look at some common configurations of organizational structure and in what instances they are used.

• What is Organizational Structure?. Authored by : Freedom Learning Group. Provided by : Lumen Learning. License : CC BY: Attribution
• Image: Span of Control. Provided by : Lumen Learning. License : CC BY: Attribution
• Organization Chart. Authored by : Gerd Altmann. Provided by : Pixabay. Located at : https://pixabay.com/illustrations/organization-chart-1989132/ . License : CC0: No Rights Reserved . License Terms : Pixabay License
• Chain. Authored by : Peggy and Marco Lachmann-Anke. Provided by : Pixabay. Located at : https://pixabay.com/illustrations/chain-strong-protection-1027864/ . License : CC0: No Rights Reserved . License Terms : Pixabay License

Organizational Structure

What Is an Organizational Chart?

Last updated: May 11, 2023

Table of contents

What is an organizational chart?

Different org charts, hierarchical org chart, functional org chart, matrix org chart, divisional organizational structure, flat org chart, the benefits of having an org chart, how do i make an org chart, collect the information you need.

An org chart does more than organize your team’s roles & relationships. Learn about the types of org charts, what they’re used for, and how to create your own.

An organizational chart is an important tool for every company — no matter the size. Having a clearly defined org chart can improve communication, increase your chances of turning candidates into colleagues, and convey transparency to the world around you.

An org chart can also be helpful in identifying issues, prioritizing resources, and making the right decisions. But what is an organizational chart, what are its benefits, and how do you create one? In this article, we’ll answer all of those questions.

Let’s dive into it!

An organizational chart is a visual representation of how your organization is structured. Company organizational charts show the reporting relationships between employees, managers, and executives within teams, departments, or divisions.

Companies can be structured in many different ways, so there are several different types of organizational charts. Some are divided by skill and designed with centralized control for making the best decisions, while others encourage collaboration and distribute autonomy to enable faster decisions. Let’s take a closer look at different types of organizational charts.

A hierarchical organizational chart is the most common and traditional way of structuring a company. A hierarchical organization is pyramid-shaped with the CEO at the top. The higher up on the chart, the more decision-making power.

Hierarchical org charts have a clear chain of command, as every employee reports to their functional manager above them in the hierarchy. Communication flows from the top down.

This type of organizational structure is found in companies such as Amazon, Walmart, and Coca-Cola where a clear chain of command is necessary for making the right decisions. Contrarily, this structure is rarely seen in startups. Startups will often implement a flatter structure to move faster and avoid the bureaucracy that can arise in the layers of middle-management.

In a company that operates under a functional organizational chart, employees work in different departments, each having a functional head. Unlike a hierarchical chart, employees are organized by their expertise rather than by decision-making authority.

As each employee is not individually managed, functional organizational designs allow for more flexibility and autonomy within each department, while still keeping a short chain of command to the head of each department.

A matrix organizational chart is defined by employees reporting to both their functional manager above them in the hierarchy _and _a cross-functional manager at a horizontal level in the organization. The functional manager oversees the employee generally, while the cross-functional manager supervises the employee on specific projects.

Matrix-style structures enable collaboration horizontally across different departments and teams while also keeping a clear chain of command vertically in the organization. Matrix org charts are adopted by companies such as Google, Microsoft, and Apple.

In a divisional organizational structure , the company is divided into different divisions. Departments each have their own focus, such as a specific product, market, or geographical location.

Divisional org structures are like small companies within a big company. Each division is responsible for its own operations, thus having its own marketing, sales, finance, and other departments. Employees report to the head of the division that reports to the executives.

This model enables flexibility and adaptability to market changes. However, it can also have downsides. It can require more effort in maintaining clear internal communication and lead to inefficiency due to duplicated efforts in different divisions.

Flat organizational charts are often found in startups. This type of company org chart aims to limit bureaucracy by removing the layers found in a hierarchy chart. This allows for a short chain of command from staff to decision-makers.

An example of a company that has delayered — i.e. flattened their organization — is Valve. The video game company used to operate with a traditional hierarchy, but the founder, Gabe Newell, found this structure to hinder innovation and implemented a flat structure to increase employee autonomy.

Let’s go over a few of the other benefits of creating an organizational chart for your company:

• Creating an org chart can help you get your priorities straight

As we have learned, different organizational charts have different goals. In trying to achieve these goals, the company is structured to prioritize a certain outcome and will often have to compromise on other areas.

A hierarchical org chart , for example, prioritizes a clear chain of command and centralized control at the top of the pyramid. This will often result in thought-out decisions that have been refined through the layers but it comes with the price of slower decision-making processes.

On the contrary, **a flat company organizational chart **distributes decision-making by giving more autonomy to each employee to make decisions faster. It is often found in startups that are willing to compromise on the quality of the decision to move faster and with more flexibility.

To create an org chart, you’ll need to settle on an organizational structure. This process will force you to define your priorities, make compromises, and maybe rethink your entire organizational design to foster innovation by delayering or by adding more management to increase control.

• Use the org chart to improve your company

Once you have created an org chart, you have a complete overview of your organization. This will make it easier to not only identify challenges but also provide solutions.

Say your engineering department isn’t meeting deadlines. Using your org chart, you can pinpoint exactly where the problem arises.

You may discover that there’s miscommunication between employees and a manager, which means that you need to change the reporting structure or make efforts to improve communication. Or maybe you find out that the engineering team is understaffed. Your org chart can then be helpful in identifying exactly where a project manager is needed so you can allocate resources to solve the issue.

• Show the world who you are

Startups are constantly competing to hire the best talent. With the same old recruiting emails, you’re going to get the same old results. More than 400,000 companies have their org chart publicly available on The Org . The platform helps companies turn candidates into colleagues and has a 40% higher response rate from candidates than traditional recruitment outreach.

Showcasing your team is great for hiring purposes as talent can clearly see how they fit into your org. At the same time, it’s valuable to potential and existing customers, who can easily find the person within your organization relevant to their inquiry.

Furthermore, there’s a symbolic byproduct of having a publicly available organizational chart: by clearly showing how your company is structured, you convey organizational transparency which can increase trust in your company.

An org chart is a helpful way for potential customers and candidates as well as internal executives, managers, and employees to learn about your company. However, choosing the right structure for your company requires some effort.

Follow these steps to create your own org chart:

• Choose the right organizational structure

To start, you need to find the right fit for you among the different types of organizational charts.

Startups will often choose an org chart that prioritizes fast decision-making, cross-collaboration, and fewer expenses for managers. This is often a flat organizational structure.

Middle-sized or innovative, large companies are often seen employing a matrix-style organizational structure that allows for collaboration but also prioritizes a high level of management.

Larger, traditional companies will be more inclined to operate under hierarchies. This organizational structure prioritizes a clear chain of command, department-based collaboration, and multiple layers of management.

Tip: Not sure which structure fits you? Check out our article: “Which Organizational Structure Fits You? Pros and Cons of Different Types of Organizational Structures”

In order to create an organizational chart of a company, you’ll need the following information:

• **Your organizational structure. **Flat, functional, hierarchical, matrixed, or divisional?
• **Names & job titles. Collect the **names, titles, and preferably pictures of every employee within the organization.
• **Departments. **Which departments make up your company? Outline it and add employees to the individual departments, teams, or divisions.
• Reporting relationships. Who reports to whom? This information will be central in the organizational chart as it shows the connections between employees, teams, and decision-makers.

When you have collected the data and completed the steps, head over to The Org. Here , you’ll be guided to finalize and publish your org chart for the world to see.

The ORG helps you hire great candidates

Free to use – try today

Which Org Structure Fits You?

Matrix organizational structure, flat organizational structure, functional organizational structure.

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Blog Graphs and Charts What Is An Organizational Chart? 12+ Org Chart Examples & Templates

What Is An Organizational Chart? 12+ Org Chart Examples & Templates

Written by: Jeilan Devanesan Jul 06, 2023

When you think of organizational charts, what often comes to your mind is probably the top-down, pyramid-like organizational chart of large companies.

I’m sure you’ve seen something like this before:

Of course, this is just one type of business organizational chart that exists today for organizations big and small.

Ever wondered how those organizational charts speak volumes about a company’s vibe and values? Well, that’s what I’ll help you figure out today.

I’m going to break down what business organizational charts are, share plenty of neat examples and show you how to design your own using an Organizational Chart Maker or awesome organizational chart templates .

Click to jump ahead:

What is an organizational chart, 15 organizational chart examples.

• 4 types of organizational charts

How to create an organizational chart in Venngage

An organizational chart is a visual representation of a company’s internal structure . Also known as organograms or org charts, these assets show how teams and departments are organized, showcase relationships across an organization and each individual’s role and responsibilities.

Here’s an example of an organizational chart:

Just so you know, some of our templates are free to use and some require a small monthly fee. Sign up is always free, as is access to Venngage’s online drag-and-drop editor.

What is the purpose of an organizational chart?

An up-to-date organizational chart serves several important functions.

This infographic highlights the five benefits of an organizational chart:

• Shows who is responsible for decision-making
• Allows everyone to understand the chain of command
• Allows employees to get to know each other
• Makes it easy to visualize changes
• Highlights a brand’s values and culture

Let’s take a closer look at each of the benefits:

• An organizational chart helps potential investors/shareholders understand who is steering the ship With an organizational chart, investors can easily see who is in the leadership team and the talent, skill and experience powering an organization. Thus, an org chart is a great way to reassure stakeholders that a business is in good hands.
• An organizational chart helps the entire organization understand the chain of command From process flows, approval flows and other types of decisions, a business organizational chart helps everyone understand the processes (really, the logic) behind them. A clear organizational chart is almost necessary for every employee onboarding process .
• An organizational chart helps new hires get to know fellow employees An org chart helps staff learn who owns which areas, who senior staff members are and the types of departments that exist within the organization. More importantly, they can better understand how their own role fits into the current organizational structure .
• An organizational chart helps people understand how changes within a company impact them As organizations grow or downsize, people are promoted, moved to different teams/departments, asked to report to new executives and so on. An organizational chart reflects these changes in leadership, team responsibilities and who everyone reports to.
• An organizational chart is a great way to communicate your brand Organizational charts today are designed to demonstrate an organization’s values and philosophies. The organization’s stance on hierarchy, collaboration, inclusivity and other concepts are visualized here.

Now, let’s take a look at some organizational chart examples you can use your business.

The majority of these examples feature hierarchical org charts, but you can add or delete branches to create other types of org charts as well.

Vertical smart organization chart example

This vertical corporate structure chart uses dynamic colors to differentiate the teams and their reports.

This extreme vertical format works well for smaller corporate structures or for departments within a larger organization.

Note : An organizational chart such as the one above can be easily customized in the Venngage editor. Click on the sections you want to add and the items will be duplicated so you can make edits. When you more text, the shape automatically resizes to fit. You can also apply formatting from one shape to another or all the branches with the ‘Formatting’ button in the menu. Sign up is free!

Corporate vertical organizational chart example

This vertical organizational chart helps employees understand who they report to, who their peers report to and the responsibilities everyone has.

Although the layout itself is minimal, the shapes and colors bring life to the design.

It looks professional, incorporates branded design and provides something more engaging to employees.

You can also use icons to differentiate between departments in organizational chart designs. This will especially help new hires understand right away what they’re looking at.

Simple vertical organizational chart example

For a more modern look and feel, check out this alternate take on a healthcare organizational chart.

It incorporates a digitized background design and a flat color palette.

Bold vertical organization chart example

When designing your own organizational chart, it’s important to group employees together who report to the same manager/executive.  

It’s up to you how you visualize those connections.

One method is to use lines and nodes for a typical layout.

Or, as in this vertical organizational chart example, you can use a legend and a varied color palette to indicate the reporting structure.

Modern vertical organizational chart example

An organizational chart can also be more than a breakdown of reporting relationships.

This organizational chart includes contact information for individual staff. This is especially helpful for new employees or when communicating across departments.

This is a memorable way to show the connections between departments and team members and it makes a statement.

Learn more: Venngage for Healthcare Organizations

Vibrant functional smart organizational chart example

If choosing a design style for your organizational chart feels challenging, consider your organization’s brand guidelines .

It can provide you the style and color inspiration you need to get started.

Marketing organizational structure example

In this example, the organizational chart is broken down by function and it’s clear the chief marketing officer oversees the marketing department.

Blue functional organizational chart example

Another option is to apply a unique color for each department or function.

This will help whoever is reading the organizational chart find exactly what they’re looking for. Otherwise, you’ll many tables that look exactly the same and it take more time to understand.

Generally, a traditional marketing organizational structure is broken down by departments.

You have teams entirely dedicated to areas like branding, communications and digital. It’s also important to identify teams that marketing relies on – like customer success and developers .

With the use of a vibrant color palette, you can clearly identify each department and who belongs in each. It’s easier to scan and follow over angular lines, especially in more complex organizational structures.

This blue functional organizational chart example is broken down in a similar way. The layout is just set to landscape and reads from left to right.

Notice how this organizational chart design makes use of employee headshots?

That’s especially helpful to new employees.

With the rise of remote work and remote employee onboarding, you may not always share an office or break room with fellow co-workers so headshots in a organizational chart is a simple way to help folks get acquainted.

Vertical organizational chart examples 

A vertical organizational chart, or hierarchical chart, is the traditional org chart you see in many organizations.

The layout positions the CEO at the top, with those report directly below and so on.

The goal of a vertical organizational chart is to present reporting relationships between employees.

Here’s an example vertical corporate structure chart for Apple. You can see it’s a very typical hierarchical chart with lots of layers of leadership.

It’s clear who reports to whom in upper-management at a glance.

Companies like Apple also have unique roles such as the Environment, Policy and Social Initiatives executive, or the Apple University Dean.

Plotting these types of roles in a business organizational chart is essential as it indicates where these roles fall in terms of hierarchy, who they answer to and what their responsibilities are.

Another aspect of a vertical organizational chart are the organizational functions. This is often referred to as a functional organizational chart .

Inbound marketing organizational structure example

In a presentation by Hubspot on creating agile teams, they shared a breakdown of how their (powerhouse) marketing department is structured.

The breakdown is by specific functions/objectives, channels and relevant metrics.

You’ll also notice that there is no clear reporting structure because the objective of this chart design is to highlight how the marketing team operates.

This is what a functional organizational chart can look like within a department.

The functions are defined as teams and channels. Your own organizational chart design will probably look different since it depends on the types of channels your marketing team is divided into.

Vertical divisional organizational chart example

This divisional organizational chart is broken down into its separate business areas of focus.

This type of organizational structure applies to larger organizations with divisions that are geographical, product-focused, industry-focused, market-focused or anything along those lines.

You’ll see that each division has its own marketing team, sales team and services team and they operate independently of one another and have all the same functions.

Horizontal organizational chart examples

The horizontal organizational chart, or flat organizational chart, is for organizations with little to no middle management or supervisory roles.

Simple horizontal organization chart example

Flat organizational structures can share the same layout as vertical organizational structures, but there are fewer executive and managerial levels.

The horizontal organizational chart example above also uses a landscape orientation.

This helps to emphasize the lack of hierarchical tiers and the extended role of management. While it is just a design choice, it communicates how the organization is structured at a glance.

Valve, the popular video-game developer, is proud of the flat organizational structure they’ve built.

Here’s how they visualize their organizational structure in their employee handbook. They include a few quips as well.

This is a fun way to understand Valve’s views on hierarchy, structure and collaboration. It’s clear there is a level of camaraderie and togetherness they aspire for.

It’s also a great example of presenting an organization’s brand and culture through documentation.

Rather than just a flat organizational structure with minimal hierarchy, Valve aspires for a completely collaborative organization with no hierarchy at all.

Within a horizontal organizational structure, managers will have a higher set of responsibilities and more direct reports than a typical manager.

This means a marketing manager may have designers, product people, support staff and others who don’t necessarily fall into “marketing” as reports, too.

Lean marketing organizational structure example

Github has a lean marketing organizational structure.

The VP oversees many areas, but they are not layered with upper and middle management. Instead, the teams are small and collaborative.

It’s always helpful to mimic your organizational structure in the design of your organizational chart. Reduce the number of tiers and group teams together in the way that makes the most sense.

In Github’s lean marketing structure, you can see where responsibilities overlap, those teams share a color code.

These color palettes can carry over into project sprints and tasks that get tracked in applications like Trello and Asana! It’s a great way to maintain consistency in all your corporate communications.

Matrix organizational structure examples

The matrix organizational chart combines traditional organizational structures.

A matrix organizational chart ties in project planning needs by pairing project managers with interdisciplinary teams.

That means the chart needs to highlight departmental or functional managers and their direct reports, as well as project managers and their reports. 

Here’s a detailed look at the layout and reporting structure of a matrix organizational chart:

There is a clear vertical functional structure with functional managers lining the top row. 

But project managers work with employees from each function and so form a parallel column to the employees in each function.

In this layout, the tiny squares highlight which employee in each function reports to a project manager.

The simplest way to indicate reporting relationships here is through the use of arrows or lines and aligning the correct staff vertically with their managers and horizontally with their project managers.

The matrix organizational structure is necessary for large organizations that have multiple projects going on and need collaboration across departments.

Nike’s organizational structure gets a lot of praise and it happens to be a matrix organizational structure.

Creative organizational chart examples

Many organizations experiment with the structure of their company.

Whether it’s a desire for faster decision-making, smarter experimentation, clear channels of communication, improved accountability or something else, how your organization is structured makes the difference.

Startups and major corporations alike often adopt creative organizational structures that achieve a goal.

Let’s take a look at some of these types of organizational charts.

Spotify’s organizational chart example: Tribes, squads and guilds

Spotify, the well-known audio-streaming service, is known for its unique tribe organizational structure.

Due to its growth and success, many startups have tried to adopt the same organizational structure, or some variation of it and make it work for them.

At a glance, it may seem strange and overly complex. But the organizational structure facilitates the communication and collaboration Spotify needed (and still needs) to grow quickly and reliably.

It starts with a tribe and its tribe leads.

They lead the squads that oversee different areas of the product. Across the squads, in each tribe, you have chapters that facilitate communication between the squads and chapter leads.

Of course, there are numerous tribes across the organization.

They work fairly independently of one another on a wide range of things that may or may not overlap.

As these individuals learn from new experiences, problems, outcomes and so on, they need to share information, tools, code and best practices.

These folks form guilds which include members across tribes. People can also belong to multiple guilds.

Spotify’s tribal organizational structure is meant to cut down on bureaucracy, which naturally builds as a company grows to hundreds or thousands of staff.

This way Spotify can still collaborate effectively as an organization, deliver projects sooner, implement changes faster, grow better and behave in a far more responsive manner.

You can also see from the way the organizational charts are arranged, there is an emphasis on fluidity within the structure, rather than rigidity.

Zappos organizational chart example: Holacratic organizational structure

Zappos is an online shoe and clothing retailer. They’re also known for having a unique culture and organizational structure.

They share insights on their approach to structure on Zappos Insights . This includes the fact that they are a holacracy.

A holacracy has a decentralized leadership, rather than one concentrated in an individual or handful of people.

It aims to distribute power typically reserved to executives across an organization to all employees.

It rejects the notion of hierarchy completely. The benefit is that it enables regular staffers to put forth ideas, collaborate with other employees and work with minimal restrictions.

Here’s an example of what a holacratic organizational chart looks like:

You can see right away there aren’t any lines, columns or rows like in the previous organizational chart examples.

Employees belong in a space that is shared, brought together in areas of specific functions and tasks.

A complete holacratic organizational chart would be a cluster of super-circles representing departments or functions, with smaller groups of circles for specific areas.

What are the 4 different types of organizational charts? 

To best visualize org structure and communicate your company’s chain of command, you can create an organizational chart for any of these four types of organizational structures : vertical (or hierarchical), horizontal (or flat), matrix and creative .

Let’s take a closer look at each one:

Vertical organizational chart (hierarchical organizational chart)

This is the most common type of organizational chart.

A vertical — or hierarchical — organizational chart has the person with the most power at the top and those with less power underneath and when combined, it forms a pyramid shape.

Here’s an example of a hierarchical organizational chart:

Horizontal organizational chart (flat organizational chart)

The horizontal org chart (or flat org chart) visualizes an organizational structure with little or no level of middle management.

This means it contains only two levels: the top administrators and the workers.

Here’s an example of a flat organizational chart:

Matrix organizational chart

The matrix organizational chart combines vertical and horizontal organizational structures.

It integrates a top-down vertical organizational structure that highlights reporting relationships with the flexibility of a flat organizational structure where cross-department teams report to project managers.

Here’s an example of a matrix organizational chart:

Creative organizational chart

The creative organizational chart applies to organizations with unconventional structures like Spotify (tribes, squads, guides) or Zappos (Holacratic organizational structure).

As an online visual communication tool, creating any type of organizational chart can be done in minutes. 

First, go ahead and set yourself up with a free Venngage account . This will let you access organizational chart templates and use our editor.

It’s not a trial and doesn’t require any payment info.

Next, head over to our organizational chart templates and choose a template that looks appealing to you.

Then, in the editor, access neat features to customize your organizational chart design.

Apply your branding, add organizational sections and levels, upload employee headshots and include a range of icons for an engaging design.

With Venngage’s Smart diagrams, you can edit, add and duplicate sections of your organizational chart with the click of a button.

You can also change the formatting to your brand colors and apply the same to any or all shapes in the diagram.

When choosing color palettes or fonts, keep accessible design  principles in mind.

You want an organizational chart that anyone can read and comprehend with ease.

Get started with Venngage for Business

Creating an organizational chart may just be the latest in your visual communication needs. To align and organize your teams through visuals more effectively, check out Venngage for Business .

• Easily design organizational charts, infographics, presentations, data visuals and so much more
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Frequently asked questions

Do small businesses need organizational charts.

The short answer is yes, absolutely. When organizations are just getting started, or fairly small, there is a tendency to share the load across team members. However, it can lead to a lack of clarity about who owns what areas, what everyone’s individual responsibilities are and how to measure individual performance.

In small organizations, a defined corporate structure chart highlights everyone’s key responsibilities, holds them accountable and allows them to manage their workload without burning out.

For additional resources for planning and organizing your teams or even company, check out these blog posts:

• 40+ Mind Map Templates to Help You Visualize Ideas
• How to Write a Comprehensive Project Plan [with Templates]
• 10 Tips for Effective Communication with a Remote Team
• How to Use Visual communication: Definition, Examples, Templates

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Understanding Organizational Charts: Types, Benefits, And Uses

Organizational charts are visual representations of a company’s structure, depicting the relationships between individuals, departments, and positions within the organization.

They provide a clear overview of the hierarchy, reporting lines, and communication channels within a company.

This guide aims to provide a comprehensive understanding of organizational charts, their types, benefits, and how to create them effectively.

Definition and Background

An organizational chart, also known as an org chart or organogram, is a graphical representation of an organization’s structure.

Charts showcases the roles, responsibilities, and relationships between different individuals and departments.

Organizational charts capture the complexity of an organization, enabling teams and stakeholders to understand the chain of command, decision-making processes, and communication flows.

Organizational charts are essential for several reasons.

Firstly , they help employees and stakeholders comprehend the structure of the organization, including reporting lines and departmental relationships. This understanding fosters effective collaboration and communication within the company.

Secondly , org charts assist in identifying gaps or overlaps in roles and responsibilities, enabling organizations to optimize their structure and improve efficiency.

Lastly , organizational charts aid in succession planning, as they provide a clear overview of the hierarchy and potential career paths within the organization.

Types of Organizational Charts

• Hierarchical Organizational Chart : This is the most common type of org chart, representing the traditional top-down structure with clear reporting lines and levels of authority.
• Matrix Organizational Chart : Matrix charts depict a dual reporting structure, where employees report to both a functional manager and a project manager. This type of chart is suitable for organizations with cross-functional teams.
• Flat Organizational Chart : Flat org charts have minimal levels of hierarchy, promoting a decentralized decision-making process and a more collaborative work environment.
• Divisional Organizational Chart : Divisional charts group employees based on products, services, or geographical locations. Each division operates as a separate entity with its own hierarchy.
• Team-Based Organizational Chart : Team-based charts focus on showcasing teams and their interdependencies, rather than individual roles. This type of chart is useful for organizations that emphasize teamwork and collaboration.
• Network Organizational Chart : Network charts represent relationships between individuals or departments in a non-hierarchical manner, highlighting collaboration and information flow.
• Circular Organizational Chart : Circular charts use a circular layout to represent the organization’s structure, with the CEO or top management positioned at the center and other departments radiating outward.

Why Companies are Interested in Organizational Charts

Organizational charts are of great interest to companies for several reasons.

Firstly , they provide a visual representation of the company’s structure, making it easier for employees to understand their roles, responsibilities, and reporting lines. This clarity fosters effective communication and collaboration, leading to improved productivity and efficiency.

Secondly , organizational charts help identify bottlenecks and inefficiencies within the organization. By analyzing the chart, companies can identify areas where decision-making processes are slow or where there is a lack of coordination. This insight allows organizations to streamline their operations and optimize their structure.

Furthermore , organizational charts aid in succession planning and talent management. By visualizing the hierarchy and career paths, companies can identify potential leaders and develop strategies for their growth and development.

Lastly , organizational charts are valuable for external stakeholders, such as investors, clients, and partners.

They provide a clear understanding of the company’s structure and capabilities, facilitating effective communication and decision-making.

10 Ways to Get Started with Organizational Charts

• Define the Purpose : Clearly define the purpose of creating an organizational chart. Determine whether it is for internal use, external stakeholders, or specific projects.
• Gather Information : Collect relevant information about the organization’s structure, including roles, reporting lines, and departments. Consult with key stakeholders to ensure accuracy.
• Choose the Right Type : Select the appropriate type of organizational chart that best represents your organization’s structure and goals.
• Identify Key Positions : Identify the key positions and roles within the organization that need to be included in the chart. This ensures that the chart accurately reflects the hierarchy and reporting lines.
• Determine Reporting Relationships : Clearly define the reporting relationships between positions and departments. This information is crucial for accurately representing the organization’s structure.
• Use Visual Elements : Utilize visual elements such as shapes, colors, and lines to enhance the clarity and readability of the organizational chart.
• Update Regularly : Organizational charts should be regularly updated to reflect any changes in the structure, roles, or personnel within the organization.
• Share and Communicate : Share the organizational chart with relevant stakeholders, ensuring that it is easily accessible and understandable. Use it as a communication tool to foster transparency and clarity.
• Train Employees : Provide training and guidance to employees on how to interpret and use the organizational chart effectively. This ensures that everyone understands the structure and their place within it.
• Seek Feedback : Encourage feedback from employees and stakeholders to continuously improve the organizational chart. This feedback can help identify areas for refinement and ensure its accuracy and usefulness.

Each of these best practices is important as they contribute to the accuracy, clarity, and usability of the organizational chart.

By following these steps, organizations can create effective org charts that serve as valuable tools for communication, decision-making, and organizational optimization.

Common Framework for Organizational Charts

A common framework for organizational charts typically includes the following elements:

• Position/Role : Each position or role within the organization is represented in the chart.
• Reporting Lines : The reporting relationships between positions, departments, and levels of authority are clearly depicted.
• Hierarchy : The hierarchy within the organization is represented, showcasing the levels of authority and decision-making.
• Departmental Structure : The different departments or divisions within the organization are visually represented, highlighting their relationships and interdependencies.
• Communication Channels : The organizational chart may include information about the communication channels and flows between different positions or departments.

Examples of Organizational Charts in the Workplace

• Traditional Hierarchical Chart : This chart showcases a top-down structure with clear reporting lines and levels of authority. It is commonly used in large corporations with a formal organizational structure.
• Matrix Chart : This chart represents a dual reporting structure, where employees report to both a functional manager and a project manager. It is suitable for organizations with cross-functional teams.
• Flat Organizational Chart : This chart depicts a decentralized structure with minimal levels of hierarchy. It promotes collaboration and a more agile decision-making process.
• Divisional Chart : This chart groups employees based on products, services, or geographical locations. Each division operates as a separate entity with its own hierarchy.
• Team-Based Chart : This chart focuses on showcasing teams and their interdependencies, highlighting the importance of collaboration and teamwork.

Developing Concept Maps

Concept maps can be developed alongside organizational charts to provide a more comprehensive understanding of the organization’s structure and relationships.

Concept maps visually represent the connections between different concepts, ideas, and processes within the organization.

They can be used to capture complex relationships, dependencies, and workflows that may not be easily represented in a traditional org chart.

Features and Benefits of Organizational Charts in Corporate Learning Settings

Organizational charts offer several benefits in corporate learning settings:

• Clarity and Understanding : Organizational charts provide a clear visual representation of the company’s structure, helping employees understand their roles, responsibilities, and reporting lines.
• Identifying Experts and Mentors : Org charts help employees identify experts and mentors within the organization, facilitating knowledge sharing and learning opportunities.
• Career Development : By visualizing the hierarchy and career paths, org charts assist employees in understanding potential growth opportunities and career development within the organization.
• Collaboration and Communication : Organizational charts promote effective collaboration and communication by showcasing reporting lines and departmental relationships.
• Succession Planning : Org charts aid in succession planning by identifying potential leaders and developing strategies for their growth and development.

How to Create an Org Chart

Creating an organizational chart can be done using various tools and methods:

• Manual Creation : Organizational charts can be created manually using software such as Microsoft PowerPoint or drawing tools. This method allows for customization but may be time-consuming and less flexible for updates.
• Org Chart Software : Utilize specialized org chart software that provides pre-designed templates, drag-and-drop functionality, and automatic updates. This method is efficient and allows for easy customization and sharing.
• Online Collaboration Tools : Use online collaboration tools that offer org chart features, allowing multiple team members to contribute and update the chart in real-time.

When creating an org chart, consider the organization’s structure, goals, and the intended audience. Ensure that the chart is clear, accurate, and regularly updated to reflect any changes within the organization.

Organizational charts are valuable tools for understanding the structure, roles, and relationships within an organization.

They capture complex structures, facilitate effective communication and collaboration, and aid in decision-making and organizational optimization.

By following best practices and utilizing appropriate tools, organizations can create org charts that enhance clarity, transparency, and efficiency within the workplace.

If you are looking to start delivering your own training courses and workshops, be sure to check our corporate training material.

Team Charter Meeting: A Guide To Bringing Success To Your Team

Make The Most Of Your Team With The RACI Chart

Understanding Maslow’s Hierarchy Of Needs: A Path To Self-Actualization

Project Charter: A Guide To Effective Project Management

Developing Strong Organizational Structure Skills For Business Success

10 Effective Ways To Train Employees On Safety Topics

Creating Concept Maps: A Step-by-Step Guide

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What is an Organizational Chart: Definition, Purpose, Types, Creating One

Organizational charts are visual representations of a company's structure that depict the relationships among employees, departments, and functions. These charts are a vital tool for any business to help understand the inner workings of the organization, and they play an essential role in strategic planning, decision-making, and resource allocation.

In this article, we will delve into the topic of organizational charts, exploring their types, purposes, benefits, and the process of creating them. We will also provide insights into how to use organizational charts effectively to promote better communication, collaboration, and productivity in the workplace. So whether you are a business owner, a manager, or an employee, read on to learn more about how organizational charts can help you achieve your organizational goals.

What is an organizational chart?

An organizational chart is a visual representation of an organization's structure that displays the relationships between its different parts. This diagram is used to communicate the organization's hierarchy and how it operates. Organizational charts come in different types and can be created using various methods. The purpose of an organizational chart is to provide a clear visualization of the organization and its components, making it easier for people to understand how it functions.

What is the purpose of an organizational chart?

The primary purpose of an organizational chart is to provide an easy-to-understand visualization of an organization's structure and relationships between its various parts. It serves as a communication tool to help people comprehend the organization's hierarchy and to convey its structure to others. Organizational charts come in many different types and can be created using different methods. They are beneficial for both managers and employees, as they can help clarify roles and responsibilities, and demonstrate how different departments and teams fit together. Additionally, organizational charts can be useful for planning and decision-making purposes.

Organizational chart types with examples

Organizational charts come in various types, each representing a different way to illustrate an organization's structure. The four primary types are functional, matrix, hierarchical and flat. Let us explore each type in more detail:

1. Functional Org Chart

The functional organizational chart is one of the most common types used by businesses. This chart groups employees by their function or job role, showing how different departments or teams within an organization work together towards a common goal. For example, all the marketing employees would be grouped together, all the sales employees would be grouped together, and so on. The functional chart is ideal for organizations that have a clear hierarchy and a well-defined chain of command. It is often used in manufacturing and healthcare industries, as well as in companies with a clear product or service line. By using a functional organizational chart, businesses can improve communication and ensure that each employee is aware of their role and responsibilities within the organization

2. Matrix Org Chart

The matrix organizational chart is a unique type of organizational chart that shows the relationships between employees in a matrix organization. In a matrix organization, employees report to two or more bosses, creating a complex web of relationships. A matrix organizational chart can help to illustrate how different departments or teams interact with each other and show the flow of authority and responsibility within the organization. This type of chart is useful for companies that work on multiple projects simultaneously or in different geographic regions. The matrix organizational chart can be challenging to manage, but it offers several benefits, such as increased flexibility, improved communication, and better resource allocation. By using a matrix organizational chart, companies can improve collaboration and teamwork across departments, resulting in better performance and productivity.

To create a matrix org chart, you will need to start by identifying the key information that you want to include. This may include the employees' job titles, departments, and the projects they are working on. Next, you will need to compile a list of all the employees in the organization and their roles. Once you have this information, you can begin to create the chart, which should show the relationships between employees and their multiple bosses.

3. Hierarchical Org Chart

This type of chart is useful for displaying the chain of command and showing how different departments and teams are related. It is typically organized with the CEO or president at the top and department managers underneath. The hierarchical org chart can help employees understand their role within the organization and how decisions are made. However, it can also be rigid and may not reflect the actual working relationships between employees. Businesses that use a hierarchical org chart include government agencies, corporations, and non-profit organizations. By using a hierarchical organizational chart, businesses can provide clarity on their organizational structure and chain of command.

4. Flat Org Chart

The flat organizational chart is a simple type of org chart that is commonly used in small startups. In a flat org chart, there are no formal divisions or job roles, and everyone reports directly to the CEO or founder of the company. This structure allows for quick decision-making and flexibility, as everyone is involved in all aspects of the business. The flat org chart can be useful in startups where employees need to work together closely and be aware of what everyone else is working on. However, as the company grows, it can become more difficult to manage, and there may be a need for more formal roles and responsibilities.

What to do before you start to make an org chart?

Before you create an organizational chart, it's important to do some preparation. Start by understanding the purpose and different types of organizational charts. Next, gather the necessary information, such as the names and titles of employees, as well as the structure of your company. Once you have this information, you can begin creating your organizational chart.

To make the process of creating an org chart easier, identify the main levels of your organization and determine the sub-levels within each level. Then, decide what information you want to include in each box of your chart, such as job titles and responsibilities. Finally, use a drawing program to create your chart. Some examples of drawing programs include Microsoft Visio, Google Drawings, and Lucidchart.

Define the purpose of the chart

The purpose of creating organizational charts is to provide a visual representation of the structure of an organization, including the roles and responsibilities of its employees or departments. Organizational charts can help to clarify reporting relationships, lines of communication, and the hierarchy of decision-making within an organization.

Organizational charts can also be used to:

Aid in communication: By providing a clear and concise representation of the organization's structure, an organizational chart can help to improve communication among employees, teams, and departments.

Assist in decision-making: An organizational chart can help managers and leaders to understand the roles and responsibilities of each employee or department, and to make informed decisions about resource allocation, delegation, and performance management.

Facilitate organizational change: When an organization undergoes changes such as restructuring, expansion, or downsizing, an updated organizational chart can help employees to understand how their roles and responsibilities may be affected.

Provide a sense of direction and purpose: Organizational charts can help employees to understand the overall goals and objectives of the organization, and how their individual roles fit into the larger picture.

Gathering data

The data can be sourced from various outlets, such as the company's employee directory, job descriptions, and past organizational charts. The more information you collect, the easier it becomes to create an efficient and well-structured chart.

After gathering the data, organize it in a logical manner to simplify the creation process. Creating a spreadsheet that encompasses all of the necessary details can be useful in identifying patterns and connections between various data pieces.

Now that you have your data organized, it's time to start creating your organizational chart!

How to make an organizational chart?

Once you have decided on the type of chart you want to use, as mentioned in the previous section, you will need to gather information about the organization. This includes the names and titles of employees, as well as their roles and responsibilities. You may also need to include information about the organization's structure, such as the number of levels in the hierarchy or the number of employees in each department.

If you want to create a more complex chart, you can use a software program that specializes in creating organizational charts. These programs usually have a variety of templates that you can choose from, and they often allow you to add your own text and images.

When creating an organizational chart, it is important to make sure that it is accurate and up-to-date. You should also make sure that the chart is easy to understand and use.

Make an org chart with Microsoft Word

If you need to create an org chart for your business or organization, Microsoft Word has a built-in tool that you can use. Here's how:

• Open Microsoft Word and click on the "Insert" tab.
• In the "Illustrations" group, click on the "SmartArt" button.
• From the list of SmartArt graphics, choose the "Hierarchy" layout.
• Click on the "OK" button.
• The Hierarchy SmartArt graphic will be inserted into your document.
• To add your own text, click on a frame in the SmartArt graphic and start typing.
• To add more shapes, click on the "Add Shape" button in the "Create Graphic" group.
• When you're finished, click on the "Design" tab and then select your preferred layout from the Layout options

Make an org chart with SmartDraw

An org chart is a great way to visualize your company's structure and see who reports to whom. SmartDraw makes it easy to create an org chart. Just enter your information in the default template and watch as SmartDraw creates a professional-looking chart for you.

Make an org chart with Lucidchart

You can create an org chart in Lucidchart with a template or by importing your employee data. It’s possible to collaborate and change positions. With org chart software, large organizations will have structures and relationships between departments that are easy to read. For an online organization chart, you can take advantage of Lucidchart’s editing control. Employees can have view-only access for information they need but only the administrator can edit the organizational chart.

How to make your org chart better?

First, assess the intended purpose of the chart. Determine whether it is solely meant to showcase the organization's structure or if it should also provide functional and informative details. If the latter is the case, consider incorporating additional information into each box, such as the name and contact information of the person holding that role, along with descriptions of their team or department's function.

Another effective way to make your org chart more useful is to color-code it. This can assist individuals in identifying the relevant teams or departments for specific tasks, streamlining workflow processes. For instance, different colors can be utilized to differentiate between sales, marketing, and customer service departments.

Lastly, it's crucial to keep your org chart updated regularly. As your organization evolves and expands, so should your org chart. This ensures that everyone within the organization has access to the most current and accurate information, thus improving the overall functionality of the chart.

What is the difference between an organizational chart and organizational network analysis (ONA)?

An organizational chart is a visual representation of the hierarchical structure of an organization, showing the different job titles, roles, and reporting relationships within the company. It typically uses boxes and lines to show who reports to whom and how different departments or teams fit together.

On the other hand, Organizational Network Analysis (ONA) is a methodology that uses network science to analyze how people and teams within an organization are connected and how they interact with each other. It identifies informal communication and collaboration networks that are not necessarily captured by formal organizational charts. ONA maps out the relationships between employees and how they work together, showing the patterns of communication, collaboration, and influence within the organization.

ONA has become a crucial methodology for managers, consultants, and researchers alike. This is because it enables the mapping of employee trust networks and identifies opportunities to enhance communication and feedback processes within the organization.

At OrgMapper, we develop a network map that illustrates how people connect to each other in various ways. This includes who trusts, motivates, and inspires whom, who seeks advice, news, or support from whom, and more. Such data is essential for gaining a deeper understanding of communication and collaboration across different levels of the organization, such as business units, departments, locations, and hierarchy levels. Consequently, the network map generated by ONA may differ significantly from traditional organizational charts.

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Representation for Planners [Module 1]

One task of an urban planner is to grapple with and understand a series of complicated processes that directly affect the organization and experience of place. Social, cultural, political, and economic forces all influence the complexity of a site. The planner must interpret these forces, arrive at a position in response to them, and make them legible to a wide array of stakeholders. Beyond the proposed plan and strategy, another critical contribution of the planner is to communicate, persuade, and be an agent for reaching consensus among competing agendas.

While urban planners need to communicate through a variety of means, visual representation of abstract concepts and processes is a skill needed to speculate and make intelligible ideas on the future of urbanism and the environment. Effective visualizations not only support verbal proposals but can stand alone as standalone artifacts that communicate new information to their audience.

In the service of these various roles, Representation for Planners provides first semester urban planning students with the graphic and technical skills needed to reason, design, and communicate. Students will learn the basics of visual representation and gain familiarity with the technical tools essential for making maps and exploring relationships in the physical, regulatory, and demographic dimensions of the built environment. Additionally, we will use computer software and modeling tools, such as Adobe Photoshop, Illustrator, InDesign, and SketchUp to distill ideas into effective graphic presentations. Each program presents opportunities to communicate visual information in different ways and, over the course of the class, workflows to operate between programs will be reinforced. Students will learn how these techniques can be used as part of the planning process itself and communicate with broader audiences.

The general structure for each week is as follows—on Tuesdays, a conceptual underpinning of representation will be presented with specific examples. Students will engage a specific exercise on Thursday classes synthesizing the representational techniques presented on Tuesday with the software skills introduced. Readings will also be discussed at the beginning of class.

This half-semester module works in tandem with Course 2128, Spatial Analysis.

Digital twins: The art of the possible in product development and beyond

Industrial companies around the world rely on digital tools to turn ideas into physical products for their customers. These tools have become increasingly more powerful, flexible, and sophisticated since the 1960s and 1970s, when computers first began replacing drawing boards in design offices. Today, product life-cycle management (PLM) has become engineers’ first language: PLM systems help companies to capture, codify, process, and communicate product knowledge across their organizations.

About the authors

This article is a collaborative effort by Mickael Brossard , Sebastien Chaigne, Jacomo Corbo, Bernhard Mühlreiter , and Jan Paul Stein, representing views from McKinsey’s Operations Practice.

Yet as engineering tools have become more capable, the demands placed upon them have also increased. Product functions are increasingly delivered through a combination of hardware and software. Sensors and communications capabilities allow products to offer more features and to respond more effectively to changing operating conditions and user requirements. Advanced, adaptable user interfaces have simplified the operation of complex and sophisticated machines.

Evolving business models are also blurring the boundaries between design and use. Customers expect the performance and functionality of products to improve during their life cycle, enabled by over-the-air software updates or the ability to unlock new features as needed. Many products operate as part of an ecosystem of related products and services. Increasingly, customers are not buying products outright, but paying for the capabilities they provide on a per-use or subscription basis.

The birth of the digital twin

These changing requirements have triggered a transformation in digital product representation and the creation of a new tool: the digital twin. Digital twins combine and build upon existing digital engineering tools, incorporating additional data sources, adding advanced simulation and analytics capabilities, and establishing links to live data generated during the product’s manufacture and use. A conventional PLM system uses one digital model to represent each variant of a product. A digital twin, by contrast, may have one model for each individual product, which is continually updated using data collected during the product’s life cycle.

The digital-twin approach can be applied to products, manufacturing processes, or even entire value chains. In this article, we will focus on their application to products, specifically to product design.

Digital twins offer multiple potential benefits for product-based companies and users. They can aid design optimization, reduce costs and time to market, and accelerate the organization’s response to new customer needs. Digital twins can also be a critical enabler of new revenue streams, such as remote maintenance and support offerings and “as a service” business models.

Based on the experience of companies that have already adopted the approach, we estimate that digital-twin technologies can drive a revenue increase of up to 10 percent, accelerate time to market by as much as 50 percent, and improve product quality by up to 25 percent. Digital-twin technology  is becoming a significant industry. Current estimates indicate that the market for digital twins in Europe alone will be around €7 billion by 2025, with an annual growth rate of 30 to 45 percent. 1 Infinium; MarketsandMarkets; MarkNTel Advisors; Meticulous Market Research; Mordor Intelligence; SBIS; Technavio, last accessed April 2020.

Digital twins in practice

Companies in many different industries are already capturing real value by applying digital twins to product development , manufacturing, and through-life support (exhibit).

An automotive OEM, for example, has used the digital-twin approach to create a concept configurator for early phase development . The start of the development process is especially challenging for complex products because the various stakeholder groups, such as sales, engineering, and finance, may have different or even contradictory product requirements. The OEM now balances these trade-offs using a digital concept configurator that allows for simultaneous evaluation of customer requirements, technical concepts, and product costs. When a technical concept within a system or subsystem of the product is changed, the implications for meeting customer requirements or product cost targets become immediately transparent.

Would you like to learn more about our work in Product Digital Twins ?

Using the configurator within cross-functional development teams has helped the OEM to reallocate 5 to 15 percent of a new vehicle’s material costs to the attributes that drive the most customer value. Applying the approach to select customer-facing components has allowed the company to optimize costs and customer value simultaneously, improving the contribution margin of those parts by 5 to 10 percent. As a further benefit, the configurator helped the team reduce the time taken to reach agreement on changes by 20 percent, thus accelerating time to market.

Digital twins are even being used to replicate systems in complex mission scenarios. Using this approach, one aerospace and defense player has cut the time required to develop advanced products by 30 to 40 percent. The digital twin also aids discussion with customers during the development process, helping the company validate and improve its designs.

In the consumer electronics sector, a company is using product digital twins to boost quality and supply chain resilience . It stores detailed information on the content of its products, including the exact source of individual components. In the event of quality issues during production or early failures in the field, the company can trace problems back to specific supplier facilities, then take appropriate action to prevent reoccurrence of the issue. An automotive supplier uses the same approach to trace quality deviations in its production through to the upstream supply chain, and in the process has reduced scrap by 20 percent.

Digital twins are increasingly being used to improve future product generations . An electric-vehicle (EV) manufacturer, for example, uses live data from more than 80 sensors to track energy consumption under different driving regimes and in varying weather conditions. Analysis of that data allows it to upgrade its vehicle control software, with some updates introduced into new vehicles and others delivered over the air to existing customers.

Developers of autonomous-driving systems , meanwhile, are increasingly developing their technology in virtual environments. The training and validation of algorithms in a simulated environment is safer and cheaper than real-world tests. Moreover, the ability to run numerous simulations in parallel has accelerated the testing process by more than 10,000 times. Incorporating sensor data from real-world vehicles into these tests helps companies improve the veracity of their simulations and identify blind spots in the virtual test database.

The mainstreaming of additive manufacturing

A company in the renewable-energy sector is using a digital twin to automate, accelerate, and improve the engineering of hydroelectric turbines . Using the machine learning system to evaluate the likely performance of the new designs allowed it to rate more than a million different designs in seconds rather than the hours required for conventional computational flow dynamics (CFD) analysis. The winning geometry delivers the maximum theoretical performance, significantly higher than what is achievable by conventional optimization methods. Moreover, by using machine learning, the overall end-to-end design cycle time was cut in half compared with the conventional approach.

Digital twins in three dimensions

Digital twins can take many different forms. Organizations that want to take advantage of digital-twin technologies must select an appropriate form that will enhance its technical and business objectives. The design of a digital twin can vary across three dimensions (exhibit).

The first dimension encompasses the value chain steps that the digital twin will cover. An engineering twin covers value chain steps similar to those covered by conventional PLM systems, ranging from product definition to detailed engineering. A production twin replicates a product throughout the manufacturing process, incorporating data such as the components, materials, and process parameters used, as well as the results of tests and quality checks. A service twin incorporates data collected from the product in use, such as operating modes, performance, diagnostic information, and maintenance history. The most sophisticated digital twins span multiple parts of the value chain, allowing in-service data to optimize manufacturing processes or future design iterations.

The second dimension is the scope of the digital twin. A product may consist of several major systems, multiple subsystems, and hundreds or thousands of hardware and software components. Some digital twins cover only one or several components, for example, those that simulate the flow of liquids through a pipe. Others cover a full product, for example, those that simulate a car’s crash characteristics. Given the limitations of computing power, generally, the narrower the scope of a digital twin, the more precise its virtual replica will be. In contrast, full-product digital twins often need to abstract or simplify certain product behaviors to remain manageable.

The final dimension of a digital twin is its degree of sophistication . The simplest digital twins consist of various sources of data relating to a product, often from sources that have few or no links with one another. The second level of sophistication uses traditional simulation tools to perform analyses of design performance and integrate the various sources through a PLM system or similar platform.

At the third level of sophistication, a digital twin will use predictive or prescriptive analytics, as well as machine learning technology to run automated simulation refinements and yield new insights. This allows design and manufacturing teams to make informed decisions based upon direct results and performances.

At the last level of sophistication, digital twins use predictions of component failure rates or performance variations to react to changing environments and manipulate the real-world counterpart in a closed-loop setup. This approach might be used in a condition monitoring system, for example, where sensor data and simulations are combined to make inferences and predictions about the state and behavior of a specific product, and might allow a machine to compensate for wear or variations in operating conditions by adjusting parameters in real time.

Companies in other sectors are also starting to use digital twins to derive deeper insights into customer behaviors and preferences . For example, white-goods manufacturers can use data from in-service products to identify the most and least used features. That can inform future product development decisions, such as deleting rarely used features or revising the user interface to make the features more accessible.

The adoption of digital twins is currently gaining momentum across industries, as companies aim to reap the benefits of various types of digital twins. Given the many different shapes and forms of digital twins (see sidebar, “Digital twins in three dimensions”), and the different starting points of each organization, a clear strategy is needed to help prioritize where to focus digital-twin development and what steps to take to capture the most value.

How to start and succeed on your digital-twin journey

Embarking on a digital-twin journey can look daunting at first sight, especially since the breadth and depth of use cases can span the entire corporate landscape, including product portfolio choices, business model design, R&D, manufacturing, and through-life support.

This versatility can also be a strength, however, as it allows companies to start small and expand the scope, sophistication, and value-chain coverage of their digital-twin projects over time. The experience of companies that have applied digital twins in their own product operations leads to a few simple rules that can greatly increase your odds of success.

Define your aspirations

Be aware of digital-twin best practices. Do your homework and seek out perspectives on best practices and future trends in digital-twin technology. Assess and prioritize the elements of your vision. Evaluate the potential of digital-twin-related opportunities and prioritize them into an implementation road map.

Be clear about the business case. Quantify the value offered by different digital-twin opportunities and determine the minimum level of model sophistication required to generate that value. Successful projects focus on short development times and rapid ROI.

Test the waters by prototyping select use cases. Run a series of hackathons (possibly supported by digital-twin specialists) to assess your capabilities’ baseline, develop solution prototypes, refine, and adjust the initial concepts. This step calibrates the approach and prevents you from losing time and resources by attempting an impossible plan. It is part of a broader value assurance move aimed at bringing the entire project to a successful conclusion.

Know your strengths

Perform a maturity assessment. Understand your current digital product development capabilities along six main dimensions: development methodologies, PLM governance, data strategy, business processes, system complexity, and collaboration. Understanding the areas where you are most advanced and where you are lagging behind will help prioritize areas of investment for a balanced implementation of a digital twin and its use cases.

Access to appropriate talent and capabilities can make or break a digital-twin initiative. Many organizations need to develop additional expertise in areas such as advanced simulation and modeling or data analytics for user experience design.

Plan a step-by-step, agile implementation

Invest several months in developing a minimum viable product (MVP). Incubate a cross-functional, agile team dedicated to bringing priority use cases to life and building digital capabilities in the process. The MVP is now the must-do approach to maximize value gains from the start rather than waiting until the program is finalized before experiencing the first benefits.

Perform an MVP retrospective to pivot or persevere. Derive lessons from the first MVP phase to confirm your digital-twin aspirations or pivot them based on the findings (for example, the validity of use cases, complexity of implementation, and maturity of the organization). This is the second value assurance move that enables you to further calibrate the implementation plan and revise the scope to avoid generating sunk costs.

Scale up the digital-twin initiative and accelerate ROI. Optimize and standardize implementation based on insights from the MVP phase. Define an (internal or external) recruiting and capability-building strategy. Build an operating model to enable rapid scaling of successful approaches. The most advanced organizations typically consider digital-twin technologies a core strategic capability.

By following these simple best practices, you will be able to reap the benefits of digital twins in a scalable, progressive way. Are you ready?

Mickael Brossard is a partner in McKinsey’s Paris office, where Sebastien Chaigne is an associate partner; Jacomo Corbo is a partner in the London office; Bernhard Mühlreiter is a partner in the Vienna office; and Jan Paul Stein is an associate partner in the Munich office.

The authors wish to thank Roberto Argolini, Elia Berteletti, Kimberly Borden, Akshay Desai, Hannes Erntell, Alessandro Faure Ragani, Anna Herlt, Mark Huntington, Mithun Kamat, Michele Manzo, and Alessandro Mattozzi for their contributions to this article.

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Health Equity Expert Values AAPI Heritage Month as Chance to Advocate for Diversity in Clinical Trials

Blog May 15, 2024

Ruma Bhagat, MD, MPH, Senior Director for Global Health Equity and Population Science, Genentech

In recognition of May being Asian American and Pacific Islander (AAPI) Heritage Month , ACRP reached out for some thoughts on the importance of the event to Ruma Bhagat, MD, MPH, Senior Director for Global Health Equity and Population Science at Genentech, where she leads cross-organizational efforts that advance health equity and inclusive research by broadening the scientifically driven representation of understudied patients in research. A member of the ACRP Diversity Advisory Council and a physician by training in San Mateo, Calif., in her nearly 19-year career with Genentech, she has focused on innovation, Good Clinical Practice, project management, and design thinking. At the recent ACRP 2024 conference, she presented on “ Partnering with Community Health Centers to Diversify Study Enrollment .”  

ACRP: Can you share some details on where you grew up, what you studied, how you first got drawn into clinical research, and what kind of duties you have now?  

Bhagat: I’m a first-generation immigrant to the U.S. I grew up in India, completed my medical schooling, and after a year in clinical care I came to the U.S. to complete my masters in public health with a focus on international health systems management. I embarked on this journey aimed at making a substantial impact on healthcare systems, especially in the realm of health equity. Transitioning from clinical care to public health and then clinical research helps in bringing a multifaceted approach to addressing healthcare challenges.  

My focus on international health systems management coupled with a passion to improve access to clinical trials and innovative therapies is grounded in my commitment to ensuring that healthcare reaches those who need it most, regardless of demographic, geographic, or socioeconomic barriers. At Genentech, a member of the Roche group, my role is to bridge the gap between healthcare research and real-world application, particularly in marginalized communities. Advocating for increased access to clinical trials and innovative therapies leads to promoting quality care and contributing to the broader goal of health equity.  

ACRP: What does AAPI Heritage Month mean in your personal and professional life?  

Bhagat: AAPI Heritage Month is a time to celebrate and honor the rich cultural diversity, contributions, and achievements of Asian Americans and Pacific Islanders in various fields, including technology, arts, science, literature, and beyond. Personally, it’s an opportunity for me to reflect on the cultural heritage of the AAPI community and deepen my understanding of its history, traditions, and experiences. Professionally, it’s a chance to amplify AAPI voices, promote inclusivity, and advocate for equity and representation in clinical trials.  

ACRP: From what you’ve seen, can you characterize how active persons of AAPI heritage are as professionals and participants in clinical research in the U.S. versus what would be an ideal situation? What can/should ACRP and similar organizations do to address any gaps in this area?  

Bhagat: From my experience, people of AAPI heritage are active professionals in clinical research in the U.S.; however, there is underrepresentation and barriers for certain groups within the AAPI umbrella in leadership positions and in specific areas of research. There is also  disparity  in representation in clinical trials for the AAPI community.  

The AAPI community is diverse and encompasses a wide range of cultures, languages, and backgrounds. To address any gaps in representation and participation, organizations like ACRP and others focused on the clinical research enterprise can take several steps:  

• Diversity and Inclusion Initiatives: Implementing robust diversity and inclusion initiatives to ensure equitable representation of AAPI individuals at all levels of the organization and in clinical research teams.  
• Outreach and Engagement: Actively reaching out to AAPI communities to increase awareness of clinical research opportunities, provide education about the importance of research participation, and address any cultural or linguistic barriers that may exist.  
• Mentorship and Leadership Development: Establishing mentorship programs and leadership development initiatives specifically targeted toward AAPI professionals in clinical research to support their career advancement and foster a pipeline of future leaders.  
• Cultural Competency Training: Providing cultural competency training for clinical research professionals to ensure that they are sensitive to the needs and perspectives of AAPI participants and colleagues.  
• Collaboration and Partnerships: Partnering with AAPI community organizations, academic institutions, and other stakeholders to collaborate on research projects, community outreach efforts, and advocacy initiatives.  

By actively addressing these areas, stakeholder organizations can help to create a more inclusive and equitable environment for AAPI professionals and participants in clinical research, ultimately advancing the collective goal of improving health outcomes for all communities.  

ACRP: Are there often clinical trials sponsored by Genentech, or in your area in general, that are or could be conducted to adequately serve the local AAPI population in terms of conditions that affect them more than other populations? For any that are conducted, is patient recruitment/outreach for persons of AAPI heritage a well-developed process or more of a challenge each time?  

Bhagat: Historically, there has been underrepresentation of minority populations, including AAPI individuals, in clinical trials. This underrepresentation can stem from various factors, such as cultural barriers, language barriers, lack of awareness, and mistrust of the healthcare system. Recruiting and outreach efforts for clinical trials targeting the AAPI population can be both a well-developed process and a significant challenge, depending on various factors. Efforts to improve representation often involve community engagement, culturally sensitive outreach strategies, language accessibility, collaboration with community organizations and leaders, and targeted education campaigns to raise awareness about the importance of clinical research.  

Efforts to enhance AAPI representation in clinical trials are ongoing, with initiatives aimed at increasing diversity in research participation and addressing barriers to recruitment and retention. These efforts are crucial for advancing health equity and ensuring that healthcare interventions are effective for all populations, including the AAPI community.  

In closing, I am proud of my AAPI heritage and journey from India to the U.S., coupled with my diverse educational background and professional experiences, which equip me with a unique perspective and skill set to navigate the complexities of healthcare systems and drive meaningful change.  

Edited by Gary Cramer  

Miami, Florida

Data Professional Reflects on Her ‘Journey Back into Clinical Research’ During AAPI Heritage Month

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