An organizational chart (org chart) is a visual aid used to clarify who reports to who, and who is responsible for what in your organization. It typically shows the business owner or department head at the top. It can be in the format of a drawing, diagram, flow chart, or picture. Most are stored as an electronic document, and often they’re printed and distributed to staff.

In this article, we’ll show you how to create an organizational chart. We’ll also share some tools to easily create org charts, find organizational chart templates, and suggest creative approaches for communicating your organizational structure.

Two Types of Organizational Charts With Samples

For the purpose of managing your small business, there are really only two types of org charts you’ll need to know about:

• Hierarchical/Top Down
• Matrixed/Cross-Functional

1. Hierarchical/Top Down Organizational Chart

A hierarchical, or top down, organizational chart is a diagram that shows an organization’s reporting structure from the top down, starting with the business owner or department manager at the top of the chart, and employees who report to her appearing below her name. All roles appear in boxes connected by a line to illustrate reporting relationships.

Most small businesses will use a hierarchical organizational chart because it’s the simpler of the two types. If your business is very basic (i.e. you and a few staff members who all report to you), you would have a simple top down chart with you at the top and your employees below. It’s a bit more complicated when you begin to add supervisory staff and department heads, but the basic idea is the same.

Here’s a sample organizational chart drawn in Organimi:

2. Matrixed/Cross-Functional Org Chart

A matrixed, or cross-functional, organizational chart shows multiple reporting relationships. It is used to depict complex business organizational structures with functional or project reporting relationships in addition to supervisory (top down, hierarchical) relationships. It shows both supervisory relationships such as ‘who is my boss’, as well as project or team relationships.

For example, in a small marketing firm that manages client projects, employees report both to their supervisor and provide deliverables to their project managers. This type of firm would benefit by using a matrixed, or functional, org chart.

Here’s a sample matrixed/functional org chart built using Organimi:

Free & Paid Tools To Create An Organizational Chart

Often, you can find free tools and templates online  to make an organizational chart, or even available features within your existing systems like MS Office or your HR or Payroll system. Alternatively, you can find org chart software as a paid service. Let’s review some of our favorite options.

Free Organizational Chart Tools

• Organimi – Org chart software with easy drag-and-drop functionality. It includes a free version and paid options. A Fit Small Business, we use Organimi to create and update our org chart.
• MS Office – You can create an Org Chart in several MS Office products if you’re already using the MS Office Suite in your business.
  • In MS Word, once you have a document open, choose Insert>Smart Art>Organizational Chart. Instructions can be found here.
  • In MS Powerpoint, you can insert text boxes and lines to draw your own org chart or search for free org chart online templates
  • In Excel, Powerpoint, and Word, you can also download a free Organizational Chart add in

• Google Slides – A simple presentation and drawing program that allows you to create an org chart and optionally add thumbnail photos of your employees to your org chart.
• HR/Payroll System – If you currently use an HR or Payroll system, some of those systems like Justworks, SAP/Success Factors, or Zenefits can provide an org chart using employee data already in your system. You can see our buyers guides here.
• Free Internet templates – Just input “free org chart template” into your browser search bar and you will find plenty of free downloadable templates. However, be aware that most of the free template sites require you to provide an email address before allowing you to download their free org charts. Once you have the template, manually input names, job titles and other information into each box, save and print. Some sites we found with a nice selection of templates are Canva, Vertex42, and FormSwift.

Paid Organizational Chart Tools

You can expect to pay between $5 to $15 dollars a month for paid software that allows you to create organizational charts. The paid sites are great if you have a rapidly growing business, you’re going to be making lots of org charts, or need to create other diagrams in addition to org charts, like flowcharts and process maps. Some of these paid sites have free trials but require you to share your email address.

We recommend Organimi to create your org chart, and have used it ourselves at Fit Small Business. They have a free version as well as paid options. We also review other organizational chart software in our article Best Org Chart Software, one of over 150 buyer’s guides we offer.

What To Include In Your Organizational Chart

Depending on the reason you’re creating an org chart, each placeholder can include as little as a name and title, or as much information as you can squeeze into each little box. Our recommendations for most org charts are to include in each position box:

• Name (leave name blank if position is open)
• Department (for example, ‘sales/marketing’, ‘accounting’, ‘operations’)
• Role or Job title (for example, ‘sales rep’, ‘supervisor’,‘clerk’ or ‘acct mgr’)
• Optional:
  • Location (use if employees are geographically diverse, i.e., NY, TX, CA, or if you have multiple buildings)
  • Contact Information
    • Phone (work phone extension or cell phone)
    • Email (work or home email to be used for business contact)
  • Photo/head shot

Why Your Small Business Needs An Organizational Chart

You don’t have to have an org chart, but as an HR best practice, we recommend you do.

There are several reasons why your small business may need an org chart:

• • To improve communication across departments and teams
  • To save time by clarifying who does what
  • To demonstrate to business associates (banks, finance partners) that your business is structured for success and that you have people filling crucial roles
  • To help you plan for growth & transition

An organizational chart is just a tool, like a phone list, to improve communication by clarifying your reporting structure. It saves time so that employees, especially new ones, don’t have to ask, “who is our IT person?”, “who can I ask a question about my employee benefits?” or “who does my boss report to?”.

Org charts are also often important if you are applying for financing — as investors, banks, lenders, and the SBA may want to see how your organization is structured to ensure it’s likely to be successful and your business can pay back a loan.

In fact, we recommend an HR best practice of having two versions of your org chart, one showing current employee reporting relationships (to share with your staff), and one that shows how your organization will be structured when you grow/expand, or when a staff member leaves. The second version of your org chart will likely have unfilled positions in it – placeholders for positions you hope to hire in the future. Here is an example:

How To Use An Organizational Chart

An org chart is all about your employees and business partners having access to the information they need. A best practice is to provide employees with a copy of the org chart upon hire, showing where they fit in the organizational structure. From the employee point of view, they need to know:

• Who they report to
• Who is on their team
• Who to escalate an issue to
• Who to contact for questions

Keep your org chart up to date by requiring someone in your office — you, your office manager, or your HR representative — update the org chart every time you process a new hire or termination. Just like the office phone list – if it’s not up to date, it’s not helpful.

Use Caution If Sharing Your Org Chart

One word of caution: other than sharing your organizational chart with employees, or including your org chart in your business plan or loan docs, be careful about letting outsiders access your org chart. Here are a few reasons:

• Other businesses might try to ‘poach’ your talent!
• The chart could be misused by marketers who might spam your team members

Consider asking your team members to keep the org chart, like other company proprietary information, confidential and private. You don’t want to lose your top talent to a competitor because they happened across a copy of the org chart and recruited them.

3 Nontraditional Approaches For Your Org Chart

Since an org chart is a tool, not a legal document per se, why not have some fun with it and get creative? Below are some ideas that not only provide the information, but inject a little personality into your org chart:

1. Photos: Obtain an image/photo of each employee. Arrange the images into their reporting structure on a wall or table. Take a photo of the final arrangement and send to each employee. Or take a group photo with employees holding signs showing their job title, and arranged into their reporting teams and post it on the wall.
2. 3×5 Cards: Use 3×5 cards on your office bulletin board with each employee’s name, job role, and contact info to provide a visual hierarchy right in your office.
3. Sticky notes: Use sticky notes in your break room to show who reports to who, and list their expertise and contact info on each note.

Bottom Line: How To Create An Organizational Chart

Before spending valuable office time creating an org chart, ask yourself, do you really need one? If you have 2 employees and they both report to you, you probably don’t. But once you begin to hire more staff, an org chart is helpful. We recommend you keep your org chart simple at first. For instance, you can create an org chart on one page using Organimi or any word or presentation software, like MS Powerpoint. Then update it by adding or deleting boxes, lines or text.

Whatever you choose to do, don’t forget to keep your org chart current as your business grows — jobs, people, and responsibilities change. Your org chart will likely increase in complexity as you go from 3 employees to 15 to 50…so save that first one you scribbled on the back of a napkin — you might look back on it with nostalgia one day.