Why every business owner should have an organisational chart
Matt Byrne
Director
Summary
As someone who works with businesses of all sizes, I can tell you that having an organisational chart is crucial to any business, whether it’s a small mum-and-pop shop or a large corporation. An organisational chart is simply a visual representation of your business’s hierarchy, outlining the relationships between departments, roles, and individuals. It may seem like a small detail, but it’s essential to the smooth functioning and growth of any business.
For a small business, an organisational chart may be a straightforward diagram that outlines the key roles and responsibilities of each employee, while larger companies may have more intricate charts that reflect their complex organisational structure. Regardless of the size of your business, an organisational chart is equally important.
Now, let’s talk about why every business owner should adopt an organisational chart. In 2018, AIM conducted a survey of over 500 Australian businesses, and the results showed that businesses with an organisational chart were more likely to achieve their strategic objectives compared to those without one. Specifically, the study found that businesses with an organisational chart were:
%
More likely to achieve their strategic objectives than those without one.
%
Reported that it had a positive impact on their ability to manage their business effectively.
%
Reported that it had a positive impact on their ability to communicate effectively with employees.
%
Reported that it had a positive impact on their ability to manage change effectively.
What does that mean for your bottom line?
Let’s take a hypothetical example:
Meet Sarah
Sarah runs a small business making handmade soaps and candles. For the first few years, Sarah operated without an organisational chart, and things were manageable. But as her business grew, chaos ensued. Employees stepped on each other’s toes, and sales started to drop. Sarah was spending more time trying to put out fires than focusing on growing the business.
Then, Sarah decided to create an organisational chart. She clearly outlined everyone’s roles and responsibilities, and suddenly, things started to fall into place. Employees knew exactly what they were responsible for, and there were no more misunderstandings or duplication of effort. Sarah was able to focus on growing the business, and sales started to pick up.
By creating a clear organisational chart, Sarah was able to achieve several positive outcomes that had a significant impact on her business and financials.
Identify inefficiencies in her business and streamline processes:
By creating an organisational chart, Sarah was able to visualize the various roles and responsibilities within her business. This helped her identify areas where processes could be streamlined, such as eliminating redundant tasks or optimizing workflow between different teams. By improving efficiency, Sarah was able to reduce costs and increase profitability.
Increased Profitability = (Reduced Costs + Improved Efficiency)
Assign roles and responsibilities to her employees, leading to better collaboration and less conflict:
With a clear organisational chart, Sarah was able to assign specific roles and responsibilities to each of her employees. This helped avoid confusion and conflict between team members, as everyone had a clear understanding of their individual duties and how they fit into the larger organisation. By promoting better collaboration, Sarah was able to improve the overall productivity of her business.
Evaluate employee performance more effectively and identify potential leaders within the organisation:
By having a clear understanding of the roles and responsibilities of each employee, Sarah was able to evaluate their performance more effectively. She could easily identify areas where employees were excelling and provide feedback where improvement was needed. Additionally, Sarah was able to identify potential leaders within the organisation, who could be groomed for future management positions.
Make informed decisions about future hires and promotions:
By having a clear understanding of the roles and responsibilities within her business, Sarah was able to make informed decisions about future hires and promotions. She could identify the specific skills and qualifications needed for each role, and ensure that new hires or promotions aligned with the overall strategy and structure of the business.
Delegate tasks and responsibilities, freeing up more time for business growth:
With a clear understanding of each employee’s role and responsibilities, Sarah was able to delegate tasks more effectively. This freed up more of her time to focus on strategic planning and business growth, which helped her achieve her long-term goals. By delegating effectively, Sarah was able to build a more sustainable and scalable business.
According to a study conducted by the Harvard Business Review, delegating tasks can improve employee engagement, increase job satisfaction, and lead to better overall organisational performance.
Without an organisational chart, Sarah’s business may not have been able to survive. Chaos would have continued, leading to low employee morale, increased turnover, and ultimately, a decline in sales. Having a clear organisational chart helped Sarah to build a more effective and successful business.
Final Thoughts
Overall, having a clear organisational chart can improve a business’s efficiency, reduce costs, and increase profitability. It helps businesses make better decisions, ensures that their employees are working effectively, and identifies areas where they can improve.
So, what are you waiting for? Whether you’re a small business owner or a CEO of a large corporation, developing an organisational chart is crucial to your success. It may seem daunting, but it’s worth the effort. And if you need help getting started, I offer business advisory services to help you take your business to the next level.