As a startup, planning is critical for a likelihood of success. One key portion of planning is a business plan. While creating your business plan, you should include a small business organizational chart. This lays out each area of the business and how every department connects. The work you put it will help you make necessary business decisions. The organizational chart will help you give a clear concept for a smooth workflow.
Purpose of an Organizational Structure
Before designing your small business organizational chart, let’s review organizational structure. Reference for Business states your organizational structure should communicate the goal of your business. It should also show how your business will meet the goal based on who takes on each role. Even as a small business, clearly communicate responsibilities so no task falls short.
Types of Organizational Structures
The organizational structure of your business says a lot about your team’s communication. There is no specific structure that fits every organization. The best one for your small business can depend on a few scenarios:
- market span
- type of work
- number of employees
- amount of revenue
The five types of organizational structures are the traditional hierarchy, flatter organizations, flatarchies, and holacratic. Most small businesses won’t use the more extensive structures. Still, you can benefit from learning about them and reviewing the organizational charts. Of the five organizational structures, most small businesses will choose one of three. The simple (flat), functional, and product organizational structures are most common in small businesses.
Simple (Flat) Organizational Structure
Simple organizational structures include the workers and management. You can consider this a flat structure because of the responsibilities of management. There is one main manager who participates in all business departments. With no formal policies in place, the owner improvises when handling business procedures. This setup leaves the owner/manager in control of making most of the business decisions.
The flat setup of this organizational structure makes it better than traditional hierarchy. It allows management to work more closely with employees. Still, there are some holes in the communication setup. Not having formal written procedures in place leaves room for error. There are no written procedures, so management can’t expect uniform results. This also opens the door for legal repercussions from staff and clients.
Functional Organizational Structure
With this structure, the owner delegates management functions. Each segment of the business has a manager to conduct operations. For example, the core of every business has sales, operations, and administration. Each of these departments would have management to help make decisions. The management team reports to the owner. The department staff reports to their manager.
The functional organizational structure gives owners freedom to work on the business versus in the business. The multi-level management can make decisions and delegate responsibilities. Formal policies and procedures create uniform expectations. This setup has a better outcome with communication. It still works as the small business continues to grow. The structure doesn’t work well with a manager who wants more hands on involvement.
Product Organizational Structure
The product organizational structure is like the simple organizational structure. It gives the owner control of making decisions and assigning tasks. There are a group of sales managers that work between the owner and sales staff. With this structure, sales managers are hands on and learn each segment of activities. The owner still makes decisions. With more management, he doesn’t have to spend as much time overseeing.
Design Your Small Business Organizational Chart
Your organizational chart displays roles and responsibilities using shapes, arrows, and labels. The purpose is to give a visual aid that represents the organizational structure. Before creating your small business organizational chart, look at some illustrations as examples. Once you have a clear idea of how to draw your chart, choose a design program.
You can start with old fashioned pencil and paper for a draft. That way you can erase while in discussion to iron out the details. I recommend transferring your written draft to a program after finalizing it. A design software will help you create a legible small business organizational chart. You can also use a program as simple as Microsoft Publisher, PowerPoint or Word. All these have the shapes and arrows to put together an understandable chart.
Step 1: Illustrate the three basic departments all businesses should have.
Start by making your departments. All businesses will have at least three to function. Draw boxes for each.
-Sales and Marketing: All businesses sale either products or services. It’s how they make money and the reason it’s a business.
-Operations: The process doesn’t end at the sale. Each business needs to make sure they make good on the sales staff guarantees.
-Finance and Administration: Money is coming and going in the organization. So are many of the employees. All businesses need a department to track and document funds and headcount. This is fundamental to the viability of the company.
Step 2: Expand on the departments by adding the functions of each.
Be more specific about what each department will handle. Write down sub-departments for each main department. Draw boxes for each under the appropriate main role. Here are some of my suggestions:
-Sales and Marketing:
- Sales Associates
- Web Development
- Digital Marketing
- Public Relations
- Account Management
- Product Development
- Order Fulfillment
- Customer Relations
-Finance and Administration
- Accounts Payable
- Accounts Receivable
- Office Administration
- Human Resources
- Technical Support
Step 3: Add staff to fulfill each organizational role.
Choose a leader for each specified role. Write each person’s name under their role in the box.
Step 4: Add short descriptions of each person’s task under that role label.
As you can see, the key to mastering your small business organizational chart is to be specific. I recommend making each person’s responsibility clear.
Step 5: Clarify the roles and responsibilities of executive leadership (owners).
Even higher leadership has specific shoes to fill. If there’s one owner, it makes it a bit easier. Two or more will give you some decisions to make. Decide and define each exec’s role based on the skills they bring to the table.
Understanding the fundamentals of an organizational chart helps you choose the right one. You also need to keep the vision and goals of your business in mind. Use your small business organizational chart to execute the type of communication you want between leadership and employees. Once you have a clear idea of where you want to go, start with the basics. Start designing your chart with the three core areas every business should have.
Learn More About Creating Organizational Charts
You’re not the first one to be in startup and planning phase. Entrepreneurs like you have built from the ground up. Who better to give you advice? At Small Business Brain, you can learn pitfalls to avoid and what actually works. Stop by our site often to get more planning tips for your startup.
She has spent the last decade assisting entrepreneurs with starting new businesses, obtaining startup and working capital and growing their customer base.
She enjoys writing about her experiences as an entrepreneur and using data and information from reliable sources to back up what she writes about. Through her writing she aims to educate other entrepreneurs on how to obtain capital and build successful businesses doing what they love.