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Analyse , Using the figure above for reference you can complete a hypothetical organization chart. Begin by putting yourself at the top of the chart, as the companys president. Then fill in the level directly below your name with the names and positions of the people who work directly for you your accounting, marketing, operations, and human resources managers. The next level identifies the people who work for these managers. In this example, because youve started out small, neither your accounting manager nor your human resources manager currently manage anyone directly. Your marketing manager, however, oversees one person in advertising and a sales supervisor (who, in turn, oversees the sales staff). Your operations manager oversees two individualsone to supervise notetakers and one to supervise people responsible for making copies.

Reporting Relationships

With these relationships in mind, you can now draw lines to denote reporting relationships, or patterns of formal communication. Because four managers report to you, youll be connected to four positions; that is, youll have four direct reports. Your marketing and operations managers will each be connected to two positions and their supervisors to one position each. The organization chart shows that if a member of the sales staff has a problem, he or she will report it to the sales supervisor. If the sales supervisor believes that the problem should be addressed at a higher level, then he or she will report it to the marketing manager.

Theoretically, you will communicate only with your four direct reports, but this isnt the way things normally work. Behind every formal communication network there lies a network of informal communicationsunofficial relationships among members of an organization. You might find that over time, you receive communications directly from members of the sales staff; in fact, you might encourage this line of communication.

Now lets look at the chart of an organization that relies on a divisional structure based on goods or services producedsay, a theme park. The top layers of this companys organization chart might look like the one in Figure 2a. We see that the president has two direct reportsa vice president in charge of rides and a vice president in charge of concessions. What about a bank thats structured according to its customer base? The banks organization chart would begin like the one in Figure 2b. Once again, the companys top manager has two direct reports, in this case a VP of retail-customer accounts and a VP of commercial-customer accounts.

Figure 2. Organization Charts for Divisional Structures

Over time, companies revise their organizational structures to accommodate growth and changes in the external environment. Its not uncommon, for example, for a firm to adopt a functional structure in its early years. Then, as it becomes bigger and more complex, it might move to a divisional structureperhaps to accommodate new products or to become more responsive to certain customers or geographical areas. Some companies might ultimately rely on a combination of functional and divisional structures. This could be a good approach for a credit card company that issues cards in both the United States and Europe. A skeleton of this firms organization chart might look like the one in Figure 3.

Figure 3. Organization Chart: Combination Divisional and Functional Structures

Lines of Authority

You can learn a lot about a firms reporting and authority relationships by looking at its organization chart. To whom does a particular person report? Does each person report to one or more supervisors? How many people does a manager supervise? How many layers are there, for example, between the top managerial position and the lowest managerial level?

Chain of Command

The vertical connecting lines in the organization chart show the firms chain of command: the authority relationships among people working at different levels of the organization. That is to say, they show who reports to whom. When youre examining an organization chart, youll probably want to know whether each person reports to one or more supervisors: to what extent, in other words, is there unity of command? To understand why unity of command is an important organizational feature, think about it from a personal standpoint. Would you want to report to more than one boss? What happens if you get conflicting directions? Whose directions would you follow?

There are, however, conditions under which an organization and its employees can benefit by violating the unity-of-command principle. Under a matrix structure, for example, employees from various functional areas (product design, manufacturing, finance, marketing, human resources, etc.) form teams to combine their skills in working on a specific project or product. This matrix organization chart might look like the one in the following figure.

Figure 4. Organization Chart: Matrix Structure

Nike sometimes uses this type of arrangement. To design new products, the company may create product teams made up of designers, marketers, and other specialists with expertise in particular sports categoriessay, running shoes or basketball shoes. Each team member would be evaluated by both the team manager and the head of his or her functional department.

Span of Control

Another thing to notice about a firms chain of command is the number of layers between the top managerial position and the lowest managerial level. As a rule, new organizations have only a few layers of managementan organizational structure thats often called flat. Lets say, for instance, that a member of the sales staff wanted to express concern about slow sales among a certain group of customers. That persons message would have to filter upward through only two management layersthe sales supervisor and the marketing managerbefore reaching the president.