What is a Hierarchical Chart?

Learn more about the most popular design to structure an org chart: through an hierarchy or pyramid.

By Matt Hallowes
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6 minute read

A hierarchical chart defines a company's vertical chain of command and flow of information through its organizational structure. An org chart provides the company with a visual representation of this structure, its levels of authority, and how information flows between superiors (decision-makers) and subordinates (implementation and execution).

A typical hierarchical chart looks like a pyramid with the board, C-suite execs at the top, and VPs, management, supervisors, and employees below. Instruction comes from the higher levels while information and feedback flow in both directions.

The importance of a hierarchical chart

A hierarchical chart is essential because it creates transparent reporting channels for decisions and information. Employees understand their place in the hierarchy, who they report to, how the organization makes decisions, and progression opportunities.

The supporting org chart defines each layer and key decision-makers at every level in the chain of command. Additionally, the org chart allows team members to identify cross-functional networking and collaboration opportunities.

The hierarchical chart also helps guide decision-making policies. For example, the company wouldn't function efficiently if the board and executive had to meet for every decision.

A hierarchical chart helps delegate roles, decisions, responsibilities, and accountability to ensure the company meets its strategic goals and objectives as efficiently as possible.

Company Structure Flowchart

Companies use their org chart as a foundation for designing the hierarchical process flow or company structure flowchart. The company's structure flowchart will map the sequential steps for decision-making, reporting, and commands from the highest levels.

The primary deliverable is a process flow diagram showing each step using universally recognized symbols for:

  • Start and end—how the process starts and ends
  • Decision—the people who make decisions throughout the process
  • Activity/task—things employees must do
  • Time—could represent multiple aspects relating to timelines and deadlines
  • Direction—the process flow direction
  • Document—supporting documentation (purchase orders, reports, request forms, etc.)

Every decision in the process flow diagram has a gatekeeper with protocols for what to do next. These decisions flow both ways vertically.

For example, a CFO gets instructions from the board. They must either pass it on to a subordinate or execute themselves. Conversely, the CFO receives information from subordinates. They must either make a decision and return instructions or refer to the board if it's "above their paygrade." The company structure flowchart and protocols will guide the CFO in making these decisions.

How Org Structure Impacts Hierarchical Chart

Not every organization operates using a hierarchical org structure. There are several types of org structures impacting the organization's hierarchical chart and company structure flowchart differently.

Hierarchical

A traditional org structure where the board and executives make critical high-risk decisions. Reporting and information flow vertically, and everyone is clear about to whom they report.

There are two significant issues with hierarchical org structures for decision-making: 1. Company structure flowcharts often have many steps and layers of bureaucracy, impeding the company's ability to make fast decisions. 2. Decision-makers are often business oriented rather than experts.

Functional

A functional org structure is visually similar to a hierarchical structure, but most decision-makers are specialists or experts in the departments they oversee.

Divisional

Divisional org structures are separated by different markets, products, or locations, primarily used by large national and multinational corporations.

The company's headquarters will make most high-level decisions and policies, while each division manages its own hierarchical reporting and process flows.

Matrix

Matrix org structures are complex, with two different lines of reporting:

  • Function
  • Product

The matrix structure is excellent for fostering cross-functional collaboration, but it can lead to confusion and conflict when the hierarchical charts aren't clear about who must make a decision.

Holacracy

A holacracy is a decentralized org structure with autonomous self-managing teams. The hierarchical chart for a holacracy is shallow (usually one layer from employee to decision-maker), with team leaders making most decisions.

How to Make a Hierarchy Chart

This three-step process will help make a hierarchy chart and accompanying company structure flowcharts. Following this hierarchy chart design process will take time, but you'll have a scalable framework that aligns with your organization's strategy.

Completing this process as a startup will give you a solid foundation to scale your company and teams efficiently.

Some examples of what you can use these hierarchy charts and company structure flow charts for include: 1. Critical decision-making 2. Sourcing, hiring, and onboarding talent 3. Procurement 4. Risk management 5. Reporting—triggered by milestones or events

Step one: Organizational design

Completing an organizational design process is an essential first step in creating a hierarchy chart and company structure flowchart. Organizational design will help align the company's strategy and vision with its org structure, workflows, HR policies, hiring prioritization, etc.

Most importantly, organizational design will define the powers of authority, governance, conflict resolution, high-risk decisions, and other vital factors that influence your company's hierarchical chart.

Step two: Create an org chart

Making an org chart with The Org is efficient and provides transparency while exposing your company to talent and investors.

The Org syncs with many Human Resources Information Systems (HRIS) and Applicant Tracking Systems (ATS), automating most of the setup and org chart design process. You can also add people manually or import your Slack team.

With a few clicks, you can assign roles and add team members to their appropriate locations in the org chart. You can add bios and other details to create a holistic company profile.

Step three: Company structure flowcharts

The final step is to create company structure flow charts for the high-risk decisions identified during the organizational design process. We recommend following this six-step method for making process flows. 1. Define the goal: what outcome must the process flow product? 2. Name the process: create a descriptive, standardized naming convention 3. Process scope: list the triggers to start/end the process and the required steps 4. Design a sequence: map the process sequentially from start to finish 5. Roles & responsibilities: define the team members and stakeholders responsible for decision-making, tasks, etc. 6. Map the process: use a process flow diagram to create a visual representation of each company structure flowchart to share across the organization

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