What Is Organizational Charting and the Best Practices for Creating One?

<span style="color: rgb(196, 198, 197); font-family: "Proxima Nova", sans-serif; font-size: 18.9px; font-style: normal; font-weight: 400;">Kerie Kerstetter</span>
In previous posts, we discussed Entity Relationship Diagramming (ERD) as a method for data visualization, the best practices to follow when finding ERD software, and some advice to keep in mind when building a diagram. Entity relationship diagrams are also frequently called organizational charts, and it's the job of this post to provide a basic how-to about creating one.

Organizational charts attempt to collect the information on your organization's servers about the various entities making up a modern, multinational enterprise in order to tell a story about the current state of its business that your board and senior management team will be able to act on. A successful business entity chart is simple without being oversimplified, and provides a coherent glimpse into the thousands of low-level transactions and documents making up your entities.

Ways to Visualize Data Through an Organizational Chart

Organizational charts or diagrams work better than most forms of presentation that rely heavily on text because human beings (board members and senior managers included!) learn more effectively through visual representation rather than strictly reading. The process of making memories and analyzing all of the data we're presented with is aided enormously by visualization, which is what a chart or diagram gives you. Each entity chart is unique in that it tells the story of your business from a singular perspective, but one that is also limited, in that no one chart will be able to capture all of the aspects your leadership needs to make smart decisions.

A diagram that aims to capture ownership relations between the different entities might use lines in specific ways that tell you at a glance whether a subsidiary is wholly or partially owned, and what its non-majority shareholder population looks like.

Historical diagramming is another perspective to consider. Through using the same color, line and shape elements an ownership diagram has in a different way, a historical diagram will tell the overall story of the creations and spinoffs, mergers and acquisitions, takeovers and so on that have played a role in shaping your present-day operations.

Geographical diagramming is especially important for enterprises that operate simultaneously across many different countries and under, in some cases, radically different regulation authorities. Fortunately, these are just a few of the different perspectives that can be put into play when diagramming or charting, and you can play around with different kinds of charts in order to find the most effective ways of telling the story of your business.

Best Practices for Building an Organizational Chart

In a previous post, we covered some of the basic practices that you need to be thinking about when creating an entity chart/relationship diagram. Here, we'll expand on that by adding several more general questions to think about during the process:

1) What is the purpose of my chart?

As discussed above, each entity chart will be aiming to tell a slightly different story from the next one. When charting your entity, you need to think about its purpose  basically, who is reading the chart and what do you want to tell them with it? A geographical chart drawn up for a strategy meeting of managers from different countries will probably look very different than, for example, a historical chart that aims to tell investors the broad outlines of your entities and their performance over a number of years.

2) What level of detail and relationships should I try to reveal with the chart?

The basic functionality of entity charting/diagramming is to tell a story that is both comprehensible and actionable. Remember, the reason we chart is that we learn better this way. In each chart, extending on the questions raised above, you need to be thinking about how complex to make it so that it tells a coherent story that is not overly simplified.

3) What chart elements will complement my purpose?

The visual elements making up a chart, such as shapes (e.g., rectangles or squares, circles or ovals, triangles), lines and text, are all to be determined based on the type of data you need to present. The lines in a diagram might tell you ownership patterns or historical mergers and spinoffs, as we discussed above. Depending on the scale of your enterprise, you may want to represent entities of different scale or type by different shapes or larger/smaller versions of the same shape.

4) What kinds of data do I need to present with this particular chart?

An entity diagram or chart is only useful to the extent that it presents your leadership with accurate, up-to-date information. You could have the prettiest, most multicolored diagram in the world, but if it's based on old data, it defeats the purpose of diagramming in the first place. Diagramming/charting, of course, does mean a certain level of abstraction. But the interactivity inherent in entity diagramming software, for example, can help you add more detail through hyperlinks should your leaders want more detailed information.


Blueprint OneWorld aims to offer a sophisticated yet easy-to-grasp method of charting/diagramming for all users of our software platform. Through our ChartIt solution, you can get efficient automated production of charts and diagrams based on certifiable and historically accurate information that allows leadership teams to operationalize the different kinds of perspective a given chart tells them through 'what-if' scenarios representing the effects of different kinds of reorganizations and restructurings on your entities. Please call or email us to discuss this and our other solutions today.