There are several advantages and disadvantages to organizational charts, assuming a company large and complex enough to want such a chart. "Mom and Pop" enterprises usually function well without them.
Advantages are clear lines of communication, clear lines of authority, and clear areas of responsibility. In an organized hierarchy, people are encouraged to communicate with the level directly above or below them, which keeps other levels clear of communication "clutter," leading to more efficiencies and providing easier communication with familiar levels and people. The clear lines of authority are very important, because personal relationships and other factors tend to muddy these if there is no organizational chart. It is difficult to have an orderly operation if people step off the chart to issue directives or make requests, because then there is no one really in charge of anything. A chart also lets people know what their functions and responsibilities are, which keeps everyone in an organization on track, doing what he or she is supposed to be doing.
Disadvantages of having an organizational chart include a loss of flexibility, possible difficulties in lateral communication, and a significantly decreased exchange of ideas, although a matrix structure can alleviate some of these problems, while creating others. When people have assigned roles and responsibilities, they might have a tendency to never think about pitching in to help in another areas, for example, and assigned work is completely confined, although it might be better served by going outside the chart's limits. A rigid structure can hinder lateral communication, with no clear means of one department communicating with another, which can lead to difficulties when things go wrong, or even when they don't. This lack of communication also can mean that ideas among departments are not exchanged, with many missed opportunities for improvement in a company.
Of course, given the clear advantages of having an organizational chart, knowing what the disadvantages are means that a smart company can take precautions to work on eliminating the disadvantages.