An organizational chart can be important for a number of reasons. Let us look at two of the most important of these.
First, an organizational chart allows everyone in an organization to understand the structure of the company. They can understand the chain of command, knowing which departments and individuals answer to whom. This allows a firm to work more efficiently as everyone knows who is in charge of what so there is no confusion about who to report to or who is supposed to be responsible for a given aspect of the job. Each worker knows their place in the system and problems can be pinpointed relatively easily since responsibilities are well defined.
Second, an organizational chart can help provide incentives for entry-level employees. They can clearly see what the hierarchy is within their firm and they can aspire to climb the corporate ladder. The chart makes the steps in this process clearer, making them seem more attainable.
An organizational chart is often useful as a form of diagnosis, too. There can be many problems that arise within an organization that can be solved by reviewing the organizational setup and reconfiguring it. One example is the organizational structure that is too "steep." A company might very well be able to streamline, eliminating levels that are costing the company money, rather than being productive. Levels in middle management can often be eliminated, representing savings and no diminution in productivity. Conversely, an organization that is relatively flat might be creating too large a span of control for managers to be productive, and require extra layers of management. Another example is the organization that is divided strictly into functional departments, which tends to repress information-sharing amongst departments, leading to errors in planning and inefficiencies. Sometimes a matrix setup is better, which provides for divisions that comprise people from many departments—for example, a division made up of people from research and development, marketing, production, and distribution. This scheme, often project-driven, allows good synergy and communication and prevents people from not able to see the big picture.