One way to operate a business is through an agency structure. Picture an agency where a client stops by and meets with an account representative, usually part of the agency's front line. That person's job is part of the agency's organizational chart. Understanding a chart containing all of the positions requires examining the relationships of the positions on that chart. Some organizations have many layers, and others are flatter with few steps in the hierarchy of authority.


In an organizational chart, there is usually at least one person at the top, such as you, if you're a business owner, or a manager. If you are the owner of an accounting agency, for example, you might have a layer of accountants below you, and below them might be a layer of accounting clerks and clerical personnel. Some people in each layer might be responsible for supervision, and others might just have higher-level tasks included in their job descriptions. Another example might be a sales manager working under you followed by a layer of account representatives.

Reporting Relationships

The structure of an agency is best explained by reporting relationships, or which positions supervises other positions. If you have a clear structure of the agency, including departments with managers and direct reports underneath, you have a basic top-down structure. For example, a large insurance agency could have a department for each type of insurance: a commercial department, an auto department, a property department, a life insurance department, and a health insurance department. Each employee would be either a manager, a sales agent, or a support staff member for that department. Employees understand they go to the manager above them in their department for certain decisions. Managers know they must go to you or your top business manager for certain decisions. In theory, with clear reporting relationships, it is easy to communicate company policies and priorities down the chain of command.

Power Dynamics

The organizational chart helps employees understand who the decision makers are and which employees serve as advisors to management. In many agencies, managers may be equal in the organizational chart, but they may compete with each other for power, positions and budgetary resources for their own departments. The result can be some departments having more perceived power than others, which changes the politics of the agency. You want to avoid that dynamic if you can. Create an organizational culture where working in any department, regardless of its leadership or responsibilities, would have enough prestige to attract a candidate.

Diversity and Equity

An organizational chart helps you study whether you have certain desired characteristics in your agency. If you want to recruit a diverse and talented workforce, diagram the gender and racial backgrounds of employees in each department and determine if there is a suitable balance. Or, diagram the salaries of employees across a layer in the chart and determine if employees are receiving comparable compensation for the same level of responsibility, such as numbers of employees under their supervision.