Org Strategy, Org structure

Do Small Businesses Need an Org Structure?

Expert author: Tim Brewer

Small businesses (less than 20 or so employees) can hold a few competitive advantages over their larger counterparts.

They can:

  • be more nimble and responsive,
  • make changes relatively quickly and locally,
  • be closer to their end customers, 
  • hold fewer tedious meetings and have less 'office politics', and
  • be workplaces where staff can feel a more important 'part' of the whole picture.

However, if there is no clearly defined organizational structure, small businesses can also be inefficient and confusing places for employees.

What Is a Small Business Org Structure?

A small business organizational structure outlines employee roles and defines the reporting hierarchy within your business. An organizational chart for small businesses provides a visual representation of that hierarchy.

In a small business, however, you may be wondering whether you need an org chart.

The Leader's Sandbox: Planning Your Future Team or Organization in Minutes
In this 15-minute session, we'll show you how Carol, our fictitious (but very wise) CEO of a small 20-person startup uses Functionly as her organization sandbox. On the cusp of closing her series A funding, Carol wants to "play around" with what an expanded team might look like: what new roles will she need? How will the compensation budget stack up? How does the team balance out if she moves talent into different roles? What does her VP or Sales think of the structure she's planning? ​ In just minutes, Carol is able to design a potential future scenario from her current org structure — without pulling her hair out from the frustration of using messy spreadsheets and slides. ​ Join to discover how Functionly goes way beyond those simple org chart tools by utilising scenarios, roles and responsibilities, compensation forecasting, real-time collaboration and scenario comparison change plans.

Why Do You Need a Small Business Organizational Structure?

In a smaller organization, you are more likely to know who reports to whom, what employees are responsible for, and have a defined chain of command.

So, why do you need a small business org chart?  There are several reasons...

1. Defined Structure

Just because you know the structure doesn’t mean all of your employees do — especially if you are in a business that experiences staff turnover.  A small business org chart makes it easy for new employees to see where they fit in and understand your reporting structure.

Small-Org2. Business Efficiency

Even in small organizations, it can be confusing for employees to know how the structure operates. 

Any time they go outside their chain of command or take concerns to the wrong person, it creates inefficiencies.  In companies that tend to blur lines between departments or managers, it can leave employees wondering who to listen to when there’s conflicting information.

An org chart provides clarity for employees.

This is especially important for small businesses where team members often have to make quick decisions about customer requests.  With a defined structure, everyone knows what decision can be made and by whom and who can delegate authority.

3. Coordination

Org charts do more than just tell someone who they report to.  They can help delineate responsibilities and functions. 

When employees know how different team members relate to each other and contribute to the organization’s success, it can avoid conflicts and duplication of work.

In projects that require cross-functional coordination, an org chart helps you streamline that coordination so you can focus more time on outcomes.

4. Identification of Stakeholders

A small business organizational structure helps employees know immediately who is the decision-maker for a particular part of the operation or task.  It helps teams understand who has the ultimate authority on issues and who needs to be part of the knowledge transfer to stay looped in.

5. Gaps in Org Structures

A small business org chart also helps you visually see gaps or holes in your organizational structure. 

Functions that aren’t assigned or areas where nobody has responsibility for are more evident when viewing the chart.

6. Change Management

Org structures also help businesses during periods of growth or change.  As people come and go, are shifted into new assignments, or moved to other areas, it helps the entire team understand the impact of changes so they can adapt more quickly.

In today’s evolving business environment and changing consumer behavior, an org structure can help you better evaluate the impact of change on your business.

7. Remote Teams

An org chart has become increasingly important given the rise of remote employees and work-from-home staffers. 

In many small businesses, new employees have never met other team members face-to-face or been together in the same location.  An org chart helps remote employees better navigate the structure.

Types of Small Business Organizational Charts

While there are many different types of org charts you can create, most small businesses focus on one of these three types:

1. Functional

Function organizational structures are the most common type of org chart for small businesses and likely the one you’re most familiar with.  The structure is organized by departments or functional areas.  They flow from the top down in a familiar pyramid structure.  The boss or owner is at the top with connecting lines to the direct reports, who then oversee employees in each functional area.

2. Product

A product-focused organizational structure will define areas of responsibility for products. For example, a small law firm may have lawyers with specialty areas of practice. 

A product org chart may also differentiate between criminal law, estate planning, bankruptcy, family law, and personal injury.  While lawyers may enjoy equal status within an organization, they are responsible for leadership in their area of expertise.

3. Matrix

A matrix structure provides reporting levels both horizontally and vertically. 

Employees may belong to a functional group, such as marketing, and also be part of the team that supports new product development. The product development area may have multiple groups or group members as part of their org structure.

Rather than department heads, this type of org chart focuses more on teams and team leaders.  Team members may fill various roles in your business but come together for projects.  This structure, whether defined or not, is common in small businesses where the lines are blurred because everybody has to do a little bit of everything.

4. Customer-Centric

Some small businesses prefer to create their structure based on customers to ensure organizations are meeting their customer needs.

A small healthcare provider, for example, may help outline the steps involved in patient care and who is responsible for what at each stage of care, from intake to treatment to billing. 

During the patient’s lifecycle, roles and responsibilities shift depending on where they are on the spectrum of care.  An org chart helps define the roles and who handles what within the organization.

Larger companies may also structure their org chart based on geographical reasons, such as sales territories or physical locations.

When evaluating the different types of org charts, you may also be wondering what’s the best structure for your business?  The type of org structure and org chart you choose will depend on how your business operates.

Interactive Org Chart - use tools to zoom, view job details, etc... © Functionly

How to Create a Small Business Org Chart

As you start to build your organizational chart for your business, you’ll need to gather a few pieces of information, including:

  • Employee names and titles
  • Employee positions and roles within the organization
  • Reporting structure
  • Areas of responsibility

Then, it’s time to create your structure.

You can create a small business org chart in just a few easy steps, and for free, with Functionly.

Whether you use a pre-built template specific to your industry or you want to create your own org chart from scratch, Functionly makes it easy for you to get started and then use.

You can choose from different styles and types of charts.  You can quickly fill out org charts and create beautiful designs using employee photos.  With drag and drop flexibility and fill-in-the-blank templates, you can plug in the information and allow Functionly to design a professional org chart in minutes.

Integration with tools and platforms such as ADP, ADP Workforce, Square Payroll, Paylocity, Paycheck, Paycor, Quickbooks, and other providers allow you to import data and align your org chart.

One big advantage of Functionly is that you can create multiple org charts depending on your business needs.  This helps you plan for future growth or uncertainty.  For example, your growth plan may require you to add different product lines or personnel.  You can quickly adjust your chart to show where and what you need to add to meet your goals.  You can also easily identify gaps in your staffing that may arise from growth or turnover.

If you need to quickly shift your business model, such as moving to a more remote workforce or servicing new customers, you can quickly design a roadmap.  That’s what we call 'intelligent organizational strategy'. 

You can run any number of different scenarios to help define any type of organization you envision as you anticipate future changes.

Functionly-icon: Free Trial Offer

The effectiveness of any organizational structure is only as good as your implementation and maintenance of it.

It’s a great idea to build an org chart to visualize your structure and clarify roles and responsibilities. Even the smallest of businesses will benefit from a clearly defined structure.

Sign up for Functionly today with a free trial offer to get started with creating your small business organizational chart.



  1. For smarter decisions, empower your employees, A De Smet, C Hewes and L Weiss, McKinsey & Co, 9 Sept 2020

Photo Credits

Title header photo:   Photo by Ketut Subiyanto / Licensed under Pexels License

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