What’s your first reaction when you hear the term organization chart, or simply “org chart”?

If you’re like me, you probably come to think of large corporations, hierarchies, power structures, and bureaucracy. Perhaps you also feel that such structures aren’t needed in young startups, at least not before the headcount grows over 25 or so?

During the past few years I’ve come to look at org charts with new eyes and today I’m convinced that even young startups benefit tremendously from drawing an org chart.

I’ve written a few times before about The E-Myth Revisited by Michael Gerber. It’s a book about systems and strategies necessary for making a small business work. When discussing organizational strategies and why org charts are needed, Gerber admits that they are often met with scepticism:

Everybody wants to get organized, but when you suggest that they start by creating an organization chart, all you get is doubtful and sometimes hostile stares.

Gerber thinks, however, that the organizational development reflected in an org chart can have a more profound impact on a small company than any other single business development step.

An org chart forces you to think about all the functions in a business and who should be accountable for what. This can be very useful in early-stage businesses, where the only resources are the founders, but there are still lots of things that must be done. Depending on how you fill the org chart boxes with the few names you have available, you’ll also quickly get a sense where the first key hires are needed.

Gerber also points out that:

Most companies organize around personalities rather than around functions. That is, around people rather than accountabilities or responsibilities. The result is almost always chaos.

In other words, you should organize around the business functions, not around specific people. People come and go, but the organization structure should ideally stay intact, unless there’s a good reason to change it.

To summarize, an org chart is like a schematic of your business, and more specifically:

• It's a visual representation of your organization strategy.

• It's the chart of the systems in your business, stated in terms of the results they obtain.

• It's the picture of an organism that is working in concert for a common objective.

• It clarifies the broad accountabilities of every position in your company and their interrelationship.

During my time in the venture capital business, I’ve come across many different types of startups and I’ve seen numerous ways of how to execute and “get things done”. In early-stage investments, one of the key things you bet on is the team – i.e. the organization – and in particular the experience and domain expertise of the team and how it executes.

It’s safe to say that without leadership, management, and an organizational strategy, it will be very difficult to execute and get the most out of the team. I believe a key tool for getting the basics right, early on, is the org chart.