Those outside the legal, compliance and operations teams hear the word “organizational chart” and immediately think of a flat, hierarchical diagram showing who reports to whom in terms of management. But there is a whole other side to this term in business, one that seeks to bring life to all the dotted lines and ownership relationships within an entire company structure.
Organizational charts for business, when done well, can help guide the big decisions in business, such as what impact a merger will have on tax liabilities or regulatory compliance in a certain jurisdiction, or where there may be worries over shareholder dominance within the whole structure. They can help to clarify management structure, increase operating efficiency and facilitate future planning.
Your entire enterprise becomes accessible and digestible through organizational charts for business. These diagrams — often called entity relationship diagrams (ERDs) or a business entity chart (BEC) — present a general, at-a-glance overview of very complex and fragmented relationships in a way that boards and senior management can understand and base decisions on.
Which is all easy to say, but harder to visualize. Let’s dive into a few examples of organizational charts for business and see both how these diagrams can look and how your company might use them.
What Can You Show in an Organizational Chart for Business?
The potential of organizational charts for business is vast, and only limited by the data you wish to reveal and the data you have available. For example, you could use an organizational chart to visualize the ownership structure of your company, the historical movements and developments, or how the company is geographically spread out.
Using organizational charts for business, compliance teams and other interested parties can group different subsidiaries by function, or reveal each entity’s ownership structure in detail by factors such as shares held. They can also visualize entities across the group structure according to any manner of data, including tax status, voting rights, shareholders, participation and interests, and more. It’s limited only by the data you have available on each entity.
Examples of Organizational Charts for Business
Let’s take the ownership question as an example of organizational charts for business. Ownership of a business comes in many different formats, and an organizational chart can look at that ownership along economic- and shares-based lines or along geographical lines.
To chart that ownership, you need to capture ownership data from documents, focusing on direct parent companies and subsidiaries only. Below are two examples of organizational charts for business that show different ways to create an ownership chart.
Economic-based ownership examples of organizational charts for business
The first, at Figure 1, digs into the ownership of a company structure from its parent company through all of its subsidiaries. It uses diagramming shorthand including colors, lines and shapes to show how the ownership flows through each relationship.
This economic-based ownership chart highlights each entity’s name, its location and the number of shares held in each entity by its parents. Shares are indicated both by number and type of shares (ordinary or special), and by a percentage along ownership lines.
Note that the entity relationship diagram also shows whether a company is incorporated in the UK or internationally, with the squares and rectangles indicating a UK company and the circles highlighting an entity that is incorporated outside of UK jurisdictions. Use of shapes and colors is an important part of making organizational charts for business so simple.
These levels of ownership within a structure can be important to know, as they both highlight regulatory and compliance considerations — is an entity subject to UK regulation or not? — and showcase ownership percentages. The latter can help to make decisions around mergers and acquisitions or future buy/sell calls. By having this clear picture of ownership, boards and directors can make decisions based on real data, not on assumptions.
Geographic ownership examples of organizational charts for business
Not every decision made in business is based on economics, though, and it might be that the board wants to chart the geographical spread of its entities. Examples of organizational charts for business include non-economic-based ownership, too — or, to put it more simply, you can chart ownership based on jurisdiction as well as based on shareholdings.
In Figure 2, we see the entity relationship diagram for a holding company incorporated in the UK that has multiple entities within its structure. These entities are based across Asia, North America and Africa, and there are several UK-incorporated entities there as well.
This organizational chart for business clearly shows the percentage of shares the holding company owns in each entity — from 0%, denoted by a circle, through to 100% of all shares. It uses colors to highlight the different countries in which these entities are incorporated, while direct lines show the relationship of each entity to its parents.
A chart such as this one can help boards to make growth decisions. Is there a country in which they wish to do more business? If there is already an entity based in that country, they will need to consider if a new entity must be incorporated, or whether they will grow ownership or the size of the existing entity. Likewise, it can show at a glance the ownership level in each jurisdiction. This can be important for compliance — some countries restrict the levels of foreign ownership in local companies, so this kind of organizational chart for business can help compliance teams to identify any potential regulatory issues.
An Organizational Chart Alone Is Not Enough
When creating organizational charts for business, it’s important to instill and retain consistency in the approach to diagramming. Without this, companies can find organizational charts that differ in style, shape and color, meaning it cannot compare like for like across time.
Think not just about how the elements of the diagram fit together, but what kinds of diagrams will accurately capture the information you need to convey. Elements such as color, text, line and shape are essential to this consistency. It’s best to establish rules around how to handle these elements; as we saw in the examples of organizational charts for business, a specific color or style of line could signify an ownership relationship, or a holding company may differ in shape compared to an operating entity.
Using technology can help rein in personal preference and ensure all entity diagramming across a business is kept uniform in style and approach. Blueprint OneWorld’s ChartIt software, available to all Blueprint users, is at the cutting edge of diagramming applications. It automatically creates best-in-class charts in a dynamic environment for presenting and analyzing data and delivering actionable intelligence.
Our technology quickly creates a single, audit-ready source of truth to highlight subsidiary-related information, such as ownership and structure, which can support effective decision-making. It also links that organizational chart to all available information, meaning your chart is not a static thing — it puts all of the relevant information at the fingertips of the compliance, legal and operations teams around your business. Schedule a demo to see how Blueprint OneWorld can help you to create organizational charts for business, and instill uniformity and consistency in how you analyze your corporate structure.