Organization design is the process of structuring the organization in a way that facilitates employee productivity and supports the organization in reaching its goals. The basic building blocks of organizational structure are division of labor, centralization of authority, and formalization. The organization can also be departmentalized functionally or divisionally.
The design of an organization involves consideration of several things, one of which is the centralization and the structure of power relationships within the employees of the organization. Hence, it is the power structure inherent in the organizational structure that determines how centralized a given organization truly is.
The power structure within the organization is determined by its span of control and degree of centralization. Span of control is the number of employees that report directly to a supervisor in the next level up in the organization. At one time it was thought that a narrow span of control of 20 employees or less was the best approach to structuring an organization.
Research has found, however, that in today's environment, the average span of control in effective organizations is 31 (Wienclaw, 2008, p. 1). The most appropriate span of control will depend on what the organization is trying to accomplish and what types of people it employs. Larger spans of control are harder to supervise. However, when the employees self-manage (either as professionals or as self-managing work teams), this task becomes easier.
Another characteristic of an organization's structure is the degree to which formal decision-making power is centralized or carried out by a small group of people. In a centralized organization, a very limited number of individuals - usually at the top of the organizational hierarchy - have the power to make decisions. This is particularly true in smaller or emerging organizations where the founder or CEO tends to make most,