Analysis an organizational Structure---California Youth Outreach (Breakout Prison Outreach)

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CHAPTER FOUR

ORGANIZATIONAL STRUCTURE

S outhend Community Services (SCS) was founded in 1974 to serve the residents of one of the most disadvantaged neighborhoods in Hartford, Connecticut, and developed a strong track record as a provider of quality programs for clients of all ages.1 In 2000, the city obtained a multimillion dollar, fi ve-year Youth Opportunities grant from the U.S. Department of Labor and chose SCS as the key contractor to provide services. The program was designed to keep in-school youth on track, lead out-of-school youth back to school or alternative ways to earn a diploma, and help older youth make transitions to college or full-time employment.2 The contract allowed SCS to expand its work with at-risk youth, and by 2004, the organization was running mul- tiple programs for young children, youth, and the elderly throughout the city. In 2005, however, it faced the expiration of the Youth Opportunities money, with no possibility of renewal. This would eliminate 40 percent of the organization’s budget. After an analysis of community needs and the organization’s internal strengths, it was determined that the organization would be most effective if it focused only on youth job training programs and eliminated services to young children and the elderly. Services for youth were reorganized into fi ve separate tracks, created to meet the circumstances and needs of discrete participant groups, and the organization was renamed Our Piece of the Pie. It was also determined that more and better performance data were needed to expand reach and results, and consequently a new information technology system was acquired. Three of the programs not focused on youth were moved to other organizations or spun off. A fourth program, child care, was refocused to support the youth job program. After the reorga- nization, an extensive public information and education campaign was launched to secure new funding, and by 2008, the organization had replaced the lost contract dollars as well as the money previously brought in by its other three programs.3 Figure 4.1 shows the reorganization of the programs.

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Tschirhart, Mary, and Wolfgang Bielefeld. Managing Nonprofit Organizations, Wiley, 2012. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/sjsu/detail.action?docID=836561. Created from sjsu on 2018-08-09 19:15:06.

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Organizational Structure 61

Southend Community Services

Youth services Elder services

Grow preschool care capabilities to meet youth participant childcare needs

• Senior Center

• Elderly Support Services

Case management

Training/employment

• Our Piece of the Pie ®

• Youth Chore • Hartford AmeriCorps

Educational services

• Former YO! services

Support services

•

Childcare

• Preschool Childcare

• After-School Childcare

SCS decided to adapt one of its non-youth programs to support the new mission and to exit the remaining three.

Exit

FIGURE 4.1. REORGANIZATION OF SOUTHEND COMMUNITY SERVICES

Source: “Our Piece of the Pie (formerly Southend Community Services): Making the Biggest Difference in Hartford,” April 2006. Reprinted by permission of The Bridgespan Group.

As the experience of Southend Community Services and Our Piece of the Pie shows, nonprofi t organizations need to fi gure out how best to deliver their pro- grams and services. These decisions will have effects on the arrangement and operations of the various units and other elements that make up the organization. A nonprofi t’s structure is designed and created during the founding of the orga- nization and then evolves, or is reorganized, continuously from that point on. At times, in fact, reorganization may be critical for a nonprofi t’s success or survival. As a result, nonprofi t managers must understand the structure of their organiza- tions, the consequences of this structure for their organizations, and the structural alternatives available should the need for reorganization arise.

In this chapter we examine an important aspect of nonprofi ts, the confi guration and design of their structures. Many nonprofi t organizations have an organizational

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62 Managing Nonprofi t Organizations

chart, such as the one shown for Southend Community Services in Figure 4.1. These charts show the various units or departments that make up the organization and indicate how they are related to each other. We can think of this as a simple visual representation of the organization’s structure that helps to answer the question, How should we organize ourselves to get our work done? This is far from a simple question, and organizational structure goes far beyond the organizational chart. This chapter reviews the many dimensions of structure that affect how a nonprofi t’s work gets done. We take the position that nonprofi t organizations operate in many different contexts and engage in an almost endless array of activities. Therefore we would expect that they will take on a wide variety of organizational structures, with no one structure being “typically” nonprofi t.

What Is Organizational Structure?

In the most general sense, structure provides a way for organizations to meet two confl icting needs—the need to differentiate and the need to integrate. As Henry Mintzberg states: “The structure of an organization can be defi ned simply as the sum total of the ways in which it divides its labor into distinct tasks and then achieves coordination among them.”4 In any but the smallest organizations with the simplest output, the operation and work of an organization needs to be bro- ken up into separate tasks and functions. This is the organization’s division of labor. Once separated, however, these diverse and disparate tasks and functions need to be coordinated and integrated for an organization to achieve effi ciency and effectiveness. The greater the division of labor, the more need there may be for mechanisms for integration.

Organizational structure designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors.5 It also identifi es the grouping together of individuals into depart- ments, and departments into the total organization. Finally, it includes the design of systems to ensure effective communication, coordination, and integration of effort across departments. By doing so, the organizational structure supports the production of outputs and achievement of organizational goals, minimizes or at least regulates the infl uence of individual variation on the organization, and provides the setting within which power is exercised and decisions are made.6

Nonprofi t structure does not exist in a vacuum of course, and it is important to understand its relationship to other aspects of the organization. Most of the writ- ing about organizations, by both practitioners and academics, is organized around the essential elements of all organizations, including structure. As Figure 4.2 shows, structure (formal and informal) connects to goals and strategy, work and

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Organizational Structure 63

technology, and people. Each element has reciprocal infl uences on the others and on the structural design, and the environment infl uences all of the elements, demonstrating the complexity of the management and analysis of nonprofit organizations.

These elements can be described as follows:7

• Environment. This encompasses all the significant elements outside the organization that infl uence its ability to survive and achieve its ends. These include physical, technological, cultural, fi nancial, and social factors.

• Strategy. This term describes the choices an organization makes about which markets or clients it intends to serve. It includes the specifi c tactics the organi- zation employs and the output goals it sets for itself.

• Work and technology. Work involves the tasks the organization needs to accomplish given the goals it has set for itself. Technology is the way in which work is accomplished and the techniques and process used to transform inputs into outputs.

• Formal organization. This is the more or less explicit codifi cation of how the work of the organization is done and how its parts relate to each other. It includes elements such as human resource practices, the design of jobs, and the overall organizational structure.

• Informal organization. This describes the emergent characteristics of the organization that affect how it operates. It includes culture, norms and values,

Environment

Strategy and Goals

Work and Technology

Informal Organization

Formal OrganizationPeople

FIGURE 4.2. ELEMENTS OF ORGANIZATIONS

Source: Adapted from W. Richard Scott and Gerald Davis, Organizations and Organizing: Rational, Natural, and Open System Perspectives (Upper Saddle River, NJ: Pearson Prentice Hall, 2007).

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64 Managing Nonprofi t Organizations

social networks inside and outside the organization, power and politics, and the actions of leaders.

• People. These are the organizational participants who make contributions to the organization in exchange for inducements, using their knowledge and skills to match their preferences to the needs of the organization.

Dimensions of Structure

There are seven core dimensions of structure: formalization, complexity, central- ization, specialization, standardization, professionalism, and hierarchy of author- ity.8 Nonprofi t leaders need to consider how much of each dimension is needed for an effective and ethical organization.

• Formalization is the amount of written documentation in an organization. This could include job descriptions, procedures, regulations, codes of conduct, employment contracts, board bylaws, and policies. The more formalized a nonprofi t, the less workers need to invent new procedures to get work done and the less uncertainty they have in their daily tasks. The price is that they also have less fl exibility.

• Complexity is determined by the number of different activities or subsystems in an organization. Vertical complexity refers to the number of hierarchical levels of the organization. The Wikimedia Foundation organizational chart displayed in Exhibit 4.1 shows four levels, differentiated by the intensity of the shad- ing of the boxes. Horizontal complexity refers to the number of units at similar levels. Wikimedia has fi ve units at the chief offi cer level. Geographical complexity describes the spatial distribution of the organization. For example, Amnesty International in the Unites States is divided into fi ve regions, each with its own staff: Southern, Mid-Atlantic, Northeast, Midwestern, and Western. Some nonprofi ts have complex parallel structures with two executive directors. For example, arts organizations sometimes have an artistic director and an admin- istrative director, with distinct structures beneath each of them.

• Centralization is determined by the hierarchical level that has the authority to make decisions. In centralized organizations decisions are made primarily at the top level of the organization. Organizations are decentralized when deci- sions affecting the whole organization are also made at lower levels of the orga- nization. In nonprofi ts, centralization issues can come into play in deciding what decision-making discretion to give the board versus the staff, and staff versus volunteers. Nonprofi t membership associations often give legal rights to make certain decisions to their members, helping to decentralize the organization.

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Organizational Structure 65

• Specialization is the degree to which organizational tasks are subdivided into separate jobs. If specialization is extensive, each employee performs only a narrow range of tasks. If specialization is low, employees perform a wide range of tasks in their jobs. Specialization is sometimes referred to as the division of labor. In organizing a nonprofi t the designer needs to ask whether the work- force should be made up of specialists, generalists, or a combination of both.

• Standardization is the extent to which similar work activities are performed in a uniform manner. In highly standardized organizations, such as prisons, work content is described in detail, and similar work is performed the same way at all locations. Some standardization may be needed to comply with government regulations and contracts.

• Professionalism relates to the level of formal education and training of employees. Professionalism is considered high when employees require long or specialized periods of training to hold jobs in the organization or need certifi cation or accreditation. Having professional workers—for example, cer- tifi ed social workers—is often a requirement to obtain government funding. Volunteer-based organizations or those that use mutual support models often consider sharing similar experiences with clients to be more important than professional training. The use of professionals in a nonprofi t can be threaten- ing or off-putting to those who have been working in nonprofi ts in similar roles without the professional training.

• Hierarchy of authority describes who reports to whom and the span of control for each manager, as covered previously in our discussion of organi- zational charts.

Types of Structure: Two Ideal Types

In the development of thinking about organizational structure, several ideas and formulations have been particularly important and useful. One of the most infl u- ential formulations about organizational structure was Max Weber’s description of bureaucracy.9 A bureaucratic organization has features such as a hierarchy of authority, limited authority, a relatively high level of specialization and division of labor, technically qualifi ed personnel, positions separated from position hold- ers, procedures for work, rules for incumbents, and differential rewards. These features were seen by Weber as enhancing organizational rationality and effi ciency, especially as compared with organizations run on the basis of favoritism or fam- ily or political connections. Weber’s description was presented as an ideal type, meaning that actual organizations would be found to be more or less bureaucratic. Bureaucratic features tend to increase with organizational size and age. As orga- nizations grow they may fi nd that the bureaucratic features that once enhanced

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66 Managing Nonprofi t Organizations

their effi ciency now impede it. At that point they may seek to reduce the level of bureaucracy in the organization. Some examples of organizations with bureau- cratic characteristics are credit unions with their specialized personnel for different client needs, hospitals with their numerous departmental divisions, and nonprofi t social service providers with their documentation requirements and strict proce- dures for dealing with a vulnerable clientele.

Exhibit 4.1 shows the hierarchical organizational chart for a nonprofi t, the Wikimedia Foundation, Inc., which is “a nonprofi t charitable organization dedi- cated to encouraging the growth, development, and distribution of free, multi- lingual content, and to providing the full content of these wiki-based projects to the public free of charge.”10 The chart shows the reporting relationships and the divisions of the foundation. The chief fi nancial and operating offi cer reports to the deputy director, as does the chief technical offi cer. Two individuals report to the chief fi nancial and operating offi cer and each of them has one person directly reporting to him or her. Contrast this with the chief technical offi cer who has a much larger span of control, with fourteen direct reports. There are many possible reasons why there is such a difference in span of control in this organiza- tion. It may be that the chief technical offi cer can give his or her direct reports great discretion over their job tasks, reducing the supervisory control needed. Alternatively, there may be technologies that help to control and integrate the work of the technical division so that it can effectively accommodate more sub- groups with only one division head to oversee them. The complexity of the work of direct reports may be such that it is relatively easy for their supervisors to monitor it and funnel it to other divisions. The structure may also have simply evolved without strategic attention to what the most effective structure would be to accomplish the mission of the organization.

Looking at their organization’s chart, nonprofit leaders should ask these questions:

• Does the organizational chart accurately depict the formal reporting rela- tionships? If not, should the chart or the reporting relationships be changed? Ultimately, they should be aligned.

• Are the spans of control reasonable? In other words, does anyone have too many or too few people to manage given the needs of those being managed? Supervisors should have the time, skills, and systems needed to perform the human relations and work coordination functions related to each person reporting to them.

• Are the individuals operating at the same hierarchical level of the organization rel- atively equivalent in terms of their discretion, authority, and responsibility within the nonprofi t? If not, they should be depicted above or below their current peers.

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Head of Communications

Communications Officer

Head of Business Development

General Counsel

Human Resources Manager

Accounting Manager and Financial Analyst

Accounting Specialist

Head of Office Administration

Office IT Manager

Executive Director

Deputy Director

Executive Assistant

Chief Technical Officer

Lead Front-End Developer - UX

Software Developer - UX

Software Developer - Multimedia Usability

Product Manager - Multimedia Usability

Researcher - UX

Head of Community Giving

Stewardship Associate

Head of Major Gifts

Head of Public Outreach

Education Programs Manager

Outreach Officer

Project Manager- Bookshelf

Head of Reader Relations

Volunteer Coordinator

Development Associate

Head of Partnerships and Foundation Relations

Senior Product ManagerIT Manager

Software Developer

Networking Coordinator

Code Maintenance Engineer

System Administrator

Software Developer and Office IT Support

Engineering Program Manager

Software Developer- Fundraising

Software Developer- Mobile

Data Analyst

Chief Community Officer Chief Global Development

Officer Chief Human Resources

Officer - OPEN Chief Financial and Operating Officer

EXHIBIT 4.1. ORGANIZATIONAL CHART FOR THE WIKIMEDIA FOUNDATION

Source: Wikimedia Foundation, Organizational Chart (July 2010), http://en.wikipedia.org/wiki/File:Wikimedia_Foundation_organization_chart.png.

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68 Managing Nonprofi t Organizations

A second major infl uential formulation was the description of the distinctions between mechanistic and organic structures developed by Tom Burns and G. M. Stalker.11 In a study of industrial fi rms in England, they identifi ed two types of internal management structures. In stable environments they found fi rms that were more formalized and centralized, with most decision making occurring at top levels of the organization. These fi rms were quite similar to Weber’s bureau- cracies. Burns and Stalker characterized these structures as mechanistic. However, in rapidly changing environments they found a structure that was less rigid and more fl exible, with fewer rules and more reliance on informal adaptation. Decisions were made at lower levels of the organization and authority was more widely dispersed. They termed these structures organic. Table 4.1 summarizes the differences between these two structures.

Many nonprofi ts exemplify the organic structure type because it appeals to values regarding the desirability of shared power, permeable organizational boundaries to facilitate collaboration, easy movement of members into and out of the organization, and an ability to be innovative and to mobilize quickly to address needs. Joyce Rothschild-Whitt describes an ideal type of a collectivist- democratic nonprofi t organization whose features are the polar opposite of the bureaucratic organization.12 Authority resides in the collectivity as a whole and compliance follows the consensus of the collective. Rules are minimal. Social controls are based primarily on personal or moral appeals. Employment is based on friendships, sociopolitical values, personality attributes, and informally assessed knowledge and skills. The concept of career advancement is not meaningful, and there is no hierarchy of positions. There is a minimal division of labor, and jobs

TABLE 4.1. CHARACTERISTICS OF MECHANISTIC AND ORGANIC STRUCTURES

Mechanistic Structure Organic Structure

Tasks are broken down into specialized, separate parts.

Tasks are shared by employees.

Tasks are rigidly defi ned. Tasks are adjusted and redefi ned through teamwork.

Authority and control are hierarchical. Less hierarchy of authority and control.

Many rules. Few rules.

Knowledge and control of tasks are centralized.

Knowledge and control of tasks can be located anywhere in the organization.

Communication is vertical. Communication is horizontal.

Source: Adapted from Richard Daft, Organization Theory and Design, 9th ed. (Mason, OH: Thomson South-Western, 2007).

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Organizational Structure 69

and functions are general and fl exible. Finally, the primary incentives for par- ticipating in the organization are intrinsic (doing something that fi ts one’s values and preferred social benefi ts), and extrinsic incentives (material benefi ts such as fi nancial compensation) are secondary.

These features are characteristic of community and grassroots organizations.13 Such organizations are composed mostly or completely of volunteers or members. Grassroots organizations are often locally oriented, focused on what is happening in participants’ neighborhoods. They may be associated with social movements or engaged in advocacy. Some examples are legal collectives, alternative media col- lectives, food cooperatives, neighborhood beautifi cation or watch groups, self-help groups dealing with diseases, citizen action committees, and recreational clubs. Exhibit 4.2 shows the organizational chart for the Oregon Organic Coalition, a nonprofi t trade association with an organic structure that operates with rotating and fl uid roles. It was founded to advance the development and growth of the organic industry and community in Oregon. For example, it advocates for using food from local farms in Oregon schools and for federal funding for research on organic crops. The work of the organization is conducted by volunteers, who par- ticipate in the leadership council, advisory committees, and task forces. There are no formal members in the legal sense or paid staff. The numerous opportunities participants have to give input and shape the activities of the organization make sense given that it exists to support those participants’ interests.

Common Organizational Confi gurations

Besides these ideal types, we can identify a number of common types of struc- tures. The overall confi guration of structural elements indicates how work activi- ties are divided, what the reporting relationships are, and how distinct units or departments are grouped relative to each other. Grouping is used to bring people and units together to facilitate work accomplishment. The confi guration estab- lishes the general principles for dividing work, breaking tasks into subtasks, and coordinating activities.14 It specifi es the overall units that are the basis for making decisions and communicating within the organization. The content and direction of information fl ows within the organization depend in part on the organization’s confi guration. A number of different bases can be used for nonprofi t departmen- tal grouping. It is also likely that changing conditions will lead to new confi gura- tions within a nonprofi t. The common departmental grouping options discussed in the following paragraphs include functional, divisional, matrix, geographical, horizontal, and virtual network structures.

In a functional structure activities are grouped together into units or depart- ments by types of work skills and tasks—common functions such as fundraising,

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EXHIBIT 4.2. EXAMPLE OF AN ORGANIC STRUCTURE: OREGON ORGANIC COALITION ORGANIZATIONAL CHART

Source: Oregon Organic Coalition, Procedures Manual (2006), http://www.oregonorganiccoalition.org/pdf/orgchart.pdf. Reprinted by permis- sion of Oregon Organic Coalition.

Executive Committee Handles the administration of

the organization 1) Conducts business on behalf of OOC 2) Provides direction for “Facilitated Electronic Consensus Building” 3) Creates additional subgroups of the OOC should the structure of the organization need to be modified 4) Serves as the officers of the nonprofit corporation

Task Force Groups

Structure

Function 1) Convened by the Executive Committee or an Advisory Committee, with approval of Leadership Council 2) Work on specific projects of limited duration.

Ad hoc groups vary in number

Communications Coordinator Structure

Function

Supports decision-making process through “Facilitated Electronic Consensus Building” system

• Manages the process of e-mail communications • Receives and incorporates comments on each issue

Resource Associates Structure

• Participate in discussions without decision-making authority • Provide information, advice, resources, and contacts

Function

Representatives of agencies and organizations working to support the organic industry, but who are not direct stakeholders

Advisory Committees

11 Advisory Committees represent the participating stakeholder groups.

1) Develop ideas for projects and activities for submission to the Leadership Council for approval for OOC endorsement; 2) Foster communications about issues relevant to their sector and suggest action items for consideration by the Leadership Council; 3) Form and oversee Task Force Groups to work on specific projects for specific periods, as approved by the Leadership Council; and 4) Select the committee’s representative to the Leadership Council.

Function

Structure

Function

Leadership Council

Act as a focal point for development of proactive plans for advancing and developing organic agriculture in Oregon;

Prioritize and decide on actions and activities to be undertaken by the OOC, particularly those originating from the Advisory Committees;

Form, maintain, and support Advisory Committees for communication among participants in their designated sectors;

Facilitate development of projects and activities through collaboration and networking with other related regional and national advocacy groups;

Raise funds to support the OOC;

Develop a strategic plan for the organization and its projects; and

Serve as the Board of Directors of the nonprofit corporation.

Structure 16 Stakeholder Members (Voting)

• 3 Farmers (crops/horticulture, livestock) • 1 Farmworker • 1 Processer • 1 Wholesaler • 1 Retailer • 2 Consumers

• 1 Organic policy analyst • 1 Scientist • 1 Environment and health • 1 Organic certifier • 3 At-large representatives

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Organizational Structure 71

marketing, and service provision. This structure can facilitate economies of scale because the organization needs only one unit for each function. Also, grouping all the knowledge and skills for one function together can promote the development of functional expertise. The Wikimedia Foundation is an example of a functional structure, with groupings around technology, community, global development, human resources, and fi nances. This structure functions best when little horizon- tal coordination is needed, as horizontal communication or coordination between functional departments will be diffi cult. Communication between two departments will need to go through a higher organizational level so that decision making can be centralized, with upper-level units deciding on matters that cut across functions in addition to matters that affect the organization as a whole. This communication and coordination pattern can create burdens for the top levels of the organization, resulting in slow response time in changing environments, poor horizontal coordi- nation, and reduced innovation. This structure is therefore best for organizations with relatively few products and working in relatively stable environments.

In a divisional structure in contrast, unit grouping is based not on functions but on organizational outputs or products. Each division is organized by the product it produces. Also, the functional departments needed to produce each division’s output are contained in that division. This allows for decentralized decision mak- ing at the divisional level, freeing the top level of the organization to concentrate on overall decision making and on decisions on issues spanning divisions. For example, top leadership can play the role of organizational banker, deciding the level of resources allocated to divisions. Southend Community Services is an example of a divisional structure, with youth services, child-care, and elderly services divisions. Decentralized decision making and coordination of func- tions within divisions allows the organization to react quickly to environmental changes, including shifts in customer desires or market conditions. This structure is appropriate for larger organizations with multiple products or services. The major weakness of this structure is that economies of scale within functions are not possible. For example, each division might have a fundraising or marketing department. In addition, coordination across divisions (product lines) may be dif- fi cult and would have to be done by higher-level units.

The principle in a geographical structure is to organize in terms of the location of the organization’s users or customers. With this grouping the organization can address and respond to customer wants and needs that may vary by location (dif- ferent regions of one country or different countries). For example, large nonprofi ts such as the Girl Scouts or Boy Scouts, United Way, and Goodwill use semiau- tonomous local units and a national headquarters. This structure can be extended globally, with nonprofi ts such as Heifer International having operations in vari- ous nations around the globe. A number of options are possible.15 Multinational

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72 Managing Nonprofi t Organizations

organizations have their operations in each country acting as divisions in a decen- tralized structure. Global organizations, in contrast, centralize knowledge in their headquarters and implement actions through national units, similar to a func- tional structure. International organizations have hybrid frameworks, with some activities centralized and some decentralized. Finally, transnational organizations are complex structures, with assets and capabilities dispersed, interdependent, and specialized. National units are integrated into a worldwide system.

A number of structures have been designed for situations calling for extraor- dinary fl exibility. A matrix structure simultaneously uses aspects of both the func- tional and divisional structures. This is a complex structure, because it features two types of management and three types of units. Functional managers have responsibility for employees with various skills and expertise, whereas product managers have responsibility for producing outputs. Employees are under the authority of both types of managers. They are assigned by functional managers to various product units, where they are supervised by product managers. For example, a nonprofi t providing housing assistance may have

• Functional units organized around expertise in (a) construction, (b) client coun- seling, (c) fi nancing, or (d) law and policy.

• Product units that may include (a) new house construction, (b) existing housing rehabilitation, (c) fi nancial assistance to home owners, or (d) advocacy.

• Projects that may involve community development in different areas of a city. Some areas may need new housing, others may need rehabilitation, and still others may need action by the city. For each project the best mix of personnel from the functional and product units is chosen for the project team. The team is disbanded after the project is completed.

The matrix structure is appropriate under a variety of conditions, including those where pressure exists to share scarce resources across product lines, environ- mental pressure exists for two or more critical outputs (such as in-depth technical knowledge and frequent new products), or the environment is both complex and uncertain.16 Under these circumstances, vertical (functional) and horizontal (team) authority are both given recognition. The advantage of the matrix structure is that it is fl exible in terms of both human resources and products. This makes it particularly useful in rapidly changing environments. It is best suited to medium- sized organizations with multiple products. The structure, however, has a number of weaknesses. Employees are responsible to two managers, which violates the principle of the unity of authority. This can cause frustration for employees and managers and requires individuals with good interpersonal skills and a willingness to work in a shifting and ambiguous work setting. Disputes over authority relations

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Organizational Structure 73

are more likely to arise here than in other structures, and time and effort must be expended in resolving them.

Finally, an emerging form termed the virtual network structure extends the concept of horizontal coordination and collaboration beyond the boundaries of the traditional organization. This structure is characterized by the outsourcing, or contracting, of some of an organization’s functions or activities. With the advent and growth of increasingly extensive and sophisticated electronic com- munication systems, a network of outside specialists can be located anywhere and coordinated by the core, or central, organization. This allows the core orga- nization to take advantage of the specialized expertise of any number of part- ner organizations. The organization decides which functions it will outsource and how much control it will maintain or allocate to the partner organizations. This structure gives an organization worldwide access to talent, resources, and capabilities without the need to invest in its own facilities or employees. This reduces overhead and makes the organization highly fl exible and responsive to changing environments. For example, the housing nonprofi t in the previous example may decide to expand its impact nationally. It has the capacity to use a matrix structure to complete a wide variety of projects locally. Outside of this, however, it may be able to provide only Web-based client education for a national constituency. In order to provide its other services, it could establish partnerships with other nonprofi ts. In each locale the partners could be linked into a network and coordinated via electronic media. The primary weakness of this structure is the increased diffi culty of maintaining control over far-fl ung partners, including the need to make contracts with these partners and monitor contract compliance. The organization is also dependent on partner perfor- mance and potentially vulnerable to partner failure.

Major Infl uences on Organizational Structure

Many factors have a role in infl uencing the structure of a nonprofi t, including information processing needs and political, cultural, and institutional infl uences.

Structure and Information Processing

One of the primary activities in an organization is to provide information when and where it is needed in order for the organization to accomplish its tasks. Information needs are contingent on a number of factors, including the technology used to accomplish tasks, the organization’s environment, and the organization’s strategy. Technology here is broadly defi ned, referring not only to the machines and

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74 Managing Nonprofi t Organizations

hardware used to perform work but also to the skills and knowledge of work- ers. John Galbraith has provided a formulation that holds that information needs are a function of three dimensions of technology: complexity, uncertainty, and interdependence.17 Information needs increase as the complexity, uncertainty, and interdependency involved in accomplishing tasks increase. Moreover, their infl uence is multiplicative in that the effect of any one dimension is much greater when another is also present.

• Complexity is a function of the number of different items or elements that must be dealt with simultaneously in task accomplishment. It can be measured by the variety of inputs or the degree of customization of outputs. For exam- ple, a fundraising event has greater complexity when it involves donors with diverse interests and giving potential. More information needs to be considered and communicated to coordinate an event suited to a wide range of donors.

• Uncertainty refers to the variability of the items or elements on which work is performed. This can be measured by the number of exceptions encountered during the production of outputs. A fundraising event scheduled to be held outdoors has uncertainty related to weather conditions. Contingency plans need to be developed in case of bad weather.

• Interdependency is the extent to which items or elements on which work is performed or the work processes themselves are interrelated, requiring infor- mation sharing. James Thompson relates information use to types of interde- pendence.18 The fundraising event, for instance, may have pooled interdependence because the program and development staff need to work together as a team to create a report to donors on the organization’s achievements. It may have sequential interdependence in that someone must fi rst secure the venue before the food and entertainment can be arranged. Task accomplishment of one per- son or unit is dependent on the output of another. It may also have reciprocal interdependence, with units posing critical contingencies for each other that have to be resolved before action can be taken. For example, tickets cannot be sold until prices are determined, which may depend on estimated costs and revenue goals and an assessment of the market base and opportunities for sponsorships.

In addition, organizational information needs have been linked to organi- zational environments and strategy.19 In addition to increasing for technological reasons, information needs increase with increasing environmental uncertainty, complexity, and change. Strategy affects the way an organization is run, which affects organizational structure and decision making. This in turn can affect the degree of information processing needed. As the example of Southend Community

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Services/Our Piece of the Pie shows, a change of strategy can lead to an increase in the amount of information the organization needs to gather and process.

When information fl ow in a nonprofi t is inadequate, a number of problems can arise. The people who need information may not get it. Or they may get too little information, too much information, or information of the wrong type. In all these cases, job performance will be negatively affected. A nonprofi t’s structure is key to proper information fl ow. The design challenge is to create structures that match the demands for information processing. Information needs to fl ow hori- zontally as well as vertically through an organization in order to link employees, work units, and organizational levels. As information processing needs increase, an organization can respond by increasing the information handling capacity of its structure. This can be done by increasing the capacity of vertical and hori- zontal linkages.

Vertical Linkages Vertical linkages can be used to coordinate activities between the various levels of a nonprofi t and are primarily used for control. They ensure that lower levels of the nonprofi t are aligned with goals set at higher levels and higher levels are informed of the activities of lower levels. A variety of structural mechanisms can be used to support a nonprofi t’s vertical linkage requirements. They are ranked here in order of increasing information handling capability:

• Rules, schedules, and plans can be used when problems, issues, or decisions between levels are routine or repetitious. This alleviates the need for direct communication for coordination.

• Hierarchical referral is used when members of a unit (or several units) at one level can’t resolve a problem or make a decision. The matter is referred to, or passed to, decision makers at the next higher level in the hierarchy.

• Vertical information systems include periodic reports, written information, and computer-based communications distributed between levels of the hierarchy.

Horizontal Linkages Horizontal linkages can be used to ensure coordination between units at the same level of a nonprofi t, such as divisions or departments within a division (fundrais- ing, marketing, production, and the like). Without horizontal linkages, information sent from one unit to another would have to fl ow up vertically to a higher unit that oversees both of the lower-level units and then be routed down to the recipi- ent unit. A number of structural alternatives are available to support horizontal information fl ow. These are ranked here in order of increasing information fl ow.

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76 Managing Nonprofi t Organizations

However, that ranking is inversely related to the cost of the time and human resources needed to establish and maintain each linkage.

• Horizontal information systems can be used to exchange information between units (workgroups, departments, divisions, and so on). Routinized and comput- erized information systems can provide periodic information about activities and information about problems, opportunities, and needed decisions.

• Direct contact can be established between managers or employees affected by a problem, opportunity, process, or decision. For example, a liaison role may be played by a person in one unit who is given the responsibility of commu- nicating with another unit in order to enhance coordination and cooperation.

• Task forces are useful when linkage is needed between more than two depart- ments. A task force is a temporary group composed of representatives of the units needing to be linked. Each member represents the interests of his or her unit and can carry information about the task force’s activities back to that unit. Task forces are typically disbanded after the tasks they were formed to address have been accomplished.

• A full-time integrator differs from a liaison in several respects. This is a position created to link several units. Also, the integrator’s position is outside the units being linked. The integrator has the responsibility to coordinate the units. His or her title may be product or program manager when a product’s or pro- gram’s accomplishment requires several units to coordinate.

• A project team is the strongest horizontal linkage, more signifi cant than a task force. Project teams are used when activities among units require extensive and relatively long-lasting coordination, such as when organizations have a large-scale project or are exploring a major innovation or new product line.

Political, Cultural, and Institutional Infl uences on Structure

Organizations, including nonprofi ts, seek to be rational and to design their struc- tures for effi ciency and effectiveness. Organizational design, however, is a far from simple process with predictable outcomes. According to Hall and Tolbert, “Organizational design does affect structure, but not in the simple, overly rational manner suggested by the authors of prescriptive solutions for organizations.”20 Organizational structure is also affected by the politics of strategy formation and cultural and institutional factors. Although these topics will be covered in detail in other chapters, it is useful here to mention their relationship to organizational structure.

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The strategic choices organizations make are infl uenced by bounded rational- ity and the politics of the decision-making process.21 Organizational choices are made by dominant coalitions. Various interest groups within organizations each have preferences for organizational goals. No one interest group is normally power- ful enough to impose its preferences on the organization. Consequently it needs to form a coalition with other interest groups who can agree to cooperate (each giving up some part of its preferences in order to form the coalition). The power of a coalition comes from combining the power held by the various parties in the coalition. The power of a dominant coalition is greater than that of other coalitions in the organization. This coalition will form the power center of the organization. Decision makers in the dominant coalition engage in a political process to select those parts of the environment with which the organization will be concerned, strategies to deal with the environment, technologies, and roles and relationships (structure) to control the technologies and implement strategy. In nonprofi t organizations such political struggles over strategic choices may be especially pervasive, given the wide variety of stakeholders who might claim to be legitimate members of coalitions.

National culture will also infl uence organizational structure. Organizations are located in national cultural contexts, and organizational cultures will be a refl ec- tion of the larger culture.22 National culture can be refl ected in how organizations structure authority relations; decision-making responsibility; control and commu- nication systems; and employee training, recruitment, evaluation, and promotion. This is important for understanding nonprofi ts, as they may be structured and operated very differently in different national culture settings. Similarly, the opera- tions of nonprofi ts with global scope or working in international settings such as development may be structured differently across national cultures.

Organizational culture is the set of key values, beliefs, understandings, and norms shared by organizational participants. It underlies the behavior of the organiza- tion as a whole and of the participants. It affects ethical behavior, management commitment to employees, employee commitment to the organization, and the relative importance placed on effi ciency or customer service. An organization’s culture is unwritten but can be observed in organizational stories, slogans, cer- emonies, dress, and offi ce layout. Such cultures are relatively stable and long lasting and are a context within which structures are formed. Culture can affect preferences, such as those for centralization or decentralization, and it interacts with other contextual factors. Nonprofi ts can have distinct cultures that affect all aspects of their structures and operations. These cultures can be based on mission, a service or client orientation, management preferences, or workplace arrangements. They may also be ideologically based, such as with a focus on feminism, holistic medicine, or environmentalism.

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Finally, DiMaggio and Powell note that organizations exist in fi elds composed of other organizations providing the same societal function.23 Within these fi elds, social pressures exist for organizations to become homogeneous. This process is termed institutional isomorphism and is the result of three possible forces. Coercive iso- morphism occurs when less powerful organizations conform to the wishes of other, more powerful organizations. For example, funders and regulators can compel nonprofi ts to adopt particular structures, such as evaluation units. Mimetic isomor- phism is the result of organizations in uncertain environments copying the struc- tures of organizations perceived to be more successful. For example, a nonprofi t may establish a marketing research department if it feels that this has contributed to the success of other similar nonprofi ts. Finally, normative isomorphism is due to the spread and adoption of ideas about appropriate structures that is fostered by professional management schools and consultants. For example, consultants may advise nonprofi ts to establish accepted models of good governance that specify a particular board structure and way of operation. In each of these cases, nonprof- its adopt the structures and processes of other nonprofi ts in their fi eld.

Structural Defi ciency

Nonprofi ts use valued time, effort, and money designing and redesigning their structures in an effort to enhance their effectiveness and keep abreast of changes inside and outside the organization. The previous discussion reveals that this is far from a simple task and that trade-offs often need to be considered. The conse- quences of inattention to structural needs or inappropriate structural design can, however, be quite serious. A number of symptoms of structural defi ciency have been identifi ed. They manifest themselves when organizational structures are out of alignment with organizational needs.24 When they occur, nonprofi t managers must move quickly to diagnose and correct any underlying structural problems.

• Decision making is delayed or lacking in quality. When this occurs decision makers may be overloaded because the hierarchy funnels too many prob- lems and decisions to them. Delegation to lower levels may be insuffi cient. Information may not reach the right people because horizontal or vertical information linkages may not be adequate.

• The organization does not respond innovatively to a changing environment. In this situation departments may not be coordinating horizontally. The organizational structure also has to specify departmental responsibilities that include environmental scanning and innovation.

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• Employee performance declines and goals are not being met. Employee perfor- mance may decline because the structure doesn’t provide clear goals, respon- sibilities, and mechanisms for coordination. The structure should refl ect the complexity of the environment and be straightforward enough for employees to work effectively within it.

• Too much confl ict is evident. In this case the structure may need to allow con- fl icting departmental goals to combine into a single set of goals for the entire organization. When departments act at cross-purposes or are under pressure to achieve departmental goals at the expense of organizational goals, the struc- ture is often at fault. Horizontal linkage mechanisms are not adequate.

Concluding Thoughts

Nonprofi t organizational structure is both a consequence and a cause. It is a consequence of the nonprofi t’s external context as well as its work processes and strategy. In turn structure infl uences many of the internal features of the nonprofi t, such as information fl ow, authority relations, and hierarchy. In addition it has both deterministic elements and fl exibility. On the one hand a nonprofi t organization cannot survive if its structure is too far out of line with important external or internal contingencies. On the other hand non- profi t organizations usually have a range of design options for accomplishing their tasks.

Given the nature of organizational structure and the diversity of the environ- ments that nonprofi ts operate in, their missions and strategies, and their internal and external stakeholders, it is not surprising that nonprofi t structures take many different forms. For instance, nonprofi ts may provide public or private goods, get funds from sales or donations, and use employees or volunteers. Each option has several structural implications. Depending on these and other factors, nonprofi ts may look structurally much like business fi rms or public agencies, or they may take on hybrid or unique forms. They may also be located in rapidly changing and unpredictable environments, which will have other structural ramifi cations. All these factors make the structural design tasks for nonprofi t organizations con- tinuously challenging.

In the next chapter we consider strategy formation. It is important to remem- ber that this process, as well as the others to follow in subsequent chapters, is inti- mately interrelated with structure. On one hand the organizational actions required by a strategy that is out of line with existing structure will not be possible. On the other hand a nonprofi t may change its structure to facilitate the accomplishment

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80 Managing Nonprofi t Organizations

of a new strategic direction. In these ways structure will both infl uence and be infl uenced by strategy in a dynamic manner.

Questions for Consideration

1. Nonprofi ts are sometimes said to have “too much” structure or “too little” structure. Explain what each condition means, how it may come about, and what it might lead to.

2. How might a nonprofi t’s structural design be infl uenced by factors outside the organization? How might the design be infl uenced by factors inside the organization? How might a nonprofi t balance these two infl uences on its structure?

Exercises

Exercise 4.1: Dimensions of Structure

Think of a large nonprofi t hospital on the one hand and a small garden club that meets monthly at a member’s house for discussions on the other. Describe how these nonprofi ts are likely to differ in terms of

1. Formalization

2. Complexity

3. Centralization

Why might you expect them to differ on these dimensions?

Exercise 4.2: Structural Design

Organizational structure needs to be aligned with the organization’s technology, environment, and strategy. Assume you want to organize one of the following types of nonprofi t. After you pick one, answer the questions that follow.

• An agency providing food and clothing to the poor

• A year-round camp for young people

• An art museum and gallery

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1. What might your organization’s mission statement be?

2. What tasks need to be done to provide its services?

3. Using your answers to the previous questions and information in this chap- ter, draw an organizational chart illustrating a functional structure for this organization.

4. Draw another organizational chart showing how this organization would look with a divisional structure.

5. What are the pros and cons of these alternative structural confi gurations?

6. Under what circumstances might it be useful for your organization to have a matrix structure?

7. Under what circumstances might your organization employ a virtual network structure?

Exercise 4.3: Structure and Information

Looking further at the nonprofi t you described in Exercise 4.2, discuss its probable information processing needs, and describe the horizontal and vertical informa- tion linkages that might meet these needs.

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