Nonprofit organizations are affected by many forces in their external environments. These can include legal constraints, uncertain funding sources, absence of competition, and public scrutiny. These outside forces vary greatly from one organization to the next. For example, one nonprofit might have relatively certain revenues, almost no competition, and programs that are essentially unchanged from one year to the next; a good example is a public school. Another, such as a museum, might have relatively uncertain sources of funding, numerous competitors, and programs whose emphases shift rapidly. Similarly, government organizations, as well as organizations that receive substantial funds from government sources, are subject to a variety of pressures and scrutiny from legislative bodies and the general public. In these cases, the desires of the press and the public for information constitute an important management issue.

Organizations also have internal environments, and senior management must give careful consideration to the fit among a variety of elements that constitute this environment. These elements include the authority and influence structure, the program structure, the measurement and reporting structure, and a variety of administrative, behavioral, and cultural factors. Not only must these elements fit with each other, but they must fit with the external environment as well.

THE AUTHORITY AND INFLUENCE PROCESS

Organizational structure refers to the formal reporting relationships among managers and other individuals in an entity. An entity also has an informal structure that is unwritten and perhaps unintended. The informal structure encompasses a network of interpersonal relationships that has important implications for management. Because it is unwritten, however, the informal structure of the organization is difficult to identify and describe. For this reason, we concentrate here on the formal structure.

Senior management weighs many considerations in determining the best formal structure. These considerations involve questions such as the most appropriate division of tasks, the activities that should be carried out by specialized staff units, the activities that should be the responsibility of line managers, the decisions that should be made at or near the top of the organization, and the decisions that should be delegated to lower levels. Some of these considerations are related to individuals; that is, in part, the entity is organized to take into account the skills and personality traits of individual managers.

An organization’s formal structure can take one of several forms. In a functional structure, tasks are classified according to function, and all personnel who work in the same functional area are under the direction of a manager. In a social service agency, for example, all social workers might report to a director of social work, or in a hospital all nurses might report to a director of nursing.

As organizations grow and become more diverse, many shift from a functional structure to a divisional one. In a divisional structure, functional tasks are grouped into a logical cluster according to clients served, regions, or programs. For example, if a large home health care agency had a divisional structure, its personnel might be grouped into teams according to geographic region. If so, its home care workers would report to a team manager or regional manager, rather than a director of home care. In a hospital, nurses would report to a department head, such as the chief of surgery or chief of medicine, rather than to a director of nursing.

The most complex organizational structure is the matrix form. In this form, individuals have two supervisors—a divisional or program supervisor and a functional supervisor. Social workers might report to a team manager for their day-to-day activities, for example, and to a director of social work for their professional development and training. In a hospital, nurses might have similar dual reporting responsibilities. In some universities, faculty have dual reporting responsibilities: to both a department chair and a program director.

Responsibility Centers

The formal organizational structure for financial control purposes is defined in terms of responsibility centers, with line control exercised by the managers of these responsibility centers. Although the type and degree of control exercised by a manager may be difficult to pinpoint, at some level someone in an organization has control over each resource-related decision. In some cases control is infrequent and has long-term implications, such as in the acquisition of a fixed asset or the commitment to a long-term lease. In other cases, it is of shorter duration, . . .