How to Choose and Design a Nonprofit Organizational Structure

A nonprofit organizational structure is the way a nonprofit is legally and operationally organized. It affects how the nonprofit fulfills its mission, manages its resources, makes decisions, and communicates with its stakeholders. Choosing and designing a nonprofit organizational structure is an important step for any nonprofit founder or leader who wants to create a successful and sustainable organization.

In this article, we will explore some of the key aspects of nonprofit organizational structure, such as governance, administration, and programs. We will also look at some of the common types of nonprofit organizational structures, such as top-down, flat, divisional, cross-functional, and matrix. We will also provide some tips and best practices on how to choose and design a nonprofit organizational structure that suits your nonprofit’s needs and goals.

Governance in a nonprofit

Governance refers to the system of rules, policies, and processes that guide and oversee the direction and performance of a nonprofit organization. Governance involves setting the mission, vision, values, goals, and strategies of the nonprofit, as well as ensuring its legal compliance, financial accountability, risk management, and ethical conduct.

The main body responsible for governance in a nonprofit organization is the board of directors. The board of directors is a group of elected or appointed individuals who have the ultimate authority and responsibility for governing the nonprofit organization. They hire, supervise, evaluate, and fire the chief executive officer (CEO) or executive director (ED), who is the leader and manager of the nonprofit’s operations. They also support the fundraising efforts and advocacy activities of the nonprofit.

The board of directors may have different roles and responsibilities depending on the type and size of the nonprofit organization. For example, in a small or start-up nonprofit, the board may be more involved in operational tasks such as planning events, managing finances, or recruiting staff. In a large or established nonprofit, the board may delegate more operational tasks to the CEO or ED and focus more on strategic tasks such as setting policies, monitoring outcomes, or evaluating impact.

The board of directors may also create board committees or other groups to delegate and manage specific board functions or tasks. For example, some common board committees are:

• Governance committee: This committee is responsible for overseeing the governance structure and processes of the nonprofit organization. It may handle tasks such as reviewing bylaws, recruiting board members, conducting board orientation and evaluation, or developing board policies and procedures.
• Executive committee: This committee is responsible for acting on behalf of the full board in urgent or confidential matters that require immediate attention or discretion. It may handle tasks such as approving contracts, hiring staff, or resolving disputes.
• Finance committee: This committee is responsible for overseeing the financial management and reporting of the nonprofit organization. It may handle tasks such as preparing budgets, reviewing financial statements, auditing accounts, or developing financial policies and procedures.

To structure a nonprofit board effectively, there are several steps to consider, such as:

• Determining the legal requirements and best practices for board size, composition, diversity, term length, rotation, and removal.
• Establishing the roles and responsibilities of board officers (such as chairperson, vice-chairperson, secretary, and treasurer) and board members (such as fiduciary duty, strategic planning, financial oversight, fundraising support, CEO evaluation).
• Developing board policies and procedures (such as bylaws, code of conduct, conflict of interest policy, board orientation, board evaluation) to guide board operations and governance.
• Recruiting, training, and retaining qualified and committed board members who share the nonprofit’s mission and vision and who bring relevant skills, experience, and perspectives to the board.

Photo by Julia M Cameron licensed under Pexels license.

Administration in a nonprofit

Administration refers to the system of structures, functions, and processes that support and coordinate the operations of a nonprofit organization. Administration involves managing the human resources, financial resources, physical resources, information resources, and communication resources of the nonprofit.

The main person responsible for administration in a nonprofit organization is the CEO or ED. The CEO or ED is hired by the board of directors to lead and manage the day-to-day operations of the nonprofit organization. They implement the board’s decisions and policies. They oversee the staff, programs, services, functions, and activities of the nonprofit. They report to the board on the performance, progress, challenges, and opportunities of the nonprofit. They also represent the nonprofit to external stakeholders such as donors, partners, media, government, and community.

Roles & Responsibilities of a nonprofit CEO

The CEO or ED may have different roles and responsibilities depending on the type and size of the nonprofit organization. For example, in a small or start-up nonprofit, the CEO or ED may be more hands-on in operational tasks such as delivering services, organizing events, managing finances, or recruiting staff.

In a large or established nonprofit, the CEO or ED may delegate more operational tasks to other managers or supervisors within the organizational structure and focus more on strategic tasks such as developing partnerships, securing funding, or expanding impact. The CEO or ED may also create management teams or other groups to delegate and manage specific administrative functions or tasks.

For example, some common management teams are:

• Senior management team: This team is responsible for overseeing the overall direction and performance of the nonprofit organization. It may consist of the CEO or ED and other senior managers or directors who lead different departments or units within the organizational structure. It may handle tasks such as setting goals, allocating resources, monitoring outcomes, or resolving issues.
• Program management team: This team is responsible for overseeing the design, delivery, and evaluation of the programs and services of the nonprofit organization. It may consist of the program manager or director and other program staff who work on different aspects or stages of the program cycle. It may handle tasks such as planning activities, implementing interventions, collecting data, or reporting results.
• Fundraising management team: This team is responsible for overseeing the development and implementation of the fundraising strategy and plan of the nonprofit organization. It may consist of the fundraising manager or director and other fundraising staff who work on different sources or methods of fundraising. It may handle tasks such as researching donors, writing proposals, organizing events, or thanking supporters.

To structure a nonprofit administration effectively, there are several steps to consider, such as:

• Determining the legal requirements and best practices for staff size, composition, diversity, compensation, benefits, and retention.
• Establishing the roles and responsibilities of staff members (such as job descriptions, performance objectives, evaluation criteria, or professional development opportunities).
• Developing staff policies and procedures (such as employee handbook, code of conduct, conflict resolution policy, staff orientation, staff evaluation) to guide staff operations and administration.
• Recruiting, training, and retaining qualified and motivated staff members who share the nonprofit’s mission and vision and who bring relevant skills, experience, and perspectives to the organization.

Programs in a nonprofit

Programs refer to the system of activities, interventions, and outcomes that deliver the mission and vision of a nonprofit organization. Programs involve identifying the needs and problems of the target population or community, designing and implementing solutions or services that address those needs and problems, and measuring and reporting the impact and effectiveness of those solutions or services.

The main group responsible for programs in a nonprofit organization is the program staff. The program staff are employed by the nonprofit organization to carry out its programs, services, functions, and activities. They report to the program manager or director, who is in charge of overseeing the design, delivery, and evaluation of the programs and services of the nonprofit organization. They also interact with external stakeholders such as beneficiaries, volunteers, donors, partners, media, government, and community.

The program staff may have different roles and responsibilities depending on the type and size of the nonprofit organization. For example, in a small or start-up nonprofit, the program staff may be more generalist in their tasks such as conducting research, developing curriculum, delivering training, or providing counseling.

In a large or established nonprofit, the program staff may be more specialist in their tasks such as designing surveys, analyzing data, writing reports, or facilitating workshops. The program staff may also work in teams or other groups to collaborate and coordinate specific program functions or tasks.

For example, some common program teams are:

• Research team: This team is responsible for conducting research on the needs and problems of the target population or community, as well as on the best practices and evidence-based solutions or services that address those needs and problems. It may handle tasks such as reviewing literature, collecting data, analyzing data, or synthesizing findings.
• Development team: This team is responsible for developing the content, materials, tools, and resources that support the delivery of the solutions or services to the target population or community. It may handle tasks such as creating curriculum, designing interventions, producing media, or developing software.
• Delivery team: This team is responsible for delivering the solutions or services to the target population or community in an effective and efficient manner. It may handle tasks such as conducting training, providing counseling, facilitating workshops, or offering support.
• Evaluation team: This team is responsible for evaluating the impact and effectiveness of the solutions or services on the target population or community. It may handle tasks such as designing surveys, collecting feedback, measuring outcomes, or reporting results.

Photo by RDNE Stock project licensed under Pexels license.

To structure a nonprofit program effectively, there are several steps to consider, such as:

• Determining the needs and problems of the target population or community that align with the nonprofit’s mission and vision.
• Establishing the goals and objectives of the program that address those needs and problems and that are SMART (specific, measurable, achievable, relevant, and time-bound).
• Developing the logic model or theory of change of the program that shows how the activities, interventions, outputs, outcomes, and impacts are linked and achieved.
• Implementing the program plan or action plan of the program that outlines the steps, resources, roles, and responsibilities for executing the program.
• Monitoring and evaluating the program performance or progress of the program that tracks and measures the outputs, outcomes, and impacts of the program and that identifies and addresses any challenges, risks, or opportunities for improvement.
  
  

  Types of Nonprofit Organizational Structures

  There are many different types of nonprofit organizational structures that vary in their complexity, flexibility, and effectiveness. The type of nonprofit organizational structure that suits your nonprofit’s needs and goals depends on various factors, such as the size, scope, mission, vision, goals, funding sources, and legal requirements of your nonprofit. Some of the common types of nonprofit organizational structures are:

  • Top-down: This is a type of nonprofit organizational structure that has a hierarchical and centralized system of authority and decision-making. The board of directors and the CEO or ED have the most power and control over the nonprofit’s direction and performance. The staff and volunteers have less power and autonomy and follow the orders and instructions of their superiors. This type of nonprofit organizational structure is suitable for nonprofits that have a clear and stable mission and vision, that operate in a predictable and stable environment, and that need a high level of coordination and consistency across the organization. However, this type of nonprofit organizational structure may also have some disadvantages, such as:

    • It may create a rigid and bureaucratic culture that stifles creativity, innovation, and adaptation.
    • It may create a communication gap or a disconnect between the top management and the front-line staff or volunteers.
    • It may create a lack of motivation or empowerment among the staff or volunteers who feel they have no voice or influence in the organization.

  • Flat: This is a type of nonprofit organizational structure that has a horizontal and decentralized system of authority and decision-making. The board of directors and the CEO or ED have less power and control over the nonprofit’s direction and performance. The staff and volunteers have more power and autonomy and participate in the planning and implementation of the nonprofit’s activities. This type of nonprofit organizational structure is suitable for nonprofits that have a flexible and evolving mission and vision, that operate in a dynamic and uncertain environment, and that need a high level of creativity and innovation across the organization. However, this type of nonprofit organizational structure may also have some disadvantages, such as:

    • It may create a chaotic and confusing culture that lacks clarity, direction, and accountability.
    • It may create a communication overload or a conflict among the staff or volunteers who have different views or interests in the organization.
    • It may create a lack of efficiency or effectiveness among the staff or volunteers who have too much freedom or responsibility in the organization.

  • Divisional: This is a type of nonprofit organizational structure that has a modular and segmented system of authority and decision-making. The board of directors and the CEO or ED have overall power and control over the nonprofit’s direction and performance. The staff and volunteers are divided into separate divisions or units based on their functions, programs, services, regions, or populations. Each division or unit has its own manager or director who has power and control over its direction and performance. This type of nonprofit organizational structure is suitable for nonprofits that have a diverse and complex mission and vision, that operate in a varied and competitive environment, and that need a high level of specialization and differentiation across the organization. However, this type of nonprofit organizational structure may also have some disadvantages, such as:

    • It may create a siloed and isolated culture that lacks collaboration, communication, and integration across the organization.
    • It may create a duplication or a competition among the divisions or units who have similar or overlapping functions, programs, services, regions, or populations.

    • • Cross-functional: This is a type of nonprofit organizational structure that has a collaborative and integrated system of authority and decision-making. The board of directors and the CEO or ED have overall power and control over the nonprofit’s direction and performance. The staff and volunteers are organized into cross-functional teams or groups based on their projects, tasks, or objectives. Each team or group has its own leader or coordinator who facilitates the teamwork and communication among the team members. This type of nonprofit organizational structure is suitable for nonprofits that have a multidisciplinary and interdependent mission and vision, that operate in a complex and changing environment, and that need a high level of coordination and cooperation across the organization. However, this type of nonprofit organizational structure may also have some disadvantages, such as:

        • It may create a challenging and demanding culture that requires high levels of trust, commitment, and flexibility among the staff or volunteers.
        • It may create a role ambiguity or a role conflict among the staff or volunteers who have multiple or competing responsibilities in different teams or groups.
        • It may create a power imbalance or a power struggle among the leaders or coordinators of different teams or groups in the organization.

      • Matrix: This is a type of nonprofit organizational structure that has a hybrid and flexible system of authority and decision-making. The board of directors and the CEO or ED have overall power and control over the nonprofit’s direction and performance. The staff and volunteers are assigned to both functional divisions or units (such as finance, human resources, marketing, fundraising) and cross-functional teams or groups (such as research, development, delivery, evaluation). Each staff or volunteer has two managers or supervisors: one from their functional division or unit and one from their cross-functional team or group. This type of nonprofit organizational structure is suitable for nonprofits that have a diverse and complex mission and vision, that operate in a dynamic and uncertain environment, and that need a high level of specialization and integration across the organization. However, this type of nonprofit organizational structure may also have some disadvantages, such as:

        • It may create a complex and confusing culture that requires high levels of communication, coordination, and negotiation among the staff or volunteers.
        • It may create a role ambiguity or a role conflict among the staff or volunteers who have to balance the demands and expectations of their two managers or supervisors.
        • It may create a power imbalance or a power struggle among the managers or supervisors of different functional divisions or units and cross-functional teams or groups in the organization.

      Example of building a matrix structure in Functionly | Image: Author

      Tips and Best Practices on Choosing and Designing a Nonprofit Organizational Structure

      Choosing and designing a nonprofit organizational structure is not a one-size-fits-all process. It requires careful consideration of various factors that affect your nonprofit’s needs and goals. Here are some tips and best practices on how to choose and design a nonprofit organizational structure that suits your nonprofit:

      • Assess your nonprofit’s mission, vision, values, goals, strategies, programs, services, functions, activities, resources, stakeholders, and environment.
      • Identify your nonprofit’s strengths, weaknesses, opportunities, and threats (SWOT analysis).
      • Compare the advantages and disadvantages of different types of nonprofit organizational structures and how they fit your nonprofit’s needs and goals.
      • Choose the type of nonprofit organizational structure that best matches your nonprofit’s mission, vision, values, goals, strategies, programs, services, functions, activities, resources, stakeholders, and environment.
      • Design the details of your nonprofit organizational structure such as the size, composition, diversity, roles, responsibilities, policies, procedures, relationships, and communication of your board of directors, CEO or ED, staff, volunteers, committees, teams, or groups.
      • Implement your nonprofit organizational structure by recruiting, training, and retaining qualified and committed people who share your nonprofit’s mission and vision and who bring relevant skills, experience, and perspectives to your organization.
      • Monitor and evaluate your nonprofit organizational structure by tracking and measuring its performance, progress, challenges, and opportunities and by identifying and addressing any gaps, issues, or areas for improvement.It may create a lack of alignment or coherence among the divisions or units who have different or conflicting goals, strategies, or cultures in the organization.

      A nonprofit organizational structure is the way a nonprofit is legally and operationally organized. It affects how the nonprofit fulfills its mission, manages its resources, makes decisions, and communicates with its stakeholders. Choosing and designing a nonprofit organizational structure is an important step for any nonprofit founder or leader who wants to create a successful and sustainable organization.

      In this article, we explored some of the key aspects of nonprofit organizational structure, such as governance, administration, and programs. We also looked at some of the common types of nonprofit organizational structures, such as top-down, flat, divisional, cross-functional, and matrix. We also provided some tips and best practices on how to choose and design a nonprofit organizational structure that suits your nonprofit’s needs and goals.

      We hope this article helps you understand some of the key aspects of nonprofit organization structures.

       

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      Header image credit: Photo by RDNE Stock project licensed under Pexels license.