In this article we will be analyzing Functional Structure, and how it relates to Non-Profit Organizations (NPO).
Do you have the right jobs in your Non-Profit Organization (NPO)? Is your organization properly designed to meet your goals? Is your structure fully aligned with the corporate strategy of your Board? How do you know? These issues may be costing you money and negatively impacting your service delivery capability.
The answers to these questions lie in the functional structure, known as the Organization Design, of your work place. But first, let’s look at the sector.
The Non-Profit Sector
The non-profit sector is quite large. There are over 1.5 million non-profits in the United States. This is a very diverse sector. NPOs (in our definition) include non-governmental organizations (NGOs), para-public agencies, professional associations, lobby groups, foundations, institutes, and charities. NPOs can be found in the arts, cultural, sciences, sports, recreation, religious, finance and social services sectors. A broader definition of NPOs would include hospitals, libraries, museums, colleges and universities.
Some NPOs are large, most are small (less than 100 staff), some are well funded, and others struggle for donations. Many NPOs have a ‘cause’; they are mission-driven and exist to achieve a social, political or environmental objective of some type.
What they have in common is not what they are, but what they are not. They are not the government (municipal, state or federal) nor are they private sector for-profit companies. They are in between.
Another key differentiator is the type of jobs. NPO’s tend to have far more unique (one employee) positions than private sector companies where many people do the same job. They tend to have far more generalists (people wearing multiple hats) than specialists.
What is Functional Structure?
It is the way your NPO is structured to comply with the strategic plan. It is the link between your program goals and how managers and staff achieve those goals. It helps achieve full alignment between your corporate strategy, your structure, and the key functions and roles in your organization.
Functional Structure focuses on determining the proper assignment and division of labor; establishing the appropriate level of coordination, control, authority and responsibility; and designing jobs that match the needs of your NPO and the skills of your employees.
Why is it Important?
Effective Functional Structure drives productivity, communications and innovation. It creates an environment where people can work effectively. Benefits include improved:
- Employee, client and stakeholder satisfaction
- Financial performance
- Relations with your Board
- Return on resource investment
When Should I Review my Organization’s Functional Structure?
Today! Symptoms of ineffective Functional Structure to look for include:
- Poor inter-office coordination
- Excessive friction and conflict among internal groups
- Unclear roles or misused resources
- Poor work flow
- Multiple Boss Syndrome
- Reduced responsiveness to change
- Proliferation of extra-organizational units such as task forces, committees and projects
A redesign may be called for when your organization evolves to the point where there are substantial congruence problems between the formal organizational arrangements and the other components of your programs (such as reporting, business processes, information, performance measurement, and control systems.) These situations may be driven by:
- Mergers and acquisitions (even in the Non-Profit sector)
- Growth or downsizing
- Staffing changes (when a key long term employee leaves)
- A new leader (who comes in and doesn’t like what s/he sees)
- A change in the strategic plan by the Board of Directors
What to Consider
There are six key elements to address in Functional Structure:
- Strategy – The basic approach to achieving your mission. Do you have an overall strategy?
- Work Processes – The interconnected program activities and employee tasks. What are the key work processes in your workplace?
- Structure – This includes work units, job design, the span of supervisory control, and delegation of authority. How are your jobs organized – by team, function, location, program unit?
- Systems – The procedures that make your organization work. Do you have the right systems in place?
- People / Skills – The competencies and skills needed to perform the work. Does your workforce possess the competencies and skills required to achieve success?
- Culture – The norms of your organization, the “way we do things around here”. What are the beliefs and values held by your employees? Do they support your strategy?
Applied Functional Structure
How to run an Functional Structure project and practical tips for success.
What Does an Functional Structure Project Look Like at a NPO?
The Community Services (CS) department at a youth organization provides shelters, transitional and long-term housing, medical and counseling support, and programming for street-involved or homeless young women and men. With a budget of $4.6 million and approximately 70 staff, CS operates two downtown shelters, a drop in center, and three long-term housing apartments.
Over the last five years, CS saw tremendous growth in the demand for their services. There was a growing concern that the existing organizational structure no longer supported operational requirements. Line programs and service delivery had always been resourced appropriately, but administrative, managerial and supervisory capacity had not kept pace with the growth.
The Program Managers had seen the scope of their job expanded and were experiencing serious challenges meeting workload pressures. Their role had been re-designed over the years to include a variety of administrative and facility duties, which they argued detracted from their client-facing responsibilities and core youth worker skill set.
At the same time, facing their own pressures, the Finance department reduced its level of control and support and made the Managers more accountable for budgets. Finance provided training on ‘how to read financial statements’ and prepare budgets, but the Managers found the new financial aspects of their roles overwhelming, creating a ‘disconnect’ with the clinical aspects of their programs.
In response, two new positions were created, Assistant Director and an administrative assistant, but their roles and place in the organization were unclear. The reorganization needed to address the workload pressures in a fixed budget environment and respect the existing set of programs.
A comprehensive analysis of opportunities and challenges was conducted. Several optional Detailed Design Models were prepared for consideration by management. The advantages and disadvantages of each option were assessed from both short and long term perspectives. The new model created a Program Administrator job. This position was designed to provide administrative coordination.
The Assistant Director was tasked with operations management. The Program Manager was re-focused back to front line aspects: providing youth worker expertise, management of staff performance and training, ensuring the quality of clinical assessments and the proper handling of high risk cases. A final new structure and revised set of roles and responsibilities were recommended to senior management and a plan was created to communicate the changes to staff. This has since been successfully implemented by CS.
Tips and Best Practices for Successful Re-organization of your Functional Structure
- Problem Statement: Define your program needs, internal and external challenges and strategic objectives. What exactly are you trying to fix? What is your ‘desired state’?
- Conceptual Business Model: Look in the mirror. Outline your strategy, resources, inputs, major functions and outputs (programs and services) in a clear and concise model.
- Design Principles: Create a set of design principles. These are attributes that you must have. Examples include Board relations, service excellence, process efficiency, and accountability.
- Workflow: Map out the major activities and steps in key program and administrative processes. Identify and link the key roles (jobs / positions) that perform each step.
- Organizational model options: Create several potential ‘to be’ states divided into three groups; A. minor change, B. practical and realistic change, and C. radical ‘outside the box’ change. Quite often the ideas generated in Group C will prove to be effective in a Group B option. Select a winner.
- People: Assess the “people impact” of changes. Prepare a People Plan and address potential retraining, re-assignment, replacement and recruiting needs. Be open to the need to design a function around the skills of the incumbents – as opposed to what looks best on paper.
- Systems and processes: Focus as much on how the new structural model will work as on what it looks like. Ensure that systems and processes are fully integrated with the re-design.
- Culture: Be aware of your organizational culture (unwritten norms and behaviors) and how it impacts your new structure.
- Change management: Expect resistance to change and plan accordingly. Appoint a senior executive as project champion. Develop a clear communications plan and adhere to it. Explain the reason for the changes and the benefits it will provide.
- Implementation: Pay attention to how the re-design will actually happen. Prepare a detailed implementation plan and hold people accountable. Address risks and bottlenecks. Define, measure and report on metrics. Quick decisive action is often more successful than an evolutionary process.
- Beware of entropy (see below).
Final Thoughts on Functional Structure
Entropy is the silent killer of organizational performance. It is the measure of the disorder of a system. Entropy is a natural process of degeneration. It is an unavoidable trend toward disorder. The alignment of functions, positions, skills, processes, human talent and performance to our strategic priorities deteriorates over time and we don’t see it.
The cure for entropy in your NPO is ongoing configuration; achieving and maintaining full alignment between your corporate strategy and your structure and processes – in other words – Functional Structure.
Tim McConnell is the Managing Partner of McConnell Human Resource Consulting Inc. in Ottawa. They provide strategic HR and OD advisory services, specifically Functional Structure, to Not-for-Profit organizations and NGO’s to enhance organizational effectiveness. Tim can be reached at Tim@McConnellHRC.com.
Tim McConnell, MPA, SPHR