3 Federated Models for Larger Nonprofits (and How Each Model Impacts Decision Making)

As a nonprofit organization grows to include dozens, sometimes hundreds, of local offices, the leaders have to wrestle with the best way to govern, organize and manage greater complexity.

While there is little consensus on a “single best practice”, three distinct models have emerged and are recognizable as the most prevalent.

For an organization assessing its own structure, this blog is intended to provide a simplified basis for self-comparison against each of the three models. The models, which are (stereotypically) summarized below, highlight how, and by whom, decisions are made and executed.

For a reader who is asking “how might we best be organized?” the aim of this article is modest—it is not a roadmap. It is a useful set of lenses through which to self-assess and to consider the pros and cons of a different organizational design. Think of it as a starting point to inform future strategy for organizational structure rather than as a proposal that explicitly favors any of the models.

3 common organizational patterns for large nonprofits:

Here we introduce three models (as illustrative stereotypes). They are the prevalent forms for organizing governance across many facets of organizational decision making. They are described here to illustrate how IT purchases are made, and how system deployments are conducted:

1. Corporate

(Centralized, standardized and with managed compliance)

• In the Corporate model centralized architectural and policy mandates exist in most areas of IT investment. This applies to technologies that serve head office as well as those that serve distributed affiliates.  IT spend is centrally and corporately budgeted and managed.
• Information strategy is predominantly centralized. Execution of “Buying”, “Deploying” and “Maintaining” IT investment decisions is centrally coordinated monitored and approved.
• Commitment to, and investment in, centralized staffing, infrastructure and governance for deployment and maintenance of live solutions also resides at the head office. There may be distributed head-count but this will not be autonomously sustained by the branch.

2. Franchise

(Replicated but with either mandatory or opt-in standards for conformance)

• For the Franchise model, Head Office functions and systems differ from those of affiliates. Some centralized data standards and policy mandates exist and Franchises may be required to conform. Technical purchasing decisions can be optional rather than strictly mandated.
• Centralized agreements may be in place but opt-in Franchise approval will be necessary to execute a purchasing decision.
• There may be some commitment to, and investment in, central staffing and resourcing to deploy and maintain live solutions at Franchises. However, this commitment will be limited (and clearly bounded) and the Franchise will usually be expected to run day-to-day operations with some level of self sufficiency.

 3. Affiliate

(Sharing brand and very cautiously\selectively mandating any affiliate conformance)

• The Affiliated model commonly has Head Office systems and infrastructure. However, this is focused on Head Office systems and on limited areas of data integration with the Affiliates
• Head Office functions and systems differ from those of affiliates. Centralized standards and policies may impact Affiliates but are usually for legal and financial compliance reasons only.
• There are No (or very few) technology mandates for Affiliate purchases.
• Centralized agreements are not typical. “Buy, Deploy, Maintain” decisions are autonomously made by individual Affiliates as a reflection of their independence, autonomy and self-sufficiency.
• The Head-Office budget contains limited investment in staffing, infrastructure or governance to deploy and maintain Affiliate solutions

The very black and white model definitions above are not nearly as clearly delineated in practice.  They are, however, quite useful for identifying predictive patterns.  Such as, how will an organization buy, deploy, and maintain information systems.

Notable variances that occur frequently:

An organization can adopt different models for departmental interests

A single company can apply different models to address individual areas that require governance. Within a single company, different model styles can be applied to:

• Legal and Policy
• Purchasing and sourcing of products and services
• Brand disciplines
• Data ownership – iconically “who owns a constituent”
• Revenue and cost sharing

An organization can operate centrally in one business area but not in another

Consider a hypothetical Foodbank company that may have highly centralized systems and mandates for Inventory management (Food procurement and distribution) but much more distributed philosophies for (local) Fundraising.

This heterogeneous philosophy regarding the extent of centralization may apply to:

• Accounting
• Fundraising
• Advocacy
• Inventory
• Programs

Differences in scale mean differences in local power for large versus small local chapters and affiliates

It is not unusual for a small number of very large local affiliates to take on much greater autonomy, even within an overall structure that is quite centralized.

Organizations change their stripes!

Distributed nonprofits are constantly considering how their structure is impacting performance, efficiency and effectiveness. With this as a backdrop, the style and model of a company can certainly change over time.

Right now, many organizations in the US are undertaking some form of transformative improvement to (selectively) replace one model with another. If there is a prevailing trend it is towards greater data sharing so that the constituent experience is coordinated and focused.

Despite all the nuances found in each organization, the three model types described above provide a useful lens through which to view culture, behavior and decision making.

The decision to prefer one model over another is situational. It is perhaps best understood as a judgment call about whether the benefits of autonomous decision making and control outweigh the benefits of standardization and replication.

Bear in mind that for many organizations the current structure is not a result of highly engineered strategy and intentional change. Historical evolution and a retained cultural personality also play a major role in the status quo.

Finally, it is also worth asking whether you can “have your cake and eat it too”?  Can we enjoy the benefits of standardized centralized systems and still foster local autonomy and energy?

Perhaps, and perhaps after all, that is the best mindset to have!

This post is one in a series of interest pieces for complex, geographically-distributed non-profits.