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Nonprofits may have bureaucratic features, but they are not bureaucracies. Nonprofits are not bureaucracies per se, and none wish to be. Like other organizations, nonprofits have bureaucratic features that serve useful purposes. Evidence of bureaucracy can be observed in organizational charts, position descriptions, staff handbooks, constitutions, bylaws, labor contracts, and other formal documents that delineate responsibilities and designate approved work procedures. Many organizational functions, such as payroll, accounting, purchasing, and government reporting require worker training, standardization of procedures, and clear chains of command.
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These bureaucratic features are eminently functional.Without them, organizations would be in constant chaos, disputing, negotiating, and reinventing each day the basic rules and procedures by which the staff and board operate. Modern society views bureaucracies as sclerotic or obsolete largely because it no longer remembers what came before. “Because obedience is owed not to a person—whether a traditional chief or a charismatic leader—but to a set of impersonal principles,” wrote organizational theorist W Richard Scott, “subordinates in bureaucratic systems have firmer grounds for independent action, guided by their interpretation of the principles. They also have a clear basis for questioning the direction of superiors, whose actions are presumably constrained by the same impersonal framework of rules” (2003).Bureaucracy may be a problem, but anarchy would be a bigger one.
The weakness of the Type I mental map is that it describes only the bureaucratic dimensions of organizations, and this is too restricted a construct to explain how modern nonprofits actually operate. Beyond the institutionalized aspects of an organization are the informal dimensions, which are no less real than the policy manual.This uncharted organization consists of constituent views, political dynamics, human relations, and social interactions both within the organization and between the organization and its environment. These forces conflict with one another, disrupt chains of command, undercut standard operating procedures, and undo the rational plans and expectations of board and management. Real organizations, then, are more than the rational theorist’s instrument for goal attainment. They have their structural aspects, but they are not bureaucracies.
Many leaders are agents in name only. The Type I board imagines the board and CEO in a principal-agent relationship. But
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increasingly the chief executive acts as the leader of the organization. Indeed, no one gains entry to society’s pantheon of organizational leaders as someone’s agent. For example, we do not remember Andrew Carnegie, John D. Rockefeller, or Henry Ford as agents, nor did they act like agents. Even the rise of complex organizations has not displaced the heroic leader. Alfred P Sloan, the legendary CEO of General Motors, for example, championed now ubiquitous organizational tools like written plans, committees, and multidivisional structures precisely because he knew a single leader was no match for a complex organization. Ironically, Sloan’s attempts to shift attention away from personal leadership to organizational systems helped establish his reputation as a leader of singular brilliance. And today it is difficult to imagine Jack Welch, late of General Electric, or Lou Gerstner, former chief of IBM, as agents of their boards.
Even in the nonprofit sector—ground zero for the mobilization of collective action—leaders reign more and more. The move away from the dowdy title of “executive director” (an avatar of principal-agent) to “chief executive officer” speaks to a trend, as does the advent of the “social entrepreneur,” a visionary who delivers innovations to society.A few nonprofit leaders rank with the industry giants, at least for a time, in public con-sciousness.Think of Frances Hesselbein, former president of the Girl Scouts USA, whose reputation for leadership landed her on the cover of Business Week, under the (somewhat patronizing) title “Surprise! Some of America’s best-run organizations are nonprofits” (“Learning from Nonprofits,” 1990). Legendary university presidents like Theodore Hesburgh of Notre Dame and James Conant of Harvard were powerful, rarely challenged leaders.These celebrated chief executives, we suspect, hardly had a self-image as agents of their boards.
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Boards are principals mostly in name. If the idea of CEO as agent is implausible, so too is the idea of a board as a principal directing its agent. Most people tend to think of leadership as singular, not plural. Howard Gardner, who plowed new ground with the idea of multiple intelligence, reflects this still dominant view, defining a leader as “an individual (or, rarely, a set of individuals) who significantly affects the thoughts, feelings, and/or behaviors of a significant number of individuals” (H. Gardner, in collaboration with Emma Laskin, 1995, emphasis added).