When it comes to the world of non-profit organizations, there are some areas where the government is very clear about how things should work, and others where directors have considerable latitude. The business's operating structure is one of the areas of flexibility. Because non-profits vary considerably in aim, size, resources and involvement levels, there is no one-size-fits-all answer to a non-profit structure. However, there are a few ideas and principles to consider when deciding how your non-profit should function.
Because many non-profits corporations are formed for small-scale community and charitable purposes and comprised solely of volunteers, most states require only one director. Certainly, non-profits can and often do have more directors.
Most states only have two other major requirements for a board of directors structure: whatever the board structure is must be written into the corporation bylaws kept on file at the non-profit's principal place of business and no more than a certain percentage of the board can be made of interested parties. Interested parties are defined as directors who provide services for pay to the organization.
Beyond these requirements, non-profits can be structured in any manner the founders and directors wish.
Small non-profits do not have typical structures because they vary significantly in their aims and resources. A non-profit founded by community members to conduct community clean-ups and social activities may have an all-volunteer structure and seek donations used to spend on these activities rather than on salaries or labor costs. Such an organization may have only one principal director or a small board consisting of only a few people. Because there is no staff, the structure doesn't extend very far.
Similarly, even if a small non-profit has an office and staff of one or two people, it may be that an unpaid board member manages the staff or that one staff member is made the director of the small operation. The director would then report to the board or a board member the board designates.
Some non-profit organizations are very large and operate much like for-profit corporations. Some examples include non-profit hospitals, private universities, and national charities like the United Way, American Red Cross and American Cancer Society. These organizations have many layers of management and employees who execute numerous functions.
As a result, they have boards of directors that can involve eight or more people. A professional chief executive officer (CEO) manages the company, which in turn has vice presidents, department managers and employees. A non-profit hospital, for example, has a chief executive officer, chief financial officer, chief nursing officer, chief medical officer and sometimes a chief operating officer. Each of these individuals oversees a number of department heads who in turn manage either employees, such as physicians and controllers, or another layer of middle management, such as charge nurses.
Hospitals and universities are more consistent in their organizational structures because they have more of a defined scope and function. Charities, however, can vary more because there is no one way to administer charity and assistance.
Non-profit foundations differ from other non-profits in that their primary function is to donate and contribute money to causes they deem worthy. These organizations typically place more emphasis on the directors or trustees who make the decisions about the money than staff and operations, which are often minimal.
The classic foundation structure involves a board of trustees which has working for it an executive director. The executive director in turn operates three departments or units: grant making, administration and investments. Depending on the size of the foundation, these departments could involve only one employee each or, in cases of very large foundations like the Bill and Melinda Gates Foundation, they could each have directors, sub-departments and significantly sized staffs.
Boards usually break into committees to address various issues of the foundation such as investments, allocations, nominations and ad hoc committees.
Creating an organizational structure or revising one can be important business. If your non-profit is expanding or undertaking a large scope of operations, particularly one that involves large fundraising efforts, you should seek the advice of an attorney who specializes in non-profits. States vary in regulations, but most have provisions to ensure that directors do not profit from their non-profits. Further, the Internal Revenue Service watches carefully for directors and executives who use non-profits as a means to shield paying taxes on personal gains.
As non-profits take on larger roles and scopes, directors have to ensure that their organizations operate in ways consistent with non-profit status and that their operations reflect their charitable, public service, religious and educational missions.