Organizational Boundaries: Where are they?

I have been reading about organizational structure of higher education organizations as part of the background reading for a paper I am working on and it got me thinking about organizational boundaries and how it relates to the key players involved in organizations. When thinking about for-profit businesses there are three key constituencies which come to mind–customers, shareholders (assuming the business is publicly held), and the actual employees of the organization. When thinking about public organizations, there are also three constituencies that occur to people, namely the voters, the employees and the people who receive the goods or services (note that there is usually overlap between the voters and those who are receiving the goods or services). When thinking of non-profits there are the employees and/or volunteers, those receiving the goods or services, and the funders and/or donors.

It is in this last category, which I am interpreting here to broadly mean those individuals, groups and organizations that fund the non-profit organizations, where the complexity arises. When a nonprofit organization is funded primarily through government grants and donations they have two constituencies– the government and the donors; if they are funded primarily by private donations then it is only one constituency. However, what if they get government grants, donations, private contracts and they also charge a fee for some of their services? At this point you have four constituencies not including the employees or volunteers and some of those who are receiving the goods or services (assuming not all of the services are fee-for-service). The example of a large public research university, though not a nonprofit institution, will be useful in illustrating the issue at hand. Many of these organization receive significant amounts of funding from state governments (appropriations and financial aid), donors (additions to the endowment as well as donations to operating expenses), students and/or their parents (tuition income), the federal government (research grants and financial aid in the form of both grants and subsidized loans) and occasionally private companies (private research grants or contracts). So when you have constituencies that hold a significant amount of power within the organization but also are “external” to the organization, for example the state and federal governments and private donors, how do we define the boundaries of this organization?

Historically organizational researchers have conceptualized the wider environment as interacting with and influencing the organization at the organizations’ boundary, without really impacting its core. But in the case of the research university the only constituency that is clearly “internal” to the organization is the students (note that this does not include their parents); the others would generally be understood to be part of the environment that surrounds this institution. However these constituencies still exert a huge amount of influence on the internal workings of this organization. This can be illustrated by looking at the role of state governments during the 2009-2010 academic year. There have been numerous accounts in The Chronicle of Higher Education as well as other media outlets about layoffs, restructuring, departmental elimination, course cancelations, and imposed furlough days in response to the budget cuts enacted by state legislatures across the country. In these cases the environment, specifically the state governments, are having a significant impact on the core of these institutions.

So the question I raise is how do we as researchers deal with the fact that in the case of nonprofit organizations, or really any organization that is subject to multiple diverse constituencies, there are powerful constituencies that are in the environment (traditionally considered “external” to the organization), and yet have significant impacts on the operations of the organization? In effect how do we define the boundaries of the organization and study the role of the environment when we are dealing with organizations which are not internally independent, and instead are reflections or sub-units which have internalized key aspects and forces of their environments?

I do not currently have a clear answer for this question. Preliminary evidence from my dissertation research suggests that a more accurate picture of organizational behavior and finances can be achieved by ignoring the black and white distinction between organizational and environmental characteristics and viewing the situation as a continuum. Constituencies are either more internal or more external to the organization or constituencies have more or less influence. This is probably not that surprising; more information is generally seen as a good thing. However, how do we conceptualize the organization without clear boundaries? How do we say this piece of the federal government support is part of this university and this part is part of this university? How do we redraw the lines? Or, the larger question, are there still lines or are they something else?