Publication Date

1998

Abstract

This paper seeks to determine whether franchising is a good choice of organizational structure for a non-profit organization attempting to expand rapidly. It examines the management implications of that choice: specifically, is franchising the best choice of an organizational structure for FINCA International, given its current stage of organizational development? The research for this paper involved conducting a thorough search of the literature regarding franchising a non-profit enterprise and the organizational development of a franchise system. This was followed by a simply survey and a focus group discussion with FINCA's management team to discuss the lessons learned from the literature review and its relevance to FINCA. A franchise system can be thought of as an organizational structure constructed from the internal ownership relationships. The particulars of franchise agreements, for-profit or nonprofit, vary greatly, but what remains consistent is the autonomy of ownership and the right to use the brand name in exchange for a fee. The organizational structure of a franchise system creates an effective framework for dealing with non-profit management issues, such as reputational externalities, coordination of fund-raising efforts, access to capital, managerial shirking, and volunteer motivation. The autonomy and personal freedom created by the individual ownership structure is potentially more motivating than financial profits, especially for those working in social enterprises, which makes franchising a powerful tool for a growing non-profit enterprise. The success of the franchise system is dependent on the quality of the relationships comprising the organizational structure. The mission of the organization is better served with input and innovations from the franchisees and coordinated leadership from the franchisor. The synergistic energy created by a strong franchisor-franchisee relationship adds value to a ;franchise system through increased productivity and higher quality products and services. It is this relationship within the franchise system that makes a mixed organizational structure effective. Any organizational form that supports such a relationship can be of value to both for-profit and non-profit organizations. FINCA International's network structure is very similar to a franchise structure, especially in its mixed ownership. This presents an opportunity for FINCA to benefit from the synergistic effects of its hybrid structure. FINCA could retain its current ownership structure, but make alterations to the other structures within the system. Individually, these changes do not represent a huge effort, but collectively, they have the potential to strengthen FINCA's current organizational structure even more than instituting a franchise structure. In doing this, FWCA could maintain quality control, even as it cultivates an organizational culture that is innovative, creative and strategic.

Disciplines

Business Administration, Management, and Operations | Organizational Behavior and Theory

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