This chapter is about the effects of leadership on the administrative structure of organizations, but it is broader in scope than the title implies. It is necessarily about the organizations that were surveyed in order to gather data for the research–city, county, and state departments of finance headed by the chief financial officers of their jurisdictions. It also touches on one of the central theoretical issues in the sociology of organizations: the debate between so-called open-system and closed-system approaches. The three strands of argument are inseparable here. The empirical findings cannot be interpreted without an understanding of what finance departments were like in the past, finance officials' beliefs about what their organizations should look like, and the changes in technology and management practices that have forced a different reality on these agencies. The findings suggest that characteristics of leadership positions have a profound impact on organizations, and they call into question the distinction between open and closed systems of which much has been written.

Finance agencies, it will be remembered, are headed by officials who, for the most part, believe that fiscal administration of local government ought to be centralized under their aegis. But finance activities that were once complementary have become inconsistent, largely due to developments in budgeting and data processing. The result has been some contraction and dedifferentiation of finance agencies, especially in the largest cities, counties, and states, and deteriorating correspondences of environmental demand with organizational size. In this chapter, it will be shown that leadership affects this process. Stable leadership and leadership that is autonomous of higher authority block environmental intrusions, whereas leadership turnover and dependence accelerate change.