Authority is the central element of organizational management. Through authority your firm develops the structure necessary to achieve its objectives.
Defining Authority
The authority that once was conferred by either owning a small business or having a position in the bureaucracy of a larger firm has been replaced by technical competence (including that of forming and running the business). Forces external to your business may emphasize the elements of granted versus earned authority. Once the owner/manager controlled the entire business, but suppliers, customers, unions and the government have severely limited the ability of the business owner/manager to take independent action.
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A primary component of authority is the exercise of control within the organization. A thorough system of controls ensures the firm’s operation and provides a mechanism for imposing authority in organizational management. Internal controls include the provision that authority be delegated and circumscribed; examples of these provisions follow. Place a check by the provisions that apply to your firm. Consider implementing controls over areas that you have not checked.
- Approval for disbursements of cash and regular accounting
- Reconciliation of bank statements
- Periodic count and reconciliation of inventory records
- Approval of pricing policies and exemptions
- Approval of credit policies and exemptions
- Review of expense and commission accounts
- Approval of purchasing and receiving policies
- Review of payments to vendors and employees
- Approval of signature authorities for payments
Delegating Limited Authority
Delegation is a key to the effective exercise of authority in your business. By delegating limited authority to accomplish specific tasks, the talents of employees in the organization can be used to upgrade the skills and experience of the manager. Create a checklist that enables you to determine if you are taking advantage of opportunities to delegate authority within the organization.
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To effectively delegate responsibility and authority in your organization you must:
- Accept the power of delegation.
- Know the capabilities of subordinates.
- Ensure that specific training is available.
- Select specific responsibilities to be delegated.
- Provide periodic monitoring and interest.
- Assess results and provide appropriate feedback.
- Praise and criticize (constructively).
The skills and abilities of each level of authority can be increased by effectively delegating authority throughout. By delegating the authority, we are also sharing responsibility among the authorities for better organizational management.
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