Schedule of Authority for Business Profitability

A clear definition of accountability and responsibility is a critical success factor for any company. This is normally achieved by the development of a schedule of authority sometimes also known as an authority matrix or a decision guide. The schedule of authority should cover financial and non-financial levels of authority.

The purpose of having a schedule of authority is to provide a tool to help staff understand processes and associated authority for taking action in an orderly manner in order to ensure that the company maintains profitability and sustainability.

What is a schedule of authority?

A schedule of authority is a table or chart that identifies the authority, protocols and involvement for decision-making and approval by executives and managers at different levels in the organization.

Best practice indicates that decision making and approval levels are allocated to a position and not a particular person. This is especially important to ensure continuity and consistency when staff absences occur or when critical positions are filled with new staff members.

Benefits

Without a well defined schedule of authority, executives and managers will be uncertain as to their roles and responsibilities within the organization and could then make decisions or grant/reject approvals without taking into account the company specific requirements for decision making and approval. Even worse, it may prevent suitably timed business decisions from being taken in the interest of the company.

The schedule of authority is a useful tool to identify roles and responsibilities and to communicate levels of authority in a company. It can be a very useful management tool the smooth running of a very complex organization.

If properly develop it will embed the management principle of solving problems and making decisions at the lowest appropriate level in the company, leaving executives and senior managers free to focus on high level issues.

What it should contain

Every company's schedule of authority will be unique. It is best practice to consult with executive, legal, financial, human resources and operational professionals in the company during the development and implementation of a schedule of authority.

The decision-making process implicit in the company's schedule of authority should be transparent and reflect the company business philosophy and culture.

The allocation of authority should be done consistently throughout the company. However, given that the departments and divisions vary in size, scope and complexity, authority levels may be scaled due to specific needs with respect to selected issues. This may result in some positions having "relative inequality" of decision-making or approval authority. For example, the human resources executive may be allocated more authority to approve training of flights for new recruits whereas the logistics executive may be given more authority to approve transport contracts.

Schedule of Authority Policy

A schedule of authority policy is part of the corporate governance and enterprise risk management process of companies. It is best practice to develop a company specific policy about the schedule of authority that will be used in the company.

The purpose of this type of policy is to ensure the efficient operation of the company while maintaining fiscal and procedural integrity through the careful delegation of authority. The policy should outline and identify those situations in which it is appropriate to use delegations of authority and the procedures that should be followed to make such delegations.

As used in such a policy, a "delegation of authority" is the formal recorded conveyance of authority from one employee to another to bind the company within the scope of authority to a legally enforceable obligation. Any such transfers of powers and duties are therefore significant actions requiring great care and scrutiny.

Conclusion

Accountability for the management of the property, assets, financial and human resources of the company ultimately rests with the President. He can expect those with delegated authority under the terms of such a policy to safeguard the resources of the company by establishing and maintaining sound business controls. The main aim of controls should be to deter and detect any potential misuse of resources.

© Carl Marx