INTRODUCTION

-Authority is one of the important considerations in the process of management.

-Managerial action in a formal organisation needs authority.
-Without authority, the executive cannot secure compliance of his orders from
his subordinates.
-It is always considered to be the key to a successful Managerial job.
-It is the power of the superior to make decisions which guides the actions of his
subordinates.

A. AUTHORITY

- Is the kind of right and power through which it guides and directs the actions of others so that the
organizational goals can be achieved.

Example: A manager- may have the authority to hire, fire or discipline its subordinates

The whole organisational structure is naka based sa concept of authority without

use of authority, anarchy (disorder) and confusion will prevail all around the
enterprise
Authority is usually respected, recognised and followed in the organisation as a
matter of course. Authority is generally adopted with power to secure obedience.
This customary acceptance of authority is a part of our culture and day- to-day
behaviour.

The word authority is used with different meanings as:

 1. A person with superior knowledge and skill is described as an authority in the sense of an
expert.
Example: Manager matatawag natin siyang expert because meron siyang extensive knowledge
and ability in managing the business so matatawag natin siyang expert because

2. In a business organization,  the word authority refers to the power of an individuals to direct
others by giving orders.

3. For practical purposes, the term authority can be defined as the legal and rightful power to
command or to extract action from others. It is the power or the right to act, to command or to
extract action by others.

-Uthority and right to command helps the manager get work done in organization

Because the manager gets the work done by subordinates, authority constitutes as the key to
manager’s job. Authority and right to command helps the manager get work done by others in the
organization and the degree of authority goes on descending down the line.

Characteristics of Authority:

(1) Exercise of authority drives staff of the organization to perform the tasks and
responsibility assigned to them: Authority means the right to influence the behavior of others.

    EXAMPLE: 

1. Shareholders of a company appoint directors and delegate to them authority to manage the affairs
of the company. They do so because the Company Law gives them this authority. 
2. Parents ask or order children to do or not to do anything.

(2) Only person holding authority can make decisions:

Decision-making is the main feature of authority.

EXAMPLE:

1.  A manager has authority to order his subordinates to act or not to act in a particular manner. He
does this because he has made decision about the work behavior of his subordinates.

(3) Exercise of authority may sometimes have element of subjectivity: SEARCH

There is legal or traditional framework in an organization within which authority may be exercised. A
manager has authority to reward and punish his subordinates based on their performance. But his
decision to do is often influenced by his personal likes and dislikes and socio-economic, educational and
cultural background.
A manager who started working decades ago on a three-digit salary might have butterflies in
stomach when he appoints staff on a salary many times exceeding his own when he had jointed
the organization. For a while he forgets that under the current global business scenario, an
efficient worker would stay only if his compensation package compares favorably with that of
similarly qualified workers in other organizations.

Authority vs. Power:

Authority may not mean the same thing as power. A person may have the power to influence the activity
and behaviour of other persons but he may not have the official or legal right of command and thus
enforce compliance by others. Such a person would have power but no authority. It may, therefore, be said
that authority includes power but power may or may not be supported by authority. Also, all authority is
formal.

To run the organization towards its goal and objectives the authority of the executive has to be re-
delegated to the managers down the line to reach the bottom line managers. In every organization, this
process of re-delegation is essential to run the organization. Thus, the concept of authority arises from the
chain, which ties together the sections emanating from different persons in the organization.

Source of Authority:

There are two versions of theory of authority.

They are:

(i) Formal authority theory, and

(ii) Acceptance theory.

But as per Koontz O’ Donnel source of authority is discussed under three headings:

(i) The formal authority theory,

(ii) The acceptance theory, and

(iii) The compe tence theory.

There are various theories to explain the sources of authority, important among them are
as follows:

1. ‘Formal’, ‘Traditional’ or ‘Top-Down’ theory.

2. ‘Acceptance’ or ‘Bottom-up’ theory.

3. ‘Competence’ or ‘Personal Authority’ theory.

1. ‘Formal’, ‘Traditional’ or ‘Top-Down Theory’ of Authority:

Formal authority flows from law, rules, and regulations that are framed by, or with the consent of all
stakeholders.

FIGURE

- In this theory, authority flows from top to bottom through various levels of hierarchy.
- It flows from the Board of Directors to Managing Director, to General Managers, to middle-level
managers, lower-level managers, supervisors and finally to workers.
- Every subordinate accepts this authority and obeys instructions issued by the superiors.

Max Weber is of the same opinion as held in the classical theory of authority. According to him,
authority is “the willing and unconditional compliance of people, resting upon their belief that it
is legitimate for superior to impose his will on them and illegitimate for them to refuse to obey.”

For example: SHAREHOLDER> BOD>TOP MANAGERS>SR. & JR. LEVEL MANAGERS

Shareholders of a company are the source of all legal authority to control and manage its affairs.
Through legal process, they delegate this authority to Board of directors elected/selected by them.

The Board, on its part, selects and appoints staff that will help it accom plish the tasks and responsibility
necessary to achieve organizational goals. Then, it assigns tasks and responsibility to the staff, based on
their competence levels. Assignment of tasks and responsibility will be meaningful only when it is
accompanied by delegation of necessary authority to perform the assigned tasks and responsibility.

Top managers of the company owe responsibility and accountability to their superiors—the board of
directors—who on their part are responsible and accountable to shareholders. Top managers appoint
senior and junior level managers and assign tasks and responsibility to them to perform and dele gate
them appropriate authority to operate and control the resources placed under their control. Their reward
is the salary and prospects of promotion to higher responsibility positions in the organization.
The flow of legal authority is top-down at each level. Delegation of authority from a manager to a
subordinate is in proportion to the nature of tasks and responsibility assigned to the subordinate.
However, delegation of authority does not diminish the authority and responsibility of the manager- he
continues to be the source of authority vested in him and also continues to be responsible for performance
of the assigned task by him and/or his subordinate(s).

2. ‘Acceptance Theory’ of Authority:

- This theory was formulated by Mary Parker Follett but later popularized by Chester Barnard. It is also
known as bottom-up authority.
- Acceptance theory of authority is the exact opposite of the traditional, formal theory of authority. According to
acceptance theory, authority of a manager will be in direct proportion to the acceptance given to his authority by
his subordinates.
It is based on the premise that authority does not flow from top to bottom but flows from
bottom to top
- Legal authority or social or cultural norms become irrele vant here. If the subordinates do not accept the authority
of manager, they may not willingly comply with his decisions and orders – they may even defy them.
It implies that superiors can exercise authority only if it is accepted by the subordinates.

This theory states that a manager’s authority rests on worker’s acceptance of his right to give orders
and to expect compliance. Workers have to believe that a manager can legitimately give orders and
there is a legitimate expectation that the orders will be carried out. Management theorist Barnard
believed organizations need to be both effective and efficient. Effective means meeting
organizational goals in a timely way and efficient means the degree to which the organization can
satisfy the motives of its employees

“Authority is the character of a communication (order) in a formal organisation by virtue of which it is

accepted by a contributor to or a member of the organisation as governing … or determining what he does
or is not to do so far as the organisation is concerned”

The acceptance theory was formulated by Chester Barnard who held that authority lies in the character
of a communication (order) issued in a formal organization which makes it acceptable to the persons for
whom it is intended. The essence of the theory is that any authority is as effective or ineffective as the
willingness or unwillingness of subordinates to accept it.

According to Barnard, “an individual will accept the exercise of authority by his superior if the advantages
to him from accepting the authority and the disadvantages from not accepting the authority are greater
than the advantages from not accepting and the disadvantages from accepting; conversely, he will not

This means that a subordinate will accept authority only if it falls within his zone of acceptance. His zone
of acceptance will be determined by a number of factors.

For example, exercise of authority by his manager will fall within his zone of acceptance if
the following conditions are satisfied:

(a) If the rewards arising from acceptance of authority are greater than the value of skills and effort that
he would be required to spend on performing the task or responsibility;
(b) If he has a strong sense of belonging to the organization and hence would willingly accept the
authority without subjecting it to cost-benefit analysis; and

(c) If the consequences of not accepting the authority would damage his career prospects in the
organization, including perhaps loss of job.

Acceptance theory would be put to test only when a manager takes a decision and communicates it to his
subordinate(s). If the subordinate ably and willingly accept to perform the assigned tasks or
responsibility, and performs it in the manner desired by the manager, he can rest content that his
authority enjoys acceptance.

Now the question – What source of authority would best enable a manager to perform his task? Formal
and legal authority would empower him to secure performance from his subordinates through adoption of
the ‘carrot and stick’ policy—reward to subordinate if the task or responsibility assigned to him is
performed to the satisfaction of the manager, and punishment if it is not.

However, the ideal source of authority is that under which the subordinates accept to perform the
assigned task and responsibility because they trust the ability and integrity of the manager. To sum up,
the ultimate source of authority rests equally on legal, social and cultural norms that fulfill the test of
validity and voluntary acceptance of authority by subordinates.

3. ‘Competence Theory’ of Authority:

This theory is derived by virtue of competence, skill and knowledge of a person and not position.
- People from all departments at all levels approach the person who has competence authority
disregarding the official chain of command. Despite not having formal authority, these persons
issue orders or directives by virtue of their skill to do so. The theory accepts informal relations in
the organisation.

For example, middle-level manager of production department has knowledge of tax related matters.
People with problems on tax from all departments and levels will approach him for advice irrespective of
their official positions. Personal qualities, like social or technical competence are the basis of authority.

EXPLANATION:

Competence theory of Authority According to this theory, the source of authority is the competence
of the managerial personnel. A manager’s authority is accepted not because of any position he holds
in the organisation but because of his technical competence, intelligence, and other personal
qualities. In organisations there are certain persons without any formal authority, but they command
respect and authority because of their technical competence and intelligence.

A person can influence the behavior of others even if he does not command any formal, legal or tra ditional
authority.

- This happens when he enjoys support and confidence of his followers because they see him as
personification of their urges and aspirations. They do so also because they trust his extraordinary
technical, social and human qualities. (LEADERSHIP)
At the root of his authority are his competence, charisma and leader-like qualities. Thus, union leaders of
an organization may select a relatively junior worker to present their case before the top management for
increase in salaries because they feel he is forceful and logical in arguing the case and has at his command
well-documented evidence to support his viewpoint.

‘Tradition-Centric’ Authority:

Every civilized society follows certain traditions and carefully protects and preserves them. Respecting
and serving elders in family and society is an age-old tradition, so is responsibility of parents to raise and
properly educate and train children for life ahead. Lord Ram went into exile to honor the promise once
made by his father. Shravan Kumar spent his youth carrying parents on his shoulders to pilgrim centers.
It is a different matter though that in the modern society this tradition-conferred authority is suffering
dilution.

Senior citizens are willingly offered seats in crowded buses and trains; no one minds their jumping the
queue to visit a doctor, or to withdraw money from bank. Tradition-centric authority has a lot to
commend itself, only it should not become a tool to exploit people who respect it.

INTRODUCTION

Manager Commands-Subordinates Obey

In a business organization a manager is vested with official and legal authority which
empowers him to assign tasks and responsibility to his subordinates and demand
accountability from them in respect of performance of those tasks and responsibility.

The subordinates accept responsibility and are accountable because they are bound by
service contract that requires them to do so to become entitled to monetary and other
benefits and privileges provided by the organization.

Responsibility:
Meaning of Responsibility:

Thus the responsibility is the obligation to perform certain functions and achieve results. It is the liability
for proper discharge of duties. According to Koontz and O’Donnell “the obligation of a subordinate to
whom a duty has been assigned to perform the duty”.

The term responsibility has been interpreted in two different ways. Some writers define as a duty while
others call it an obligation. In a more comprehensive sense responsibility can be defined as an
obligation of a subordinate to perform the duties assigned to him.
“Duty” or “responsibility” refers to an obligation or liability for performance of a task or responsibility that
is assigned. Assignment of a task or responsibility casts a duty to perform something. It means the person
who has been assigned a task or responsibility has a duty or obligation to perform it. Koontz and O’
Donnel define it as the obligation of a subordinate, to whom a superior has assigned a task and delegated
authority, to perform the task as required.

Responsibility is also an important concept and has been defined as follows:

Responsibility is an obligation of the individual to perform assigned duties to the best of his ability under
the direction of his executive leader. – Keith Davis

Responsibility is the obligation of a subordinate to perform duty as required by his superior – Theo
Haiman

These are the main characteristics of the responsibility :

1. The essence of responsibility is obligation to perform the assigned duty or task.

2. Responsibility arises from superior subordinate relationships. When a superior assigns some work to a
subordinate, the latter becomes responsible for performance of tasks.

4. Responsibility may be a continuing obligation or specific obligation.

6. Responsibility is a concomitant of authority, therefore authority and responsibility should be equal.

Is ‘Responsibility’ Different from ‘Accountability’?

Accountability means an obligation on the part of a person to account for, or explain, why the task or
responsibility assigned to him has not been performed as desired. A person will be accountable only when
he has been assigned any task or responsibility by the person who commands authority over him.

Accountability will shrink or expand with the nature of responsibility assigned. A manager is accountable
only to his superior but the top management owes the maximum accountability.
https://www.businessmanagementideas.com/notes/management-notes/authority/top-4-theories-of-
authority-organisation/4955

ORGANIZATIONAL DESIGN
• Organizational design refers to the way managers structure their organization to reach the
organization’s goals

• Organization design is the process of deciding how organizations should be structured and
function

Universal approaches to organization design attempt to specify the one best way to structure organizations for
effectiveness. Contingency approaches, on the other hand, propose that the best way to design organization
structure depends on a variety of factors. Important contingency approaches to organization design center on the
organizational strategy, the determinants of structure, and strategic choice.

The contingency factors to be studied are briefly

discussed in the following paragraphs:
Managers having the responsibility for organisational design, study the contingency factors that affect
organisational design and then design a structure to fit these contingency factors.
(i) Strategy:

Logically structure follows strategy because organisational structures are built to achieve objectives by
implementing the strategies. When strategy changes, structures must change. At the corporate level,
strategies are formulated based on the company’s mission and strategic goals or objectives.

(ii) Environment:
Environment has an impact on decision making – specifically the difficulty of making decisions in an
uncertain or unpredictable environment. Similarly, the stability and predictability of the environment
have a direct bearing on the ability of the organisation to function effectively. An unstable environment
that changes rapidly and is less predictable has two requirements:
i. The organisation must be able to adapt to change, for which it needs to be flexible and responsive.
ii. The organisation needs greater coordination among departments.

(iii) Size of the organisation:

The number of employers working in an organisation indicates its size. It is observed that large
organisations differ structurally from small ones in terms of division of labour, rules and regulations,
performance appraisal and budgeting procedures.

(iv) Age of the organisation:

With age; an organisation incorporates standardised systems, procedures and regulations. Like people,
organisations evolve through stage of life cycle – birth, youth, midlife and maturity. In the birth stage,
the organisation created by the entrepreneur is informal, with no rules and regulations. Decision making
is centralised with the owner and tasks are not specialised.
In the youth stage, the organisation is growing – it expands and hires more employees. It incorporates
division of labour and formal rules and policies. Decision making is still with the owner although it is
shared by few persons close to the owner.
In the midlife stage, the company has become quite large. It now has extensive sets of rules, regulations,
policies and systems to guide the employees. Control systems are used, professionals are hired, tasks
are decentralised and authority is delegated to functional departments. In the maturity stage, rules,
regulations, specialised staffs, budgets, a refined division of labour and control systems are in place.

(v)  Technology:
Some kind of technology is used to convert the resources into outputs in every organisation. Technology
includes the knowledge, machinery, work procedures, and materials that convert the inputs into
outputs. The technology used to manufacture the products decides the kind of the organisation for the
production system.

How to design an organization is a great deal of organizational structure. There are two theories
regarding the organization design, these are universal approach and contingency approach. A
universal approach is one prescriptions or propositions are designed to work in any situation.
Otherwise, a contingency approach suggests that organizational efficiency can be achieved in
several ways. In a contingency design, specific conditions such as the environment,
disorganization work force and technology determine the structure.

Although each of these approaches contributed to the organizing process and the practice of
management, it is argued that none of them is universally applicable. Several contingency
designs attempt to specify the conditions, or contingency factors. The contingency factors
include such thing as the strategy of the organization, technology, the environment, size of the
organization or the social system within which the organization operates. There are a number
of factors upon which design of an organization structure is based on. These factors are
discussed below:

Size: Size is an important factor to design an organizational structure. The size of an

organization can be measured in many ways. It is measured in term of its budget, total value of
productivity or business, number of clients sewed, value of the organization’s assets. Larger
organization have more complex organizational structures than smaller organization.

Technology: Organizational technology refers to the information and communication

technologies that transform inputs into outputs. In small organizations the structure depend
primarily on the technology, whereas in large organization coordinative activities may be more
important.

Strategy: Strategy is the plans and actions necessary to achieve organizational goal. The
structural necessities are environment, technology and size.

The process of organizing

Organizations exist to achieve a purpose. They do this through the collective efforts of the
people who work in or with them. The process of organizing can be described as ‘the design,
development and maintenance of a system of coordinated activities in which individuals and
groups of people work cooperatively under leadership towards commonly understood and
accepted goals’. The key word in that defi nition is ‘system’. Organizations are systems which, as
affected by their environment, contain a set of practices or activities that fi t together and interact
to achieve a purpose.
The process of organizing may involve the grand design or redesign of the total structure, but
most frequently it is concerned with the organization of particular functions and activities and
the basis upon which the relationships between them are managed.
Organizations are not static things. Changes are constantly taking place in the business itself,
in the environment in which the business operates, and in the people who work in the business.
There is no such thing as an ‘ideal’ organization. The most that can be done is to optimize
the processes involved, remembering that whatever structure evolves it will be contingent on
the circumstances of the organization.

Aims of organization design

Bearing in mind the need to take an empirical and contingent approach to organizing, as suggested
above, the primary overall aim of organization design is to optimize the arrangements
for conducting the affairs of the business. But another overall aim of organization design is to
achieve the ‘best fi t’ between the structure and the circumstances in which the organization
operates.
The detailed aims of organization design are set out below.

Contingency theory is considered a dominant, theoretical, rational, open system model at the structural
level of analysis in organization theory (Scott, 1992). The basic assertion of contingency theory is that
the environment in which an organization operates determines the best way for it to organize.

ontingency theory is considered a dominant, theoretical, rational, open system model at the structural
level of analysis in organization theory (Scott, 1992). The basic assertion of contingency theory is that
the environment in which an organization operates determines the best way for it to organize.