Functional Authority: A Tool of Decentralizing Corporate Management

Abstract

Functional authority is a management term that underscores the need to apply authority by an individual, team to play over an individual, department, division in order for them to follow strict principles, procedures to carry out their work within schedule aiming to make the best outcome according to the standard principle of the organization. Through the functional authority an organization’s mission, vision, objectives, policy, guideline, procedure, principle, cultures are highlighted. Functional authority is bestowed to those persons by the authority to the effect that they will control specific processes, practices, policies, or other matters to carry out managerial functions as per the decision of the company’s policymakers. Delegation of functional authority varies at different types of strategic decisions. First, decisions concerning capital investments are kept more centralized than those concerning the workforce due to the greater number of financial resources and the greater externalities involved in each individual decision. Second, as to decisions concerning investments in capital equipment, the larger the amount of the investments the less likely decentralization. As to decisions concerning a plant’s labor force, decision authority is more likely to be kept centralized if decisions affect other units of the firm and decentralized if they have a larger impact on the plant manager’s activity. In labor relations matter, decentralization is necessary for the implementation of agreements reached after negotiation and are applicable to all units under their one ownership. On the other hand, centralization is necessary in case labor relations are at the bargaining level only. The concept, expressed as the transfer of authority from the center to subordinate ends, is important both for more effective and productive management of the areas outside the center organization in public administration and for strengthening these areas in terms of democracy conception. Because of the increasing interest all over the world in issues such as ensuring service need compliance, the importance of decisions made by the closest unit to the public and the reduction of bureaucratization have made implementation of decentralized systems a necessity in the local regions.