As much as we may like to try, Company Directors and CEOs cannot possibly undertake every task on behalf of the company. It is neither reasonable nor efficient.
So how do we go about enabling and empowering our teams to make decisions and take the necessary steps to continue driving the company forwards?
We can achieve this simply by creating a formal delegation authority which sets out who has the authority to act on behalf of your company.
Here are 5 important features of a delegation authority:
1. Clear and concise
Although a delegation authority serves a legal purpose, it should not look like a legal document. It should be clear and concise, accessible to everyone in the company, and easy to understand.
2. Accountability structure
Organisational charts serve more than one purpose, and a good delegation authority should include one. Organisation charts help clarify the accountability structure of your organisation.
3. Set value limits
Your delegation authority should set value limits. It could, for example enable the Supply Chain Manager to authorise any purchase up to AU$5,000, but stipulate that any purchase with a greater value be approved by the General Manager.
It is also important to remember that making financial decisions is not the same as physically signing a contract. Your delegation authority should make it very clear who has the authority to sign documents and contracts on behalf of the company and whether anyone holds a power of attorney.
4. It complies with the constitution of your company
The Corporations Act provides that Directors may delegate their powers subject to the constitution of the company, so it is important to review your company constitution and make sure all proposed authorities are constitutionally valid.
5. It should reflect the size of your company
A small start-up company should have tighter controls and lower values that reflect the operations and turnover of the company, while larger companies may find they need expense and capital management committees.
The Corporations Act provides that Company Directors will be bound by the actions of their delegates unless they reasonably believed that the delegate was reliable, competent and acting according to their duties.
A well-defined delegation authority will not only empower delegates to act, but can provide protection against personal liability in the event that a delegate acts outside the scope of their authority.