≡ Menu

Reservation of Authority

There must be a kind of “supremacy clause” reserving to central management the decisions that affect the business as a whole and its long-range future welfare.

Top management in a decentralized company must think through carefully what decisions it reserves for itself. For there are decisions that have to do with the entire company, its integrity, and its future. These decisions can be made only by somebody who sees the whole and is responsible for the whole. Specifically, there must be three reserved areas if the business is to remain a whole rather than splinter into fragments. Top management, and top management alone, can make the decision on what technologies, markets, and products to go into, what businesses to start and what businesses to abandon, and also what the basic values, beliefs, and principles of the company are. Second, top management must reserve to itself the control of the allocation of the key resource of capital. Both the supply of capital and its investment are top-management responsibilities that cannot be turned over to the autonomous units of a federal organization.

Third, the other key resource is people. The people in a federally organized company, and especially managers and key professionals, are a resource of the entire company rather than of any one unit. The company’s policies with respect to people and decisions on key appointments in the decentralized autonomous businesses are top-management decisions—though of course, autonomous business managers need to take an active part in them.

ACTION POINT: Reserve certain key decisions for top management, especially those having to do with the mission, values, and direction of the organization; the allocation of capital; and the selection of key people.

Management: Tasks, Responsibilities, Practices

* Source: The Daily Drucker by Peter F. Drucker

{ 0 comments… add one }

Leave a Comment