Delegation of authority: building a matrix people actually follow

A delegation of authority (DoA) is the document that sets out which decisions the board keeps for itself and which it hands down — to the chief executive, to directors, to managers — and up to what limits. It answers the question every growing company eventually hits: who is allowed to approve this? Without a delegation of authority, the answer is whoever is most senior in the room, which is slow for small decisions and dangerous for large ones.

What a delegation of authority matrix contains

• Decision categories: spending, contracts, hiring, pay, pricing and discounts, capital expenditure, borrowing, legal claims.
• Approval levels per category: board, chief executive, director, head of function, manager.
• Financial limits for each level, stated as amounts rather than as "significant" or "material".
• Whether approval is individual or requires two people.
• Decisions reserved to the board regardless of amount — acquisitions, new debt facilities, related-party transactions.
• Conditions: budgeted versus unbudgeted spend, contract length, recurring commitments counted over their full term.
• Who may approve in someone's absence, and for how long.

Limits that match the organisation

Set limits from real decisions, not from a template. Look at the last year of purchase orders, contracts and hires, and ask where approval currently happens and where it should. Limits set too low push routine decisions up the chain and create queues for executives; limits set too high remove oversight where it matters. Two distinctions prevent most loopholes: count the total contract value rather than the monthly amount, and treat unbudgeted spend at a lower limit than budgeted spend.

Splitting a purchase into smaller orders to stay under a limit is the classic way a delegation of authority is defeated. State explicitly that related purchases are aggregated, and check for it.

Keeping the delegation of authority alive

1. Have the board approve the delegation of authority and minute the approval.
2. Publish it where approvers work, not in a policy folder nobody opens.
3. Build the limits into the tools that route approvals, so the matrix is enforced rather than remembered.
4. Record every sub-delegation and temporary cover in writing, with an end date.
5. Review it annually and whenever the structure changes — a reorganisation silently invalidates half the approval levels.
6. Test it: sample approved transactions and check each was signed off at the right level.

Ettex Records suits the matrix itself: one row per decision category and level, with the limit, the conditions and the date approved, plus a separate table for temporary delegations with their start and end dates. When the matrix lives as data rather than a PDF, the same limits can drive an approval workflow, and signing authority for contracts and bank payments can be derived from it instead of maintained separately.