Delegation of authority refers to a manager's ability to authorize a third party to represent or commit the company in dealings with other stakeholders (suppliers, customers, banks, etc.).
This act does not entail a change in the original composition of the management team, nor does it remove the delegator's powers. The delegate is able to carry out a certain number of acts in the name and on behalf of the company, such as signing contracts or bank loans.
The powers granted to the delegate are specified in a delegation agreement.
Nevertheless, certain acts may require the approval of the General Meeting of Shareholders, or of another officer. It is therefore a very useful document in certain circumstances, helping to simplify business life.
Let's take a closer look at all the benefits it can bring, depending on your situation.
Delegation of authority is only possible if the executive is recognized as being unable to assume all his or her responsibilities alone.
It's not that simple to delegate your powers to a third party, and it depends on several criteria established by law:
- Does your company have enough employees?
- How many types of business do you have?
- What is your company's organizational structure?
Delegation of authority is only granted if the company is large enough. There is no defined threshold, but each company must demonstrate that it is in a position to make use of it.
It is therefore not possible to delegate authority to a person outside the company.
Within the organization chart, the delegate must report directly to the manager in the hierarchy, and must possess all the skills required to assume this function.
Secondly, the company is obliged to provide him with all the means necessary to achieve his goals. He must be able to carry out his duties fully, serenely and independently.
To create a valid delegation of authority, several essential conditions must be met. Firstly, the delegator and the delegatee must be clearly identifiable.
Secondly, a delegation of authority is limited in time. Its duration must be commensurate with the tasks entrusted to the delegate, so as not to hinder him or her in carrying out the tasks entrusted to him or her.
To remove any ambiguity, the delegation agreement must specify the responsibilities and objectives incumbent on the delegatee.
This will enable you to define the scope of his or her prerogatives and responsibilities, so as to avoid any form of dispute. Be sure to include all the powers he or she may need to carry out his or her duties.
For example: can he modify the way a team operates? Is there a ceiling on the amount of contracts he can sign?
Once signed, the delegate takes possession of his new responsibilities from the date stipulated in the agreement.
Their professional civil and criminal liability may be incurred in the event of non-compliance with the law, or professional misconduct.
Delegation of authority is often envisaged if the manager wishes to anticipate the promotion of an employee, by temporarily entrusting him/her with more responsibilities.
It also reduces the workload on the manager. It is important to specify that it does not imply the transfer of powers from the delegator to the delegatee.
In other words, the executive does not lose any powers when he signs a delegation agreement with one of his employees.
Similarly, the employee's remuneration is not reduced. It is customary to increase the employee's salary, although this is not a legal obligation.
Signing a delegation of authority agreement is therefore an important act that requires careful thought and preparation upstream.
It is preferable to call on a professional to draw up the agreement, so as not to omit any clause limiting the delegate' s powers, and to provide an effective framework for the delegate's actions.
Otherwise, poor management choices can have major repercussions for the company in the short, medium and long term.
Written by our expert Paul LASBARRERES-CANDAU
February 13, 2019
