Formal and Real Authority in Organizations | Zendy

Philippe Aghion | Zendy; Jean Tirole | Zendy

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Formal and Real Authority in Organizations

Author(s) -

Philippe Aghion,

Jean Tirole

Publication year - 1997

Publication title -

journal of political economy

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 21.034

H-Index - 186

eISSN - 1537-534X

pISSN - 0022-3808

DOI - 10.1086/262063

Subject(s) - delegated authority , primary authority , reputation , control (management) , principal (computer security) , authority control , delegation , business , organizational structure , formal description , microeconomics , traditional authority , computer science , economics , public administration , computer security , law , political science , management , programming language , legal research

This paper develops a theory of the allocation of formal authority (the right to decide) and real authority (the effective control over decisions) within organizations, and it illustrates how a formally integrated structure can accommodate various degrees of "real" integration. Real authority is determined by the structure of information, which in turn depends on the allocation of formal authority. An increase in an agent's real authority promotes initiative but results in a loss of control for the principal. After spelling out (some of) the main determinants of the delegation of formal authority within organizations, the paper examines a number of factors that increase the subordinates' real authority in a formally integrated structure: overload, lenient rules, urgency of decision, reputation, performance measurement, and multiplicity of superiors. Finally, the amount of communication in an organization is shown to depend on the allocation of formal authority.

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