1-3_2006_jun_a

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Answers7Part 1 Examination – Paper 1.3June 2006 AnswersManaging People

1All organisations of whatever size need to understand and address the issues of the relationship between various levels ofmanagement, especially the nature, source and limitations of authority, responsibility and delegation. Understanding responsibility,delegation and authority is fundamental to the practice of management. Professional accountants should be able to show anunderstanding of the problems and challenges associated with these concepts of management. Students are not expected toremember definitions verbatim, but they are expected to show an understanding of the inherent logic contained in these concepts,and to demonstrate a clear distinction between the two main concepts of authority and responsibility.

(a)There are many explanations of what managers do. The most widely understood approach is that of Henri Fayol, who saidthat managers perform five duties, to forecast and plan, to organise, to command, co-ordinate and control. Managers areultimately responsible for the efficient use of the organisation’s resources and are accountable to the organisation’s owners.At Flavours Fine Foods, the owners (the Jones brothers) must recognise this reality and allow the managers to manage.

It used to be said that a manager did his or her job by getting others to do theirs. In many ways this sums up the role of thesupervisor. However, management must ensure that supervisors understand organisational objectives and must make clearthe powers and limits of the supervisors’ authority. Supervision is an important and integral part of the task and process ofmanagement.

The role of the supervisor is critical because of direct contact with and responsibility directly for the work of others. Thesupervisor is unique; he or she is the interfacebetween management and the workforce and is the direct link between thetwo, being in direct physical contact with non-managers on a frequent basis. Supervisors are in the front line of managementand see that others fulfil their duties, resolve problems first hand and often quickly, direct the work of others and enforcediscipline. In addition, they often must have direct knowledge of health, safety and employment legislation and have authorityfor negotiation and industrial relations within the department.

(b)(i)RESPONSIBILITYis the liability of a person to be called to account for their actions and results, and is therefore anobligation to take some action to discharge that responsibility. Unlike authority, responsibility cannot be delegated. Thereis however some discussion on the extent to which this statement is true: the idea that responsibility cannot be delegatedis too simplistic. Any task contains an element of responsibility. It is the idea of accountability and the directionofresponsibility that is the relevant concept and is the problem at Flavours Fine Foods; ultimate responsibility resides withthe owners. It is self evident that it is impossible to exercise authority without responsibility because this could lead toproblems of control and therefore undesirable outcomes for the organisation. However, the superior (the owner) is alwaysultimately responsible for the actions of his or her subordinates. The key element here is the recognition of discretion byvirtue of the person’s position. This underlines the doctrine of absolute responsibility; the superior is always ultimatelyaccountable.

(ii)AUTHORITYis the scope and amount of discretion given to a person to make decisions by virtue of the position heldwithin the organisation. The authority and power structure of an organisation defines the part each member of theorganisation is expected to perform and the relationship between the organisation’s members so that its efforts areeffective. The sourceof authority may be top down (as in formal organisations) or bottom up (as in social organisationsand politics). In the scenario, authority is from the top and should be delegated downwards.

(iii)DELEGATIONis giving a subordinate the discretion to make decisions within a certain, defined sphere of influence.Therefore the superior must possess the authority to delegate. The key element here is discretion and the level ofauthority within a specific sphere which is behind the problems at Flavours Fine Foods. Authority should be clearlydelegated as appropriate to the managers and, through them, to the supervisors.