Delegation of Authority for Professional Services Firms
An authority matrix nobody can remember is an authority matrix nobody follows, and the exceptions become the process.
Every firm has rules about who can sign what. In most firms those rules exist in three incompatible forms: a document written when the firm was half its current size, a set of system permissions configured by whoever set up the system, and a shared understanding that the managing partner decides anything important.
A delegation of authority framework is worth having when it makes decisions faster rather than slower. That is the test to apply to every threshold in it: does this line let someone act with confidence, or does it merely record who to blame.
Authority should follow risk, not only value
Value thresholds are the usual approach and they are a poor proxy on their own. A small engagement for a listed client in a regulated sector, producing an opinion a third party will rely on, carries far more exposure than a large but routine implementation for a private company.
A better framework uses value as one axis and risk as another. Risk factors worth weighting include whether the output will be relied on by a third party, whether the client is regulated or listed, whether the work is in a jurisdiction the firm rarely operates in, whether it involves personal or price-sensitive data, and whether the fee model transfers scope risk to the firm. A high score on any of these raises the approval level regardless of fee.
The decisions worth defining
- Accepting a client and accepting an engagement, which are separate decisions and often have different approvers.
- Committing to a fee, and separately, committing to a fee model that transfers risk to the firm.
- Granting a discount, and granting a standing rate concession, which is the more consequential of the two and is frequently uncontrolled.
- Approving a change to an engagement, with a value limit and a rule for what happens between governance meetings.
- Accepting an unusual contractual term: uncapped liability, an indemnity, an unusual intellectual property position, or a jurisdiction clause.
- Writing off work in progress or a receivable, which should sit above the person whose engagement it is.
- Subcontracting any part of the work, and granting access to client data outside the engagement team.
Keeping it usable
The most common failure is length. A matrix with sixty rows is consulted by nobody, and people fall back on asking whoever is nearest. Aim for a page: the decisions that genuinely recur, with two or three thresholds each, and a single catch-all rule for anything not listed.
The second failure is that the matrix lives in a document while the decisions happen in systems. If the approval is recorded where the work is, the matrix is enforced. If it is recorded in a signature on a document filed elsewhere, the matrix is advisory. That difference determines whether it survives a busy quarter.
Exceptions, and what they tell you
Exceptions will happen, and the framework should provide for them explicitly: who can grant one, what must be recorded, and that it applies to a single instance rather than establishing a precedent.
Then read them. A threshold that generates frequent exceptions is set at the wrong level, and the exception log is the most reliable evidence available for where to move it. A framework reviewed annually against its own exception log converges on something people follow, which is the only version worth having.