Delegation within Hierarchies: How Information Processing and Knowledge Characteristics Influence the Allocation of Formal and Real Decision Authority

We investigate trade-offs associated with delegating authority over multiple interrelated decisions in a complex task structure. The empirical setting is a business process of a global Fortune 50 firm. The firm decentralized its organization and redefined decision authority across organizational hierarchies between 2008 and 2011. We employ regression analysis of microlevel data on the allocation of decision authority between formal and real authority, and further on the organization design of 761 decision tasks within a hierarchy. Our findings show how the specialization of decision-relevant knowledge, the matching of required knowledge and managers’ expertise, and information processing intensity affect (a) the occurrence of delegation and, (b) if delegation occurs, how far down the organizational hierarchy authority is delegated. We discuss how these findings complement existing theories on delegation by providing insights into when and how interrelated decisions are delegated across multiple levels of an organizational hierarchy.