Why some managers are impotent on money matters

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Rey Elbo-125

In The Workplace

I’m a department manager for a major corporation that has averaged P700 million in net revenue in the past five years. What I cannot understand is that all managers are not allowed to make any independent decisions on disbursements as small as P500 for a single transaction. Our decisions on money matters are treated only as recommendations that need the approval of a high-ranking officer, like our vice president. On the other hand, my wife who works for a small corporation has the final authority to sign for as much as P100,000 provided that such expense is covered by a budget. Can you please enlighten me on this? – Pathetically Sad.

The following notice was seen at the desk of a small hotel in a far-flung rural area. “Please introduce yourself to your fellow guests. We are one big happy family here. But don’t leave valuables in your room.”

In many organizations, we are often encouraged by management to practice a proactive, two-way communication process with everyone as a manifestation of goodwill and as a trust offering. However, in actual practice, such reminders are often negated unconsciously through written or unwritten policies.

Many managers have been installed in such responsible positions because the appointing powers believe they can be trusted. Otherwise, if they can’t be trusted, they should not occupy even the post of a junior supervisor for a single minute. Beyond that, the ability of the organization to practice what it preaches can be easily destroyed by the kind of system which you have illustrated.

I’ve seen similar situations in many organizations and the managers appear unconcerned and not worried about its negative implications on their image and credibility. Perhaps they’ve accepted their fate. So, why do some corporations allow their managers to have the authority to sign for as much as P100,000 for a single transaction while others are not allowed to release P500 worth of petty cash without the counter-signature of another corporate official?

It depends on many factors, including the company’s centralization and decentralization policy, the size of the organization, industry practice, the volume of transactions, the ownership structure, the nature of the job or the business, management style, among other things. Most of the time, the expenditures are classified into cash-level disbursements, capital expenditure, and operating expenses. These factors are inter-related and cannot be separated from one another.

However, all of this must be understood within the context that all organizations (without exception), regardless of the size and nature of the business, follow three levels of hierarchical authority. They are situated in a pyramid-like structure that includes top level management, middle management, and junior management.

One, centralization or the concentration of authority at the top, is evident in many Filipino-Chinese companies that don’t give even an iota of signing authority to their managers, even for a P100 emergency cash purchase. Even giant, multinational Japanese corporations do that as a matter of practice, even while mouthing “employee empowerment” in their value statements. Their managers can only give recommendations. Nothing more than that.

Two, decentralization or the dispersal of authority. Approval of disbursements is distinguished between middle and junior managers with the former receiving higher amounts of discretionary authority but lower than that of the top level managers. Decentralization happens for practical reasons and for the convenience of the customers because of the volume of daily transactions. That’s not all, decentralization is also being touted by organizations to train their mid-level and junior management professionals to meet future challenges.

Three, nature of business and industry practice. In the case of the banking industry, bank tellers even if they’re not part of management are allowed to release P50,000 to service client withdrawals or check encashment without the approval of bank officers. Bank officials who are assigned to non-banking functions such as human resources, marketing, accounting, and administration are allowed to sign for as much as half a million pesos for lower-level executives up to one million for middle-level officials.

Being trustworthy is an absolute necessity for managers. A single iota of doubt on the manager’s integrity and trustworthiness is enough to sidetrack a career. Against this, we encounter managers who complain they have no authority to sign anything.

It is easy to commiserate and take pity on them over their predicament.

Is this an issue of trust? Not necessarily. I believe it’s a matter of management style, no matter how unacceptable it has become to the managers who suffer from lack of authority in many family-owned companies.

Some top managers give more senior job titles and pay and perks packages to favored managers even if they possess the same qualifications of their peers. That is their style of thinking. Take it or leave it. And we can’t question that.

ELBONOMICS: A man who doesn’t trust is like a mirror that can’t be trusted.


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