Question

What is the relationship of accountability, responsibility, and authority with respect to a responsibility center

Answer 1

There are different corporate function departments, lines of business within a firm like Human Resource, Marketing, Finance, Operations, Sales etc which is responsible for smooth running of firm when they operate in collaboration with each other. Each of these departments can be looked upon as a responsibility center. If the center can only control costs (like IT, Finance departments) it is called as a cost center. If the center can control both cost and revenues (like marketing, manufacturing units) it is called as profit centers. If the center has only control over revenue but little control over costs, then it is called as revenue centers.

Accountability in a cost center refers to the fact that each of the responsibility centers are given their specific goals and objectives which has to be accomplished with dedicated staff, rules, regulations and guidelines. This way the top management in firm can tie back quarterly, annually results of the firm back to specific unit and specific employees. This way accountability of different employees towards specific goals and objectives can be established.

The goals and objectives allocated to specific responsibility center within a firm is further divided into sub tasks. These subs tasks needs to be completed in cohesion for overall achievement of the center's objectives. To ensure full achievement of center's goals and objectives, different employees within the firm are given responsibility to complete the specific sub task allocated to them. In this way responsibility is given to employees by their senior managers who are overall accountable for achieving center's goals and objectives.

Authority to define or change goals and objectives of different responsibility centers, introduce new responsibility centers altogether lies with top management. The top management have authority to select specific employees who are accountable to them for achieving the responsibility center's overall goals and objectives. The employees selected by top management gives responsibility to their sub ordinates for completing their respective sub tasks. These sub tasks identified within a responsibility center (by managers accountable to senior management) when completed in cohesion (by employees who hold the responsibility of completion) provides overall achievement of goals and objectives.