‘Formal Operational authority’, is the right to command things, in the sense that the person having such authority has the right to acquire assets or to convert assets into other, forms, to dispose of them. This is the traditional concept of formal authority.

This theory assumes authority as organising at the top of an organisational hierarchy and flowing downward therein through the process of delegation. Thus, the, authority does not vest, in a managerial position, but it is delegated from up. Formal authority is a vested right. It must be bestowed upon an individual. It cannot be assumed.

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It can only’ be delegated to an individual by a superior, who himself must have superior authority and the right to delegate that authority. However, there are various social factors laws, political and ethical considerations, and economic factors put certain limits on this authority, and organisation has to function with in, these limits. In this way the basic source of authority can be traced in social institutions themselves.

Most formal authority theorists emphasize the legal aspects of private property as the source of authority, though sociologists analysis has broadened the source to include all social institutions which may be defined as complex of laws, codes, cultures and ethics by which a social group attains and enforces group purpose. In this way, owners themselves have certain limits on their authority.