In one of the earliest studies of formal organisations, Weber distinguished three types of authority: traditional, charismatic and legal–rational. These types of authority are based on the form of control regarded as legitimate by subordinates and their acceptance of the power of superiors. The three types of authority relate to different types of organisations.

In traditional organisations, authority is legitimised by custom and a longstanding belief in the natural right to rule, or is possessed by traditional procedure. Examples would be the authority of the Pope, kings or queens or a paternalistic employer. In charismatic organisations, authority is legitimised by belief in the personal qualities of the leader; authority is based on the leader’s strength of personality and inspiration. Winston Churchill might be quoted as an example. The practical need for some routine, for procedures and systems and for economic support means that if the movement is to continue it must become organised. On the impending demise of the charismatic leader the movement might collapse unless a ‘legitimate’ heir is found. This process tends to transform a charismatic organisation into either a traditional organisation or a bureaucratic organisation. In bureaucratic organisations, authority is based on the acceptance of the law of formal rules and procedures, and on impersonal principles. There is a legal–rational authority which stems from hierarchical position in the organisation and not from personality. Examples are the armed forces and the authority of government ministers or a college principal.

The concept of legal–rational authority is of most interest to us because most business organisations, particularly large-scale ones, tend to be of the bureaucratic type of structure, although there are variations in degree. Bureaucracy, as applying to certain structural features of organisation, is the most dominant type of formal organisation.