Organizational power is the tool used to resolve the conflict. It is the ability to defeat the opposition in accomplishing a goal. Marketing gets production to run an extra batch of goods; production would not have run this batch, so an element of coercion is involved.
The power of different coalitions to influence decision-making determines how conflict gets resolved and which subunits benefit. Conflict and power are interrelated. Conflict arises because groups need to cooperate but compete for resources. Groups use power to resolve conflict in their favor.
Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ • Refer to discussion question 3 here to discuss the importance of maintaining a balance of power.
_________________________________________________________________________________ ________________________________________________________________________________ 14.5 Sources of Organizational Power
Individuals, groups, and divisions seek power to influence others. There are seven sources of power: authority; control over resources; control over information; nonsubstitutability; centrality; control over uncertainty; controlling the premises of decision-making, and unobtrusive power. (Fig. 14.4)
Authority is the most obvious source of power. Because it is legitimate power stemming from an
organization’s legal and cultural foundations, it is the ultimate source of power. The legal charter permits the board of directors, the agent of shareholders, to grant a CEO the power to use resources to create value. The CEO has the power to grant authority to other managers, who give power to subordinates. Employees accept the legal right of the organization to control their behavior. Authority is distributed differently in various organizations. Centralization has top managers retain authority, and
decentralization delegates authority to lower levels.
Q. If centralization discourages coalitions, why would an organization decentralize?
A. A highly centralized organization makes few significant decisions, because everyone is afraid to take responsibility. Employees just agree with superiors, which hurts organizational effectiveness.
Many managers try to retain control. Out of fear of losing authority, the manager limits information to subordinates, making it hard for them to make decisions. Decentralizing authority does not mean a loss of authority, because the supervisor is still responsible for subordinates. Intentional decentralization is called empowerment, giving employees decision-making freedom and motivating them to create value. Organizations need to empower both individuals and divisions.
Control over resources gives subunits power. At a pharmaceutical company, R&D scientists have power. Money is the ultimate resource, as it buys other resources. Top managers have ultimate power because they allocate resources. The ability to generate resources also increases power. Divisions that produce revenue have power.
P H A M H O A N G H I E N
Control over information, access to and control over the information flow, is a source of power. By choosing the information others receive, an individual influences their opinions. Those who select information are called “gatekeepers.” People in specialized roles have power stemming from the control over information. Patients take the word of doctors.
Nonsubstitutability means that no one else can perform an individual or subunit task, giving power. Centrality refers to those who make decisions and functions needed for resource flows. Centrality is a source of power. An organization’s strategy determines which subunit is central.
Q. Which function is central for a low-cost strategy? How about a differentiation strategy?
A. The manufacturing function is central for a low-cost strategy. For differentiation, R&D or marketing is central.
Control over uncertainty: A subunit with control over the primary source of contingencies has power. Doctors have power in hospitals because they treat patients, the major source of uncertainty.
Contingencies change over time, causing functions to rise and fall. Right after World War II, manufacturing was the most important function, as firms concentrated on developing production techniques. Once manufacturing became routine, companies had to sell products, so marketing became important in the 1960s. With the 1970s came a recession, so finance became important.
Unobtrusive Power: Controlling the Premises of Decision-Making
A dominant coalition has the power to control decision-making to resolve conflict in their favor. This is known as unobtrusive power, because other subunits do not know the coalition has influence.
A coalition’s power stems from the ability to control the assumptions, goals, and norms to evaluate alternatives. If marketing is the dominant coalition, cost cutting will not get much attention.
Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ • Refer to discussion question 4 here to review the concept of unobtrusive power.
_________________________________________________________________________________ _________________________________________________________________________________ 14.6 Using Power: Organizational Politics
Managers try to gain power to use it to their advantage. Organizational politics is the process of acquiring power and using it to overcome opposition for a desired outcome. To strengthen power, subunits engage in politics. Many have negative images about politics, like politicians campaigning and not keeping promises. Politics are an inevitable part of an organization. It is important to understand how politics work to recognize a skillful politician who gets visible and prestigious assignments.
Tactics for playing politics enable individuals and subunits to attain power to accomplish goals. Such political tactics, which stem from sources other than authority, include:
P H A M H O A N G H I E N 1. Increasing indispensability.
Q. What tactics increase indispensability?
A. Increasing nonsubstitutability and centrality increase indispensability. Individuals with specialized skills in an area of concern to an organization are indispensable. Centrality rises by accepting
assignments with visibility and developing a network of contacts.
2. Associating with powerful managers. Individuals can work with managers on their way to the top in hopes of ascending the corporate ladder with them. Top managers become mentors, because
succession planning is an important responsibility. Q. How can you identify powerful managers?
A. Signs of power include reputation, ability to influence decision-making, and control of important resources. Symbols of prestige, such as access to corporate jets, indicate power.
Taking advantage of common ties, such as graduating from the same school, is a way of associating with powerful individuals and becoming indispensable.
Q. Is this political tactic ethical?
A. Answers will vary, but it does creates visibility and individuals won’t ascend the corporate ladder solely on their political ability; talent counts. Politics offers the opportunity to display talent.
3. Building and managing coalitions. Subunit can join to increase power. Coalitions require a trade-off: Manufacturing supports finance if finance supports manufacturing. Top managers must establish good relationships with shareholders and the board. A CEO will fall without board support. Managers need long-term relationships with stakeholders, such as customers, banks, and suppliers. External linkages give top managers political power. Internal linkages increase the chance for promotions. Coalitions change, so managers need to develop coalition-building skills. Co-optation is a way to manage coalitions, making the opposition part of decision-making.
4. Influencing decision-making. To be successful at politics, power must be coupled with knowing when and how to use it. Unobtrusive power is the most effective, because people do not realize their help in accomplishing another group’s goals.
Tactics to make decisions seem like a promotion of organizational interests include controlling the agenda and bringing in an outside expert. Controlling the agenda allows for issues to be addressed by significant decision makers. Conflict stays in the latent or felt stage, because dissenters miss the opportunity to state their views. Managers can bring in a supposedly neutral outsider, but actually the outside consultant represents the dominant coalition and recommends its solution. Opposing groups agree because they think the outsider is objective.
The Costs and Benefits of Organizational Politics
Coalitions lobby for their interests because the stakes are high. Stakes include control over resources. Politics play a role in strategy and structure choices. Politics can improve decision-making, yet more time could be spent fighting than in making and implementing decisions.
P H A M H O A N G H I E N
To achieve the benefits of politics, an organization must create a balance of power in which all parties recommend solutions and dissenting views are considered. (Fig. 14.5)
The benefit of politics is improved decision-making because coalitions engage in a productive debate over alternatives. When resources are allocated to groups that can manage contingencies, value is created.
Benefiting from politics assumes that power is conferred on those who can provide the most benefit. Power constantly moves through an organization as unsuccessful managers lose power to successful managers.
Q. What is wrong with this assumption?
A. Unsuccessful managers may retain their power despite poor performance due to control over property rights. A top-management team can hold all important roles on committees and choose supporters as members. Some CEOs serve as chairmen of the board, which allows for board control. Other top
managers centralize decision-making and deny promotions to dissenters.
Organizational Insight 14.3: Power Struggles and Corporate Greed at WorldCom This insight details how the board members at WorldCom failed in their oversight role, costing
shareholders billions of dollars. The board members resigned voluntarily and cannot be replaced until the next general meeting.
Q. Why do CEOs and directors try to keep their positions? What role do large institutional shareholders play in the balance of power?
A. CEOs and directors want to keep their power and strong property rights. They receive millions of dollars in salaries, bonuses, and stock options plus private planes and chauffeured cars. Large institutional shareholders, angry at abuses of power, influence boards to oust ineffective CEOs. They recommend outside directors less likely to reward poor performance with generous stock options. They want authority to monitor top managers and create a more equitable balance of power.
When powerful managers silence dissenters, debate declines, checks and balances dwindle, conflict escalates, inertia increases, and effectiveness declines. The balance of power among stakeholders determines whether power and politics benefit or harm an organization.
Managerial Implications: Power and Politics
Managers should understand the effect of politics on decision-making. Managers should develop a personal power base to influence decision-making and associate with powerful managers and a mentor to obtain power. Managers should seek to maintain a power balance between individuals or subunits to preserve organizational decision-making.
DISCUSSION QUESTIONS AND ANSWERS
1. Why and under what conditions can conflict be good or bad for an organization? Would you expect a higher level of conflict in a mechanistic or an organic structure? Why?
Conflict can be good for an organization by overcoming inertia. Because different managers and stakeholders present different views, conflict can improve decision-making and use resources better.
P H A M H O A N G H I E N
Without agreement on priorities and resource allocation, conflict causes performance to decline.
Bargaining over decisions keeps decisions from being made. Conflict is higher in a mechanistic structure because a tall organization loses control over its hierarchy. Loss of control results in conflict; people have decision-making responsibility, but lack authority and require approval from others. A flatter organic structure gives lower-level employees decision-making and promotes mutual adjustment. An organic structure has integrating mechanisms to promote cross-functional cooperation.
2. You have been appointed to manage a large R&D laboratory. You find a high level of conflict between scientists in the unit. Why might this conflict be arising? How will you try to resolve it? This conflict results from task interdependence. R&D scientists have reciprocal interdependence; the actions of one affect the actions of others. Different groups of scientists have different goals and compete for scarce resources, such as funding. I would implement an organic structure, such as a product team structure, with decentralized authority and clearly defined authority relationships. Integration should be increased between groups. I would change attitudes by allowing opinions to be aired.
3. Why is it important to maintain a balance of power between different groups of organizational stakeholders?
A balance of power is necessary to manage politics and obtain its benefits. This allows for alternative and dissenting views. A balance helps allocate resources to those who can create the most value. A group with dominant power can misuse it. Opposing views are suppressed, checks and balances disappear, conflict escalates, and inertia increases. Effectiveness declines. A balance of power helps achieve the benefits of power and politics.
4. What is unobtrusive power? Why is it so important?
Unobtrusive power stems from the ability to control the premises of decision-making. Subunits with similar interests build coalitions to pursue common goals and use their power to influence decision- making. Unobtrusive power is important because the coalition controls the assumptions, goals, and norms used to evaluate alternatives. A coalition in favor of differentiation will not consider cost-cutting.
Unobtrusive power is important because others think they are promoting organizational goals, but they are being manipulated.
5. How can the design of the organization’s structure and culture give some subunits more power? Structure and culture give some subunits more power through control over resources, information, and centrality. An organization controls resources if it generates resources. In a pharmaceutical company, R&D generates resources, so it has power. Structure dictates which subunits receive information. Control over information can lead to influence over opinions. A subunit is powerful if it is central to the
organization. In a low-cost culture, manufacturing is central.
6. Discuss how you, as manager of the R&D function in a cosmetic products company, might try to increase your power and the power of your subunit to control more resources in a battle with marketing and manufacturing.
I would increase the indispensability of the R&D function by increasing nonsubstitutability and
centrality. I would ensure that the function had special knowledge, such as the ingredients to a successful product. I would make contacts with functions to build a network of supporters. I would be visible to powerful managers and build a coalition to influence decision-making by controlling the agenda.
P H A M H O A N G H I E N
ORGANIZATIONAL THEORY IN ACTION
Each small group consists of top managers at a large reputable pharmaceutical company. The company faces pressures from competition and the government to reduce costs and speed product development. Groups will discuss how the implementation of cross functional teams will affect the relative power of each division. They will discuss the conflict that will likely emerge and make recommendations on how to manage the conflict.
The Ethical Dimension
Students debate the ethical implications of CEOs appointing directors who will be evaluating their performance. Use the WorldCom case to show what can happen under these conditions.
Making the Connection
Students will find an example of a conflict that occurred between the managers of a company or between the managers and other stakeholders. They will identify the source of conflict and how managers are using their power to influence the decision-making process.
CASE FOR ANALYSIS