Individual Versus Organizational Power-Organization Theory and Design-Handouts, Lecture notes for Organization Theory and Design. Amity Business School
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alaknanda6 August 2012

Individual Versus Organizational Power-Organization Theory and Design-Handouts, Lecture notes for Organization Theory and Design. Amity Business School

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Carnegie model, conflict power, ethics, decision making, information technology, manufacturing technology, organization system, strategy and external environment are main topics of this course. This lectures main points ...
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Organization Theory and Design - MGT504 VU

© Copyright Virtual University of Pakistan 133

Lecture 40 INDIVIDUAL VERSUS ORGANIZATIONAL POWER

In popular literature, power is often described as a personal characteristic, and a frequent topic is how one person can influence or dominate another person. You probably recall from an earlier management or organizational behavior course that mangers have five sources of personal power. Legitimate power is the authority granted by the organization to the formal management position a manger holds. Reward power stems from the ability to bestow rewards – promotion, raise, pat on the back – to other people. The authority to punish or recommend punishment is called coercive power. Expert power derives from a person’s higher skill or knowledge about the tasks being performed. The last one, referent power, derives from personal characteristics such that people admire the manager and want to be like or identify with the manger out of respect and admiration. Each of these sources may be used by individuals within organization. Power in organizations, however, is often the result of structural characteristics. Organizations are large, complex systems that contain hundreds, even thousands, of people. These systems have a formal hierarchy in which some tasks are more important regardless of who performs them. In addition, some positions have access to greater resources, or their contribution to the organization is more critical. Thus, the important power processes in organizations reflect larger organizational relationships. Both horizontal and vertical, and organizational power usually is vested in the position, not in the person. POWER VERSUS AUTHORITY Power is an intangible force in organization. It cannot be seen, but its effect can be felt. Power is often defined as the potential ability of one person (or department) to influence other persons (or departments) to carry out orders – or to do something they would not otherwise have done. Other definitions stress that power is the ability to achieve goals or outcome that power holder’s desire. The achievement of desired outcomes is the basis of the definition used here. Power is the ability of one person or department, in an organization to influence other people to bring about desired outcomes. It is the potential to influence others within the organization but with the goal of attaining desired outcome for power holders. Book Mark 12.0 offers some guidelines for increasing your power and ability to influence others. Power exists only in a relationship between two or more people, and it can be exercised in either vertical or horizontal directions. The source of power often derives from an exchange relationship in which one position or department provides scare or valued resources to other department. When one person I dependent on another person, a power relationship emerges in which person with the resources had greater power. When power exists in a relationship, the power holders can achieve compliance with their requests. For example, the following outcomes are indicators of power in an organization: • Obtain a larger increase in budget than other departments. • Obtain above – average salary increases for subordinates. • Obtain production schedules that are favorable to your department. • Get items on the agenda at policy meetings. People throughout the organization can exercise power to achieve desired outcomes. Back in 1994, when the Discovery channel wanted to extend its brand beyond cable television, Tom Hicks began pushing for a focus on the emerging internet, even though Discovery’s CEO favored exploring interactive television. Hicks organized a campaign that eventually persuaded the CEO to focus instead on Web publishing, indicating that Hicks had power within the organization. Today, Hicks runs Discovery Channel Online. The key to success, he says, is “to consider your personal ambitions separately from your strategic goals for the company.” The concept of formal authority is related to power but is narrower in scope. Authority is also a force for achieving desired outcomes, but only as prescribed by the formal hierarchy and reporting relationships. Three properties identify authority; 1. Authority is vested in organizational position. People have authority because of the position they hold, not because of personal characteristic or resources. 2. Authority is accepted by subordinates. Subordinates comply because they believe position holders have a legitimate right so exercise authority. Even though Jim Hear and Gregg Trueman founded Buoyant Company and served as CEO and president respectively, they learned that employees did not accept their authority to make critical decision. Staff members were aligned with three top managers who had been hired to handle the day – to –

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Organization Theory and Design - MGT504 VU

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day hands on work of the company. Staffers accepted the authority of these managers because they worked with them on a daily basis; therefore, they supported the managers’ decisions over those of the two co – owners. 3. Authority flows down the vertical hierarchy. Authority exists along the formal chain of command, and positions at the top of the hierarchy are vested with more formal authority than are positions at the bottom. Organizational power can be exercised upward, downward, and horizontally in organizations. Formal authority is exercised downward along the hierarchy and is the same as vertical power and legitimate power. In the following sections, we will examine vertical and horizontal sources of power for employees throughout the organization. VERTICAL SOURCES OF POWER All employees along the vertical hierarchy have access to some sources of power. Although a large amount of power is typically allocated to top managers by the organization structure, employees throughout the organizations often obtain power disproportionate to their formal positions and can exert influence in an upward direction. There are four major sources of vertical power; formal positions, resources, control of decision premises, and network centrality. Formal Position: Certain rights, responsibilities, and prerogatives accrue to top positions. People throughout the organization accept the legitimate right of top managers to set goals, make decision, and direct activities, thus, the power from formal positions is sometimes called legitimate power. Senior managers often use symbols and language to perpetuate their legitimate power. For example, Adam Schiff, administrator of Pacific Medical Center, described in the opening case, symbolized his formal power by issuing a newsletter with his photo on the cover and airing a 24 – hours – a – day video in the rooms to welcome patients and announce that “we don’t waste dollars.” The amount of power provided to middle managers and lower-level participants can be built into the organization’s structural design. The allocation of power to middle managers and staff if important because power enables employees to be productive. When job tasks are non-routine, and when employees participate in self directed teams and problem – solving task forces, this encourage employees to be flexible and creative and to sue their own discretion. Allowing people to make their own decisions increases their power. Power is also increased when a position encourages contact with high – level people. Access to powerful people and the development of a relationship with them provide a strong base of influence. For example, in some organizations a secretary to the vice – president has more power than a department head because the secretary has access to the senior executive on a daily basis. The logic of designing positions for more power assumes that an organization does not have a limited amount of power to be allocated among high – level and low – level employees. The total amount of power in an organization can be increased by designing tasks and interactions along the hierarchy so everyone has more influence. If the distribution of power is skewed too heavily toward the top, research suggests the organization will be less effective. Resources: Organizations allocate huge amounts of resources. Buildings are constructed, salaries are paid, and equipment and supplies are purchased. Each year, new resources are allocated in the forth of budgets. These resources are allocated downward from top managers. Top managers often own stock, which gives them property rights over resource allocation. However, in many of today’s organizations, employees throughout the organization also share in ownership, which increases their power. At St. Luke’s, a London advertising agency, the company is owned entirely by its employees from the CEO down to the janitors. In most cases, top managers control the resources and hence can determine their distribution. Resources can be used as rewards and punishments, which are also sources of power; resource allocation also creates a dependency relationship. Lower- level participants depend on top managers for the financial and physical resources needed to perform their tasks. Top management can exchange resources in the form of salaries, personnel, promotion, and physical facilities for compliance with the outcomes they desire. Control of Decision Premises and information: Control of decision premises means that top managers place constraints on decision made at lower levels by specifying a decision frame of reference and guidelines. In one sense, top mangers make big decisions; whereas lower-level participants make small decisions. Top management decides which goal an organization will try to achieve, such as increased market share. Lower – level participants then decide how the goal is to be reached. In one company, top management appointed a committee to select a new marketing vice president. The CEO provided the committee with detailed qualifications that the new vice president should have. He also selected people to serve on the committee. In this way, the CEO shaped the decision premises within which the marketing vice president would be chosen. Top manager actions and decision such as these place limits on the decisions of lower – level managers and thereby influence the outcome of their decisions. docsity.com

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The control of information can also be a source of power. Managers in today’s organizations recognize that information is a primary business resource and that by controlling what information is collected, how it is interpreted, and how it is shared, they can influence how decisions are made. In many of today’s companies, especially in learning organization, information is openly and broadly shared, which increases the power of people throughout the organization. However, top managers generally have access to more information than do other employees. This information can be released as needed to shape the decision outcomes of other people. In one organizations, Clark, Ltd.., the senior manager controlled information given to the board of directors and thereby influenced the board’s decision to purchase a large computer system. The board of directors had formal authority to decide from which company the computer would be purchased. The management services group was asked to recommend which of six computer manufactures should receive the order. Jim Kenny was in charge of the management services group, and Kenny disagreed with other managers about which computer to purchase. Kenny shaped the board’s thinking to select the computer he preferred by controlling information given to them. Middle managers and lower – level employees may also access to information that can increase their power. A secretary to a senor executive can often control information that other people want and will thus be able to influence those people, top executives also depend on people throughout the organization for information about problems or opportunities. Middle managers or lower – level employees may manipulate the information they provide to top managers in order to influence decision outcomes. Network Centrality: Network Centrality means bring centrally located in the organization and having access to information and people that are critical to the company’s success. To executives often increase their power by surrounding themselves with a network of loyal subordinates and using the network to learn about events throughout the organization. They can use their central positions to build alliances and wield substantial power in the organization. Middle managers and lower – level employees have more power when their jobs are related to current areas of concern on opportunity. When a job pertains to pressing cognitional problems, power is more easily accumulated. David Shoenfeld, who is now senior vice – president for world – wide marketing, customer service, and corporate communications, at FedEx, increased his power by being central to solving an organizational problem. When pilots threatened to go on strike, Shoenfeld believed the best approach was to warn customers up front on the company’s Web site. The strike that had crippled archrival UPS had warned FedEx manager about the dangers of letting customer be caught by surprise, Shoenfeld idea of openly sharing information with customer on a regular basis through a daily “ Pilot Negotiation Update” Helped FedEx maintain the trust of its customers. Lower level employees may also increase their network centrality by becoming knowledgeable and expert about certain activities or by taking on difficult tasks and acquiring specialized knowledge that makes them indispensable to managers above them. People who show initiative, work beyond what is expected, take on undesirable but important projects, and show interest in leaning about the company and industry often find themselves with influence. Physical location also helps because some locations are in the center of things. Central location lets a person be visible to key people and become part of important interaction networks. When she took a job as manager of employee communications at Xerox, Cindy Casselman used the idea of network centrality to increase her power and accomplish a goal. On Xerox Teamwork Day, Xerox Chairman and CEO Paul Allaire Proudly described the company the company’s newest internal communications tool- the Web Board. Today, thanks to Casselman and the SCO team, 85,000 Xerox employees can visit this lively intranet site to read up –to-the – minute news about internal developments, talk with other workers. And generally stay connected with what’s going on in the company. Casselman herself has been promoted to executive assistant to the head of corporate research and technology. “ the Web Board raised my profile and proved that I could follow though on an ambitious project and form the relationship needed to support the project,” Casselman says “it definitely helped me win my new job,” Even though Cindy Casselman had little formal power and authority, she surrounded herself with a network of people who supported her idea for a company intranet. Casselman developed sufficient network centrality to accomplish her goal. docsity.com

Organization Theory and Design - MGT504 VU

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HORIZONTAL SOURCES OF POWER Horizontal power pertains to relationships across departments. All vice – president are usually at the same level on the organization chart. Does this mean each department has the same amount of power? No, Horizontal power is not defined by the formal hierarchy or the organization chart. Each department makes a unique contribution to organizational success. Some departments will have greater say and will achieve their desired outcomes, whereas others will not. For example, Charles Perrow surveyed managers in several industrial firms. He bluntly asked, “Which department has the most power? Among four major departments; productions, sales and marketing, research and development, and fiancé and accounting. On average, the sales and production departments were more powerful than R&D and fiancé, although substantial variation existed. Differences in the amount of horizontal power clearly occurred in those firms. Today, e-commerce departments and information services departments have growing power in many organizations. Horizontal power is difficult to measure because power differences are not defined on the organization chart. However, some initial explanations for departmental power differences, such as those shown below, have been found. The Theoretical concept that explains relative power is called strategic contingencies. STRATEGIC CONTINGENCIES Strategic contingencies are events and activities both inside and outside an organization that are essential for attaining organizational goals. Departments involved with strategic contingencies for the organization tends to have greater power, Departmental activities are important when they provide strategic value by solving problems or crises for the organization. For example, if an organization faces an intense threat from lawsuits and regulations, the legal department will gain power and influence over organizational decisions because it copes with such a threat. If product innovation is the key strategic issue, the power of R&D can be expected to be high. The strategic contingency approach to power is similar to the resource dependence model, organizations try to reduce dependency on the external environment. The strategic contingency approach to power suggests that the departments most responsible for dealing with key resources issues and dependencies in the environment will become most powerful. POWER SOURCES Jeffrey Pfeiffer and Gerald Salancik, among others, have been instrumental in conducting research on the strategic contingency theory. Their findings indicate that a department rated as powerful may posses one or more of the characteristics. Dependency: Interdepartmental dependency is a key element underlying relative power. Power is derived from having something someone else wants. The power of department A over department B is greater when department B depends on A. Many dependencies exist in organizations. Materials, information, and resources may flow between departments in one direction, such as in the case of sequential task interdependence. In such cases, the department receiving resources is in a lower power position than the department providing them. The number and strength of dependencies are also important. When seven or eight departments must come for help to the engineering department, for example, engineering is in a strong power position. In contrast, a department that depends on many other departments is in a low power position. In a cigarette factory, one might expect that the production department would be more powerful than the maintenance department, but this was not the case in a cigarette plant near Paris. The production of cigarettes was a routine process. The machinery was automated and production jobs were small in scope. Production workers were not highly skilled and were paid on a piece – rate basis to encourage high production. On the other hand, the maintenance department required skilled workers. These workers were responsible for repair of the automated machinery, which was a complex task. They had many years of experience. Maintenance was a craft because vital knowledge to fix machines was stored in the minds of maintenance personnel. Dependency between the two groups was caused by unpredictable assembly line breakdowns. Managers could not remove the breakdown problem; consequently, maintenance was the vital cog in the production process. Maintenance workers had the knowledge and ability to fix the machines, so production managers became dependent on them. The reason for this dependence was that maintenance managers had control over a strategic contingency – they had the knowledge and ability to prevent or resolve work stoppages. docsity.com

Organization Theory and Design - MGT504 VU

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Financial Resources. There’s a new golden rule in the business world; “the person with the gold makes the rules,” Control over various kinds of resources, and particularly financial resources, is an important source of power in organizations. Money can be converted into other kinds of resources that are needed by other departments. Money generates dependency; departments that provide financial resources have something other departments want. Departments that generate income for organizations have greater power. The survey of industrial firms reported in above. Showed sales as the most powerful unit in most of those firms. Sales had power because salespeople find customers and sell the product, thereby removing an important problem for the organization. The sales department ensures the inflow of money. An ability to provide financial resources also explains why certain departments are powerful in other organizations, such as universities. As shown in the example of the University of Illinois, power accrues to departments that bring in or provide resources that are highly values by an organization. Power enables those departments to obtain more of the scarce resources allocated within the organization. “Power derived from acquiring resources is used to obtain more resources, which in turn can be employed to produce more power – the rich get richer,” Centrality: Centrality reflects a department’s role in the primary activity of an organization. One measure o centrality is the extent to which the work of the department affects the final output of the organization. For example, the production department is more central and usually has more power than staff groups. (Assuming no other critical contingencies) Centrality is associated with power because it reflects the contribution made to the organization. The corporate finance department of an investment bank generally has more power than the stock research department. Finance tends to be low in power. When the finance department has the limited task of recording money and expenditure, it is no responsible for obtaining critical resources or for producing the products of the organization. Non-Substitutability: Power is also determined by non- substitutability. Which means that a department’s function cannot be performed by other readily available resources? Non-substitutability increases power. If an employee cannot be easily replaced, his or her power is greater. If an organization has no alternative sources of skill and information, a department’s power will be greater. This can be the case when management uses outside consultants. Consultants might be used as substitutes for staff people to reduce the power of staff groups. The impact of substitutability on power was studied for programmers in computer departments. When computer were first introduced, programming was a rare and specialized occupation. People had to be highly qualified to enter the profession. Programmers controlled the use of organizational computers because they alone possessed the knowledge to program them. Over a period of about ten years, Computer programming became a more common activity People could be substituted easily, and the power of programming departments dropped. The power of computer programming department increased again as organizations battled the “Y2K problems,” most large corporations use computer systems that were programmed thirty years ago to deal only in two – digit dates, which convert the year 2000 into 00, throwing the entire system out of whack, the complex conversion process had to be done manually, and programmers with the skills to handle the conversion became highly prized. Coping with Uncertainty: The discussion on environment and decision making described how elements in the environment can change swiftly and can be unpredictable and complex. In the face of uncertainty, little information is available to managers on appropriate courses of action. Departments that cope with this uncertainty will increase their power. Just the presence of uncertainty does not provide power; reducing the uncertainty on behalf of other departments will. When market research personnel accurately predict changes in demand for new products, they gain power and prestige because they have reduced a critical uncertainty. Forecasting is only one technique for coping with uncertainty. Sometimes uncertainty can be reduced by taking quick and appropriate action after an unpredictable event occurs. These techniques that department can use to cope with critical uncertainties are (1) obtaining prior information, (2) prevention, and (3) absorption. Obtaining prior information means a department can reduce an organization’s uncertainty by forecasting an event. Departments increase their power though prevention by predicting and forestalling negative events. Absorption occurs when a department takes action after an event to reduce its negative consequences. In the following case, the industrial relations department increased it power by absorbing a critical uncertainty. It took action after the event to reduce uncertainty for the organization. docsity.com

Organization Theory and Design - MGT504 VU

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In Crystal Manufacturing Company, the industrial relations unit coped with the critical uncertainty by absorption. It took action to reduce the uncertainty after it appeared. This action gave the unit increased power. Horizontal power relationship in organizations change as strategic contingencies change. For example, in recent years, giant retailers such as Wall- Mart and Winn-Dixie have increased their power over magazine publishers by refusing to sell issues that contain cover photos or stories that might be objectionable to some customers. Some Magazine publishers have agreed to provide advance copies so retailers can spot controversial material ahead and decline the issue.” If you don’t let them know in advance,” one circulation director said,” they will delist the title and never carry it again.” These demands from powerful retailers are creating new uncertainties and strategic issues for magazine publishers such as Hearst Corp., Miller Publishing Group, and Time Warner, which has to far refuse to provide preview copies.

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