Chapter 9: Power and Control

1. Chapter 9: • Power and Control • By Muhammet Said Dinç

2. Contents • Discuss the arguments in support of strategic choice for managers • Distinguish between power and authority • Describe how an individual and group gains power • Define politics • Explain the power-control model of how structures emerge • Describe the power-control interpretation of technology and environment’s role in structure • Explain the power-control view of structural change • Examine how power and politics interact within organizations • Discuss at what levels in the organization the five contingencies are likely to have their strongest influence.

3. Power- Control View • In the previous chapters, strategy, size, technology andenvironmentwere explained as independent determinants of structure. • While each of these contingency variables could explain some of the variations to be found in organizational structures, none could explain all of the variations identified. • Four factors explain only 50-60% of the variability in structure.

4. Power- Control View (cont.) • Power and control may contribute to explaining variations in structure which can not be explained by other means. • The power-control view states that an organizations’ structure at any given time reflects the interests of those in power who select a structure that will, to the maximum degree possible, maintain and enhance their influence and control and permit them to implement their policies.

5. Power- Control View (cont.) • Effective management is not powerless; power is necessary in order to move the organization towards its goals. • But misuse of power can lead to dysfunctional consequences.

6. Strategic Choice and the early challenge to contingency • John Child realized that the contingenciesdid not explain all the variance that was found in organizations. • Child’s strategic choice argument is that while there are limitations on managers’ discretion to make decisions, there is still scope for them to make choices favorable to themselves.

7. Strategic Choice and the early challenge to contingency (cont.) • The contingencies do not compel managers to implement certain structures. Rather they limit the choices that managers have. • Child’s argument can be condensed into four basic points: 1. Decision makers have more autonomy than that implied by those arguing for the dominance of environmental, technological or other forces. • We would not expect organizations facing similarenvironments or using the same technology to be structured identically. The structures of Ford, Toyota, General Motors and Renault, Citroen.

8. Strategic Choice and the early challenge to contingency (cont.) 2. Organizational effectiveness should be construed as a range instead of a point. • Managers make choices that meet a generalized criterion of effectiveness. • Decision makers may be content with varying levels of organizational effectiveness, so long as they all meet minimum satisfactory level. • The range between maximizing and acceptable creates an area in which managers can use their discretion.

9. Strategic Choice and the early challenge to contingency (cont.) 3. Organizations often have power to manipulate and control their environments. • Organizations are not always powerless in the face of their environments. • Managers of large companies are able to create demand for their products and control their competitive environments. 4. Perceptions and evaluations of events are an important intervening link between environments and the actions of organizations. • People do not always perceive environmental characteristics the same way. Threat- opportunity

10. Strategic Choice and the early challenge to contingency (cont.) • The ability and authority to define the threats facing an organization provides a strong power base. • Although there are constraints which limit management decision making, strategic choice reaffirms that organizational decision makers have a degree of discretionary latitude in choosing their strategies and market domains.

11. The Role of Rational Choice in Organizations • The contingency perspective- which states that structure will change to reflect changes in strategy, size, technology and environment- is based on a number of assumptions about organizational decision making. • (1)Decision making process assumes that • there is agreement between decision makers as to the nature of the problem, • a comprehensive search for alternative solutions has been made,

12. The Role of Rational Choice in Organizations (cont.) • the most appropriate solution has been arrived at, • decisions are capable of implementation without modification or resistance. • (2) Decision makers are rational with a commitment to rationality which is belief that decisions are goal-directed and consistent. • (3) Decisions regarding structure are made by those charged with the responsibility for making decisions. Generally, coalition of top management.

13. The Role of Rational Choice in Organizations (cont.) • (4) Decision makers always act in the best interests of the organization. • Self-interests are ignored by decision makers for the good of the organization. • Power- control supporters offer another set of assumptions about organizational decision making. They propose that processes are characterized by 1. Non-rationality 3. Dominant coalitions 2. Divergent interests 4. Power

14. Non-rationality • Decision makers are human beings and thus have human frailties and limitations. • Their choice of goals depends on their perception of circumstances • They do not always pursue systematically the goals they hold • They make choices with incomplete information • They seldom conduct an exhaustive search for alternatives • They often preconceived ideas as to the nature of problems and the decisions to be made

15. Non-rationality (cont.) • Defining nature and cause of problems facing an organization may be difficult as they are often embedded within complex environments and organizational processes. • Decision makers reduce options to a few decision criteria which they consider to be important. • Their choice of criteria and selection of alternatives will reflect their self interests, their ideologies, belief systems vs. • It will also reflect the realities of what is capable of being implemented.

16. Non-rationality (cont.) • So, decision makers’ selection of best solution is not optimum choice but one that meets minimum criteria. • Non rationality is a process of decision making that does not follow the principles of logicaldeduction and decision optimization.

17. Divergent Interests • The realities of organizational decision making tell us that decision makers often have their own agendas and interests which they pursue when making decisions. • Interests of decision maker and interests of organization rarely entirely coincides. • “Rational decision making assumes that decision makers focus exclusively on the interests of the organization. “ • Figure 9.1 depicts reality.

18. Divergent Interests (cont.)

19. Divergent Interests (cont.) • Modern management techniques aim to merge the interests of the decision maker and those of the organization, thus reducing the influence of the manager’s self interest. • This may be achieved in a number of ways. • Reward systems are often aimed at inducing decisions which benefit the organization. Rewarding sales staff and top management.

20. Dominant Coalitions • The individuals who make up the organization coalesce into groups with similar interests or values. • These are called coalitions and they flourish largely because of the differences of opinion surrounding goals, strategy, organizational effectiveness. • The most visible coalitions form along departmental lines.

21. Dominant Coalitions (cont.) • In functional units, employees in the marketing department, members of accounting, finance and supply chain management have their coalitions. • Plant and middle managers, top management and board of directors will have their coalitions. • Although coalitions may form around any number of issues, the dominant coalition is the one that has power to affect structure. • In small company, the dominant coalition and owner are typically one and same. • In large organizations, top management usually dominates. • Any coalition that can control the resources can become dominant.

22. Power and Authority • Authority is the right to act, or command others to act, towards the attainment of organizational goals. • This right derives its legitimacy from authority figure’s position in the organization. That is, authority goes with the job. • Power is an individual’s capacity to influence decisions. • As such, authority contributes to an individual’s power; that is, the ability to influence, based on individual’s legitimate position, can affect decisions, but one does not require authority to have such influence.

23. Power and Authority (cont.)

24. Power and Authority (cont.) • Figure 9.2A indicates that there are levels in an organization and that the right to contribute to decision making increases as one moves up the hierarchy. • Think the cone in figure 9.2B as an organization. • The centre of the cone will be called the power core. • The closer one is to the power core, the more influence one has to affect decisions. • Functional groupings in A become wedges in the cone. This is seen in figure 9.3 which is shown from above. • Each wedge of the cone represents a functional area.

25. Power and Authority (cont.)

26. Power and Authority (cont.) • The cone analogy allows us to consider the following two facts: • 1. The higher one moves in an organization (an increase in authority), the closer one automatically moves towards the power core. • 2. It is not necessary to have authority to wield power, because one can move horizontally inward towards the power core without moving up the hierarchy. • Members of centrally placed unions, who have little authority in the organization, are often very powerful because of their ability to stop production. Secretaries and high place managers.

27. Contingencies and the nature of the organization • A further problem for contingency theory is that organizations are open systems, which engage in interactions with their environment. • Environmental influences may act as major limitations on decision making, as well as being a source of ideas and opportunity.

28. Contingencies and the nature of the organization (cont.) • Influence of existing organizational structures in management thinking: • Legacy systems are the existing systems, rules, procedures, roles, responsibilities and ways of doing things that are accepted practice within an organization. • Organizational structures often reflect past practices rather than current needs. • The existence of legacy systems leads to large organizations being slow to react to change.

29. Contingencies and the nature of the organization (cont.) • Influence of institutional pressures in management thinking: • A further example of institutional forces is the need to obtain quality endorsement (e.g. ISO 9000) with its resultant influence on organizational practices. • Influence of management fashion andfadsin management thinking: • Many of these books are persuasively written, often by consultants seeking to promote their own businesses.

30. Contingencies and the nature of the organization (cont.) • Jack Welch's approach to running General Electric, a large conglomerate based in the United States, has had a major influence on approaches to strategy. • The above examples highlight the influence of social trends on management. • If managers felt confident that their organizations were effective, perhaps they would be more resistant to fashions in management thought.

31. The roads to power • How does an individual or group gain power? • This section will consider the way in which power derives from the structure of the organization. • Those individuals or departments performing the more critical tasks, or who are able to convinceothers within the organization that their tasks are more critical, will have a natural advantage in the power-acquisition game.

32. The roads to power (cont.) • There are three roads to the acquisition of power: • Hierarchical authority • Control of resources • Network centrality

33. Hierarchical Authority • Formal authority is a source of power. • Individuals in managerial positions can influence through formal decree. • Subordinates accept this influence as a right inherent in the manager's position. • But, many managers find their formal influence over people or decisions extremely limited because of their dependence on others within the organization. • The power of a supervisor is obviously less than that of a general manager.

34. Hierarchical Authority (cont.) • Those with hierarchical authority have diminished in number over the past 20 years as hierarchies have flattened. • There are fewer managers in most organizations • There has been a trend to devolve greater decision-making responsibility to those actually undertaking the tasks. • But, in spite of these limitations, those higher in the hierarchy have greater power than those lower down.

35. Control of Resources • If you have something that others want, it gives you potential power over them. • But the mere control of a resource is no guarantee that it will enhance your power. • The resource must be both scarce and important to the organization. • In most organizations, cleaners have little power. Why? • Airline pilots

36. Control of Resources (cont.) • A resource for which there is no close substitute has greater scarcity than one that has high substitutability. • Skills provide an example: Design engineers at aerospace firms provide a powerful coalition because it would be virtually impossible to replace their skills in the short term. • Media owners see radio and television personalities as scarce and critical resources responsible for generating high earnings for which there is no close substitute.

37. Network Centrality • Positions within the organization whose main function is to coordinate information flows and the work of others may be a source of power. • Those individuals or groups in a position of network centrality gain power because their position allows them to integrate other functions or to reduce organizational inefficiencies or uncertainties.

38. Network Centrality (cont.) • It also provides them with privileged access to wide sources of information which may be used selectively to influence decisions. • In consumer products companies, brand managers and in other industries, project managers and coordinators

39. Structural Decision Making as A Political Process • Structural decisions are often the result of political activity. • Organizational politics involves activities to acquire, develop and use power and other resources to obtain a preferred outcome when there is uncertainty or disagreement about choices. • Role of dominant coalitions gives us some indication of the role of politics in organizations.

40. Structural Decision Making as A Political Process (cont.) • Not everyone in the organization is involved in political activity at any one time, although it is likely that everyone has engaged in it at some time in their career. • Surveys show that the higher a person is in management, the more likely he/she is to use politics as part of their job. • Those lower in the organization can face a more constrained set of options, which can be guided by established procedures and practices.

41. Structural Decision Making as A Political Process (cont.) • Five areas can be identified in which structure creates political arenas in organizations: • Position in the hierarchy: Status, and therefore influence, is closely attached to the position of a department head in the organization's hierarchy. Finance department head’s answer. • Resource allocation:Resources are allocated to departments or divisions as part of a budget. The better funded the department, the more status it has and the more likely it is to influence decisions.

42. Structural Decision Making as A Political Process (cont.) • Interdepartmental coordination: Relationships between departments are part of organizational life. At the lower level, these relationships are often routine and characterized by established rules and practices. Further up the management hier­archy, relationships between departments are less well defined: conflict • Responsibility exceeding authority: A principle of sound management is that authority should always equal responsibility. Senior managers are far more likely to delegate responsibility but withhold the authority.

43. Structural Decision Making as A Political Process (cont.) • Structural change: All structural change leads to managers and departments redefining their authority and power relationships. This inevitably creates those who gain and those who lose.

44. Structural Decision Making as A Political Process (cont.) • The following describe the way that political tactics are used: • Building coalitions: Coalition building relies on developing and maintaining mutually strong relationships with other people. These may be based on liking, trust and respect and shared interest and desired outcomes. • Defining the nature of the problem: All decisions are aimed at solving problems.But in many cases identifying the problem is not easy.

45. Structural Decision Making as A Political Process (cont.) • Enhancing legitimacy and expertise: A manager's or department's power is greatly enhanced when they do their job well and when they have a good reputation for task knowledge and achievement. • Making preferences explicit, but keeping power implicit: Politics requires that preferences be known to others. The best political players are those who have the courage to reveal their preferred outcome, then try to convince others that their point of view is correct.

46. Structural Decision Making as A Political Process (cont.) • Expanding networks of influence: Politics involves trying to boost the number of people who support you and minimize the number against you. Alliances can be built or expanded by such means as • hiring, • transfers • promo­tions • relationship building.

47. The Power-Control Model

48. Implications Based on the Power-Control View • The power-control perspective into implications for the structuring of organizations. • Technology and environment • Power-control advocates argue that an organization's structure, at any given time, will be one that allows those in power to maintain the control they have. • In terms of technology and environment, therefore, the dominant coalition can be expected to seek routine technologies and operate in environments which present littleuncertainty to the organization.

49. Implications Based on the Power-Control View (cont.) • So through choosing a stable environmental domain and routine technologies, top management can keep a fairly tight hold on power. • Stability and mechanistic structures • The argument made by power-control advocates is that when change occurs, it is in effect a mini-revolution. • They further suggest that it is likely to occur only as a result of a political struggle in which new power relationships evolve.

50. Implications Based on the Power-Control View (cont.) • The power-control view of structure predicts that not only will structures be relatively stable over time but mechanistic structures will be the most numerous. • If stability, routine technology and centralized control are sought, it seems logical that mechanistic structures will dominate.