Countervailing Power in Management

Subject: Management
Pages: 8
Words: 2244
Reading time:
8 min
Study level: Bachelor

Introduction

Power can be defined as a person’s, group’s or organization’s capacity to persuade others to act or behave in particular ways. Often, powerful individuals do not require their influence to get things accomplished. They generally influence individuals around them to behave in certain ways by their perceived power. One of the most basic characteristics of power is that one side feels reliant on the other for something meaningful. Thus, power is usually psychological, which means that individuals can establish influence over others by persuading them that they possess something valuable to offer. However, power cannot flow in one direction, which is evident from observing employer-employee relationships in most organizations.

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Although managers may have control over employees, the latter may also have power over them. Managers rely on their staff to be efficient, which provides them with countervailing power that describes bargaining power. Subordinates might use a variety of strategies to counteract their superior’s dominance. While managers have a lot of control over their employees, the workers also have a leverage since they have the required skills and expertise to keep things running smoothly, which helps to retain consumers’ satisfaction (McShane & Von, 2018). Without a doubt, this is something the management cannot achieve alone. This essay explores the concept of countervailing power in organizations arguing that it is a crucial mechanism that subordinates can use to influence policy in organizational decision-making.

Theoretical Underpinning of Countervailing Power

Countervailing power, also known as countervailance, has its origins in the political philosophy of medieval times. The term refers to the concept in political science of established processes that the exercising of power inside a democracy with two or more midpoints may, and typically does, create counter-forces that effectively counter one another (Cheffins, 2018). The word was popular with Roman Catholic and early Protestant organizations, albeit not all were fortunate to achieve their objectives. Even though the Conciliar Movement failed to change the Catholic Church, it presented important concerns in all spheres of social organization and added to the comprehension of the universal principle of countervailance (Gooberman et al., 2019). Ultimately, these became the cornerstone of contemporary democratic ideals. This political system stands apart compared to political systems like monarchies, in which individual princes were ultimate controllers in their territory or recent cases of authoritarian governments.

Today, countervailing power is understood as a concept of political market modification. This approach was formulated by John Kenneth Galbraith, an American economist (Gooberman et al., 2019). Essentially, a free-market economy allows goods and services to be provided and prices to be established by negotiation. In Galbraith’s view, contemporary economies offer major corporate enterprises tremendous capabilities to influence this process, and ‘countervailing’ forces emerge in the shape of the union movement, citizens’ associations to counterbalance business’s overriding dominance (Cheffins, 2018). In the field of economics, Galbraith expounds on countervailing power by arguing that the emergence of countervailing power necessitates a particular level of organizational opportunity and capability, whether commercial or not.

Galbraith highlights the labor market as an example of where the functioning of countervailing power may be seen most clearly. Big unions negotiate on a national, sector-wide scope in the labor market against organizations of corporations operating collaboratively, either via a trade organization or an unorganized improvised negotiating committee (McShane & Von, 2018). Galbraith observes countervailing power in practice in highly saturated sectors such as rubber, steel, and automotive production. As a result, he claims that not only has the dominance of the businesses in these areas made it essential for employees to create countervailing power, but it has also presented unions with the potential to achieve considerably more (Gaudin, 2018). If they succeed, they will reap the benefits of the business’s market strength. Thus, he supports bilateral monopolies in the labor market since they eliminate unilateral extortion while also enabling one monopolist to benefit from any excess rewards accruing to the other.

Power as an Organization Resource and its Bases

Although organizational power may hold a company in check and possibly propel it to success, it can also lead to the destruction of the company. The degree and orientation of the power exercise are determined by the power holder’s objectives and abilities. As a result, organizational power can be considered a management resource, similar to knowledge and technical skills. Therefore, the wise application and construction of corporate power is crucial. Scholars have identified five primary sources of administrative power, which have been extensively acknowledged in the literature. These include legitimate power, reward power, coercive power, expert power, and referent power (Kovach, 2020). Each of these power bases is discussed to underpin their connection with Galbraith’s power theory.

Legitimate Power

Legitimate power is the formal authority and power lawfully accorded to the management under contract by the company’s contemporaries. In light of this certified role of the manager, staff feels that the manager has the authority to dictate their conduct failure to which they may risk punishment. Aggressive application of legitimate power diminishes employee enthusiasm and inventiveness, whereas an absence of power delays their decision-making (McShane & Von, 2018). The result is that both lack of formal power and excessive power is harmful to project accomplishment. A careful balance should be achieved, which is challenging to attain perfectly, making conflict unavoidable. Vague wording in the legal contract can generate employee disputes, leading to wrangles. The leader’s credibility may be called into doubt, or he could be relegated to a position with limited responsibility (Gooberman et al., 2019). An organization’s power can only be taken seriously by well-grounded management capable of preparing a functional charter of authority.

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Reward Power

Having reward power is about influencing how incentives are allocated to individuals in an organization. Some of these benefits include pay rises, constructive evaluations, and promotions. A person who holds reward power influences how other people act in an organization (Kovach, 2020). When applied correctly, reward power may considerably motivate staff. However, the misuse of reward power through favoritism can greatly diminish employee morale and productivity. From the view of Galbraith’s theory, employees must work hard to ensure that reward power tilts in their favor. For example, by meeting company goals or performing their duties beyond expectation. In this case, the management is left with no other choice but to reward employees who perform well.

Coercive Power

Coercive power is primarily based on fear since it makes the subject feel that they have no choice but to cooperate to earn something. The manager may deny the staff things listed under reward power, such as perks, promotion, and more. Regardless of its source or methodology, coercive power is similar to the forcing style of resolving conflict (Kovach, 2020). In contrast to reward power which encourages employees to work with the expectation of getting something, coercive power relies on the subordinate fearing they will not lose something. Hence, the conceptual foundation of reward and coercive power sources is fundamentally equivalent.

Additionally, external threats are an excellent example of coercive power. For instance, a government agency can threaten to block a company from its list of suppliers if it fails to pay bribes. Businesses have inherent reward and coercive powers, and workers should balance their beliefs of getting versus losing. When left uncontrolled, variations between reward and coercive powers may produce a conflicting climate, putting employees’ balance and inventiveness at risk and casting aspersions on the manager’s ability and aspirations (Kovach, 2020). The popular carrot-and-stick approach exemplifies the alternating application of rewarding and coercive powers. Although it is an aggressive technique, and hence less civilized, it has its role in emerging companies.

Leaders revert to coercion whenever legitimate power is challenged or when directions are disobeyed or disregarded. Whereas legitimate power may not effectively deploy coercive and reward powers, legal power has an effect without comparable coercive and reward capabilities. Coercion can also be practiced through an amalgamation of various power centers, and it can appear as harassment and discrimination (Kovach, 2020). Employees can oppose it using psychological, constitutional, diplomatic, and confrontational means. Countervailing power will be stronger in organizations where managers frequently use coercion to control employee behavior and activities.

Expert Power

Expert power is the ability of a leader to exert influence over subordinates only on the basis of their superior intellect, skill, and proven performance ability. If given the option to extend their field of knowledge, workers may choose to work with a competent manager (Kovach, 2020). Staff may erroneously assume that a leader has expert power merely because of his or her rank, even if his real ability is restricted. Managers are in the unique position of being at the heart of knowledge transfer at all times. Accordingly, they can easily acquire high, trustworthy operational intelligence that accurately describes expert power.

Furthermore, executives have expert power due to: (a) their genuine credentials, skills, and abilities; and (b) the cumulative knowledge obtained from their position. Individuals with expert power are regarded in utmost praise by other personnel, and their views, opinions, and judgments have a significant impact on their behaviour (McShane & Von, 2018). In other words, employees almost have no means of counteracting expert power.

Referent Power

Referent power is derived from an individual’s traits, like how they are liked, respected, and emulated. Thus, this power base can be derived from common identity, character embodiment, idolization, common culture, or glorification. Referent power is a sort of power that an astute management can exercise if their followers are aware of it (Kovach, 2020). This means that referent power can be commonly observed in charismatic leaders. Subordinates tend to idolize high ranking and senior staff and try to emulate their behaviour. They can have a hidden longing to be in the highest ranks, which is a sign of determination. While balanced aspiration is an asset, misguided aspiration or a lack of emotional intelligence—can render subordinate staff susceptible to role model control. Referent power has been praised as a sound basis for modern contemporary administration as it can be utilized productively to the organization’s advantage and has significant consequences in the proper exercise of power (Kovach, 2020). This implies that organizations that embrace referent power are less likely to witness the negative effects of countervailing power.

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Reciprocal Power

Reciprocal power is extremely useful and should be used in corporations. This power stems from fundamental moral values, such as the concept of treating your number the way you want them to treat you (Kovach, 2020). Addressing people’s wishes, giving them a treat, responding to their genuine assistance, and more allows the manager to seek support from them in exchange. Reciprocal power is a valuable and innocuous power source unless utilized for nefarious reasons. Like referent power, managers who embrace reciprocal power are less likely to encounter adverse countervailing power.

The Importance of Power to Management Effectiveness

Corporations are inherently political bodies in which several individuals or groups control limited commodities. Revenue, staff time, knowledge, and organizational assets are examples of such commodities. Managers must know that they are reliant on individuals whose participation is required to achieve cooperative aims. They must operate within the current power structure and amass their authority to persuade those who manage valued precious resources required to fulfill their duties.

Consider the case of a COVID-19 vaccine production company frontline manager. In the aftermath of vaccine misinformation, the manager must convince his seniors to allocate essential resources such as funds, researchers, and laboratory space to the vaccine manufacturing effort he is supervising. He acquires the president’s trust over time due to his determination, experience, and captivating interpersonal skills. In turn, he raises his perceived influence in the company and enhances his capacity to negotiate for resources. Due to his successes, he acquires more power, allowing him to have greater influence over the company’s future.

Power has no intrinsic worth because it is neither helpful nor harmful. Overtly, what matters is how it is amassed and utilized. Power ought not to be gained or exploited inappropriately by unjust or deceitful means. Ideally, power should be gained in honest and just ways, and it should be utilized productively in enterprises and society at large. Both Stalin and Abraham Lincoln possessed power, but Stalin used it to inflict horrific misery on innocent people. On the contrary, Lincoln utilized power to bring a divided nation together. Thus, Stalin’s abuse of power faced strong countervailing power that led to his downfall.

Conclusion

Power is a phenomenon that is firmly established in people’s psyches and conscious identities. People and organizations primarily seek power to exert control over their destinies. Performance, for example, high and low production, ambition and disillusion are all determined by the correct or wrong utilization power. From an organizational standpoint, power can be used to influence the performance of departments. It can also be used to determine the results of interpersonal problems in an organization. The more disorder or disagreement in a company, the greater the desire for power. Conflicts tend to emerge when a leader desires not just power but also influence.

Furthermore, a desire for power may lead to the abuse of personal insecurities, which is a very harmful and destructive behavior and a bad trend for constructive organizational growth. Ultimately, the design of organizations through which countervailing power functions determines the manifestations and effects of such power. As illustrated in this essay, countervailing power can arise from any type of organizational relationship. The extent to which power impacts organizational functions and relationships is determined by the power source and management style.

References

Cheffins, B. R. (2018). Corporate governance and countervailing power. Business Law, 74, 1. Web.

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Gaudin, G. (2018). Vertical bargaining and retail competition: What drives countervailing power?. The Economic Journal, 128(614), 2380-2413. Web.

Gooberman, L., Hauptmeier, M., & Heery, E. (2019). The evolution of employers’ organisations in the United Kingdom: Extending countervailing power. Human Resource Management Journal, 29(1), 82-96. Web.

Kovach, M. (2020). Leader influence: A research review of French & Raven’s (1959) Power Dynamics. The Journal of Values-Based Leadership, 13(2), 15. Web.

McShane, S. L., & Von, G. M. A. Y. (2018). Organizational behavior. New York: McGraw-Hill Education.