How Power Can Shape Business Relationships

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Have you ever been in a meeting where you really, really wanted to say something but felt like you couldn’t? Maybe you weren’t even allowed to speak or constantly were talked over. That could have been because of the power dynamics at play.

Power dynamics are completely unavoidable in business. You may think that being on the upside (i.e., the person with the most power) is always the favorable position, but there’s a fair bit of evidence to show that unbridled power often backfires greatly. Ever heard of Napoleon?

Strong leaders create a positive workplace by recognizing power dynamics and catching themselves when something tips too steeply to one side of the scale.

What Are Power Dynamics?

Power dynamics are like an unspoken code that dictates how we interact and engage with each other. Those with less power are more likely to take directions from those with more power. The greater the power, the greater the weight of your opinions no matter how ill-advised those opinions may be in actuality. For example, a governor might intrinsically have more power than his citizens, but that doesn’t mean he’s the most effective lawmaker.

Power dynamics affect every single interaction we have in life. It’s as simple as a child listening to the advice of his mother or a manager doling out work to lower-level employees. There’s even power dynamics at play from employee to employee depending on the importance of the project on which they’re working and their connections with other influential people in the office.

The thing is that power breeds more power, especially in the world of business. The more connections you have with perceived power, the more people will perceive that you actually have power too. This is an essential part of relationship and reputation building, but power dynamics can also get in the way of running an effective office if you don’t recognize them.

How Power Dynamics Are Created

Power dynamics are created when someone has a need and the other person can fill it. It’s extremely reliant on agenda and overall goals, and you either have power or you take power. Generally, authority is created through:

  • Job title

  • Expertise

  • Ability to coerce: See quid pro quo

  • Personality: Assertiveness and charisma make people natural-born leaders

  • Connections: Those who hang around people with power are intrinsically viewed as having more power.

  • Cultural bias: This, for example, is one of the reasons women are historically underrepresented in C-level positions at major companies. 

There are two overall types of power: formal power and informal power. The former is typically created by role, rank or title. For example, a CEO automatically has more power than the people who report under her. This chain of command goes all the way down from department heads to project managers to employees to interns, and each person has less power the more it goes down the line.

What’s really interesting is how power is created within a team environment where everyone’s role is equal. Within the dynamics of a team, power is a finite resource, so it must be taken. Not everyone can have her voice heard at the same time. This type of informal power is created through means like persuasion, personality and earning respect among the team.

Have you ever worked on a group project where someone starts organizing everything and assigning tasks? That’s power that’s taken. It’s informal power. If you vote for a group leader, that would be formal power.

Why Are Power Dynamics Important in Business?

Power dynamics affect a business in more ways than you might think, which is why it’s very important to be mindful of what’s at play. For example, a power dynamic that’s navigated poorly could result in a wrongful firing claim or a harassment or discrimination claim. Beyond that, power dynamics:

  • Create your company culture: Company culture is just a way of quantifying how your employees interact with each other. Power dynamics dictate how they interact. Are you in the type of laid-back workplace where top-level management is viewed as authoritatively equal, or do your power dynamics breed a culture of fear and obedience? Hint: The former is much more effective.

  • Dictate collaboration: Power dynamics have the ultimate ability to destroy collaboration. A company with healthy power dynamics will have a culture of collaboration where lower-level employees or minority employees feel like they’re able to express ideas freely without rubbing someone’s ego the wrong way. This increases productivity and innovation too.

  • Affect communication: Power dynamics often create a chain of command to which employees report. For example, an employee may go to his manager rather than his boss

    if he's having difficulty completing a task. Employees may also be more willing to be honest with those on the same level as they are.

Power Dynamics: Interviewer vs. Interviewee

One of the first ways power dynamics show in a small business is during the hiring process. There are intense power dynamics at play between the interviewer and the interviewee, particularly if someone is interviewing for the first time, and there’s no prior relationship. Why? Well, the interviewee wants the job, and the interviewer has the job to offer.

According to Slate, this power can actually be quite detrimental to a business if it’s completely unbridled. For example, the article depicted outrageous real-life behavior that interviewees put up with because they really wanted the job. This included:

  • A hiring manager searching through an interviewee’s purse because he felt that gave him the best profile of a candidate.

  • Interviewers asking deeply personal questions like, “What did you talk about as a family?”

  • Interviewers verbally harassing candidates.

  • In one instance, a hiring manager even faked a fire to see how the candidate acted in an emergency.

This seems exaggerated, but it all actually happened, and it may have resulted in a hiring, but it’s unlikely to have resulted in the best hiring. Businesses looking to hire top talent actually have less power because these people are in high demand. The more options they have, the less willing they’ll be to accept unfavorable treatment. Depending on the market, you’re bidding on them, not the other way around.

Power Dynamics: Employer vs. Employee

Healthy employer and employee relationships are the hallmark of a productive business, but power dynamics can easily get in the way. Just because there is a company hierarchy, which businesses need to effectively delegate tasks, that doesn’t mean employees should feel less than anyone else. This, however, is a difficult line.

Often, managers feel puzzled at how to effectively navigate this kind of power dynamic. If they take too much control, employees will feel like they’re not trusted or valued. If they don’t take enough control, employees will essentially run the team on their own and order, direction and productivity could be lost.

To create a healthy power dynamic between employer and employee, companies should:

  • Avoid micromanagement, which statistically destroys employee trust, increases turnover and decreases productivity

  • Be clear about employee roles, why they were hired and your expectations

  • Allow employees to openly voice ideas and concerns without retribution

  • Strictly adhere to U.S. Equal Employment Opportunity Commission guidelines when hiring

  • Have a dedicated human resources team that can navigate conflict without bias

  • Help particularly motivated employees climb the hierarchy. Set them up to succeed.

In addition, power between employer and employee shifts based on the job market. When there is a lower unemployment rate, employees have more power. This shift was noticeable in 2019, when employment was at an all-time high and employees increasingly negotiated for additional benefits like flexible work hours or work-from-home policies. If unemployment is high, employers have the most power because people need jobs to survive and therefore are willing to accept a mediocre offer.

Power Dynamics: Vendor to Vendee

This type of business-to-business relationship can get a little complicated. Again, the power dynamics at play here all have to do with supply and demand. If there are lots of vendors offering the same service, prices are more likely to be competitive because the vendee has all the power. If the vendor is creating a specialized product, there is less competition, and in that case, it wields more power.

Because supply and demand is often based on the market — which means it’s subject to ebb and flow, not just in the United States but globally — it’s best to maintain a positive relationship with your vendor regardless of how much power you truly have at the current moment. To do this, you can:

  • Limit the number of vendors you use: This does give vendors some power, but they’re more likely to pull strings to keep your business if you offer them a large chunk of business.

  • Help your vendors grow their business: This is sort of like quid pro quo. If you scratch their back, they’re more likely to scratch yours.

  • Get to know vendors: Relationship building is important. They should view you as a person and a business.

Power Dynamics: Business vs. Customer

There’s a reason the phrase “the customer is always right” has become famous in the world of retail and service work. The customer is valuable. It’s the backbone around which your company is built, and as far as power dynamics go, they’ve got quite a bit of power.

For example, businesses with positive Yelp reviews have higher sales. Conversely, negative Yelp reviews actually do hurt businesses. If one dissatisfied customer posts scathing comments, it will almost surely result in fewer patrons. That’s a lot of power put on the customer.

For this reason, it’s important that businesses develop strong customer service teams. To optimize customer service, you can:

  • Know your customers, especially the regular ones

  • Treat your customers like you want to be treated

  • Mitigate issues with a value-add, like a discount or free service

  • Give customers the benefit of the doubt

  • Do as much as you possibly can to say yes!

How Strong Leaders Approach Power Dynamics

There’s an overall strategy to power dynamics that has been shown to create a better, more productive company culture. Basically, strong leaders share their power rather than hoard it. To create overall healthy boundaries within the power dynamics of your small business, you should always:

  • Lead with your actions: If you want upper management to respect lower-level employees or minority employees, you need to lead with respect first. Do your best to bolster underrepresented voices and pull ideas out of more reserved and shy team members.

  • Disrupt bad behavior: Team members on the same level should share power, which means you need to shut it down if someone starts delegating tasks or getting too big for his britches.

  • Emphasize team goals: This pushes the idea of personal power out the window and fosters a shared, collaborative environment.

  • Have clearly defined goals for each team member: If workplace roles are not clear, employees may fight for power in order to jump up the rungs. Strong leadership should make clear where employees stand.

Finally, the one thing that helps mitigate all issues created by power dynamics is communication. You should get to know the members of your team so you can understand their goals and what motivates them. Once you know what they’re working toward, you can understand how they’ll act and help set up everyone to succeed across the board.