Who holds power within your small business? At every level of the organizational structure, leaders have power over certain aspects of the company. For example, the CEO has the power to lead the business strategically. A manager has the power to develop plans for the business. A supervisor has the power to implement those plans with his team. Leadership is closely tied to power in a business setting.
Where does that power come from? Bertram Raven and John French, American sociologists, conceptualized five distinct sources of power in their landmark study in 1959: reward power, coercive power, legitimate power, expert power and referent power. Unlike leadership theories that look at the form of leadership a person in power should offer, such as values-based leadership or ethical leadership, this study focused on the basis or source of a leader’s power.
According to Raven and French, the sources of management power are related to the followers’ perception of the leader’s position and qualities. These perceptions affect the leader’s power and her ability to lead. This means that the power doesn’t only come from the leader’s actual role within the organization, but is equally sourced from the beliefs of the followers. If the followers see value in someone as a leader, even if they are not in an actual position of power, that person will hold more power than someone who has hierarchical status but no respect from the followers.
The sociologists categorized the five sources of power into two areas; positional power, which is related to the leader’s position in the organization, and includes reward, coercive and legitimate powers; and personal power, which is related to the leader’s intrinsic qualities, and refers to expert and referent powers.
The different kinds of power are not mutually exclusive and can be combined. For example, someone can have both reward power and referent power. One power can also lead to another power, like expert power leading to a promotion to gain legitimate power.
Positional power is based on the idea that if employees do their jobs well, they will be rewarded by the leader. It is assumed that as a society, people are more inclined to do things for others if they are getting something in return. Rewards can come in the form of salary increases, bonuses, additional paid vacation days, organizational awards, promotions and compliments. Within a business setting, this source of power can be used to motivate employees to go above and beyond their duties. Leaders within the business that hold reward power can use it to influence the performance of their followers.
While reward power can be one of the most motivational sources of power, problems can also arise due to the use of incentives. Sometimes, the reward being offered does not hold enough perceived value to others, such as a bonus that is only a nominal amount. As a result, the leader’s power is weakened. Often, rewards need to be bigger and better than the previous time to entice employees to act. If given too often, rewards can lose their effectiveness. Also, if rewards are handed out unfavorably, such as to employees who do not necessarily deserve them, they can harm the morale of the company and cause employees to decrease productivity.
Coercive power, another positional power, is based on the idea that the leader can punish those who do not listen to his instructions. This source of power is used to enforce certain rules within the organization in a strict manner, scaring people into obeying to avoid punishment. Threats often used in companies that rely on coercive power include salary cuts, vacation day cuts and terminations. If used optimally, this source of power can result in improved performance of employees, ensuring that they challenge themselves to be better at work.
Coercive power requires employees to be compliant with the rules of the leader. Sometimes, this source of power can be abused, leading to problems in the workplace. Leaders who depend on this type of power often lose the respect of their subordinates due to their use of constant threats. Coercive power can lead to dissatisfaction at work and creates an unwelcome and unproductive workplace culture.
The last positional power, legitimate power is based on the leader’s actual position within the hierarchy of the company. It’s derived from the idea that employees accept the wishes of the leader because of her title and place within the business. As a result, this source of power enables the leader to give her subordinates orders, review their work and provide guidance and feedback.
For the leader to gain the respect of her employees within the organization, it’s important that she has the experience, education and expertise to hold her title. If she doesn’t, employees may question her legitimacy and she can lose her source of power because her followers no longer perceive her to be legitimate. Legitimate power can also be lost if the leader no longer holds that specific title. For example, if the leader was a marketing manager within a business and held legitimate power, she could lose that perception of legitimacy if she took a different role within the company. If she was demoted, for example, she would no longer be seen as someone with legitimate power. Because this kind of power is intrinsically linked to the job, it’s often seen as a weak way to persuade and motivate employees.
Part of the personal power category, expert power is based on the idea that the leader has superior expertise and knowledge within an organization. In this case, the leader doesn’t necessarily have to hold a leadership title; he can have power based solely on his knowledge. People who have unique specializations or have done extensive research in certain aspects of the business are valuable to the company. With this kind of expertise, someone with expert power persuades employees, delegates tasks and enforces guidelines. Often, people with expert power have the respect and admiration of their fellow workers.
By strategically offering their knowledge and experience to the company, someone with expert power can become indispensable to the organization. This can result in promotions, where the expert power can be turned into legitimate power. Also, employees with expert power can be sought after by other organizations who want to leverage their knowledge and experience for their businesses.
Referent power, another part of the personal power category, is based on the personality, charm and likability of the leader. Along with other sources of power, it's a helpful source of power in management. And the person with referent power doesn't even need to be in a position of authority to influence others. Their source of power is within themselves. A manager with referent power has strong relationships with employees. Similarly, employees with referent power interact well with other employees and may have close ties to people in leadership positions. They are often approachable and garner respect from their coworkers. Plus, they are relatable to many different kinds of people and seen as a role model employee.
Because people with referent power, managers and otherwise, have a lot of influence over others within the company, they have a lot of responsibility on their shoulders. While many people can handle this duty, some people can lose themselves and take advantage of how much others trust them.