Organizations have complex structures that help them perform their business function and power and politics influence how these functions are run. When performing business functions, an organization is often faced with the task of making decisions, and this task is often influenced by politics. Those who are involved in making these decisions use their power to sway people in favor of their decisions. However, power and politics can have both negative and positive influences, and organizations must find a way to ensure positive outcomes from both.
The Influence of Power and Politics on Organizational Culture and Performance
Power refers to the use of authority to influence others in an organization (Omisore & Nweke, 2014). The influence power has in an organization is based on how it is used. If used appropriately then an organization can achieve its strategic goals and objectives. However, if power is not used at all or is used inappropriately, then the organization is bound to fail in one way or another (Omisore & Nweke, 2014). Leaders must, therefore, learn when to use power and how to use it appropriately.
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Organizational politics refers to the activities that are used to influence decisions for both personal and organizational interest (Jarret, 2017). They can be used in the struggle for power or to influence and can result in negative and positive outcomes (Omisore & Nweke, 2014). If organizational politics are dysfunctional, they result in the collapse of an organization (Jarret, 2017). Organizational politics may be inevitable but is important for leaders and employees to distinguish dysfunctional politics from positive politics.
Power played a big role in the Wells Fargo scandal with dysfunctional politics influencing the decisions the company made. To begin with, the company’s corporate culture was flawed as it was both intimidating and unethical (Ochs, 2016). The senior leaders failed to exercise their power in dealing with the warnings of fraud they had been receiving for five years (Ochs, 2016). Power was also used inappropriately by the leadership which fired any employee who tried to raise a voice against the company’s corporate culture (Ochs, 2016).
Wells Fargo’s corporate culture is not irredeemable. Power and politics can be used by the company’s leadership and employees to redeem its corporate image. The solutions lie in determining the source of power and using them to increase organizational performance. Leadership behaviors also affect the shaping of Wells Fargo’s organizational culture. Using this information, recommendations can be made to ensure Wells Fargo does not do more harm to its corporate culture.
Sources of Power and Organizational Performance
Sources of power differ from bases of power. A source of power refers to the way a party comes to control a base of power. On the other hand, a base of power refers to the way a party controls the behavior of others (Omisore & Nweke, 2014). Sources of power are office/structural position, opportunity, expertise, and personal characteristics. On the other hand, the bases of power include coercion, information, legitimacy, expertise, referent power, and rewards (Omisore & Nweke, 2014).
Bases of power can be summarized into three – coercive, remunerative and normative (Omisore & Nweke, 2014). Coercive power refers to the ability of a party to threaten another party using sanctions. Remunerative power refers to the control a party has on rewards and material resources (Omisore & Nweke, 2014). Normative power refers to the control a party has on symbolic rewards. Information is also important as base power and can be used by a party to gain an advantage over another.
Sources of power can be used by Wells Fargo to increase its organizational performance. At the structural position, the type of power exercised is authoritative (Omisore & Nweke, 2014). A party at this position is thus given access to an array of bases of power. These bases of power include normative, remunerative and coercion (Omisore & Nweke, 2014). The management at Wells Fargo could use their authority to increase employee compensation and benefits which will limit the number of fraudulent attempts made by the employees to get money.
Personal characteristics are a source of influential power. Leaders can be recognized by their characteristics. A charismatic leader is more likely to influence the employees. A leader’s verbal skills are also effective in influencing others (Omisore & Nweke, 2014). Therefore, the management at Wells Fargo could use these personal characteristics to instill a corporate culture that is trustworthy in its employees. The management may be required to identify leaders with good verbal skills who can reach out to their employees.
A leader’s expertise can help them influence the organization. A leader’s expertise can be measured by their level of education or experience at a job (Omisore & Nweke, 2014). The information an expert leader has is specialized and can be used to improve organizational performance. The management at Wells Fargo should identify employees who are experienced in auditing to help them root out fraud internally. The company could also employ employees who are qualified at doing their jobs.
Opportunities can also be used as sources of power. An employee who happens to have information concerning a specific issue can use that opportunity to exercise his/her influential power. The management at Wells Fargo displayed the negative use of power by silencing and/or punishing the company’s whistleblowers and should not have done so. These employees may have information that could ultimately influence the company’s organizational performance. An employee with information on fraud within the company should be treated as an asset.
The Relationship between Leadership Behavior, Culture, and Influence
Leadership behavior and culture are interconnected. Leadership behavior influences the quality of an organization’s culture. The behavior of an organization’s leaders is what creates employee satisfaction and thus influences the organization’s overall performance (Folkman, 2010). Leaders influence organizational culture and performance through their behaviors. Leaders must consider employee practices that will help encourage employee satisfaction if they are to instill a culture of excellence for their companies.
The leadership at Wells Fargo was wholly to blame for the fraud scandal that plagued them. The management was defined as intimidating by former employees and was known for setting unrealistic goals (Ochs, 2016). An influential leader should encourage cultural excellence by being visionary, vigilant and accountable, visible, having values that encourage ethical behavior, and voicing their opinions to motivate others (ISPE, 2017). These are the values Wells Fargo should embrace if they are to reshape their organizational culture.
Studying power and politics reveals the importance of leadership behavior in an organization. Leaders have both authoritative and influential power and are more likely to reshape an organization than their subordinates. The following are recommendations that Wells Fargo’s management can adopt to encourage organizational change and performance (Folkman, 2010):
Encourage collaboration between the management and employees. This will encourage a productive environment for the employees. This could include having an open-door policy allowing employees to raise their concerns without fear.
Build trust between the leaders and employees. Wells Fargo’s management can build trust between it and its employees by addressing any concerns raised by their staff.
Build relationships with the employees. By addressing the issues and concerns of its employees, Wells Fargo will encourage employee satisfaction and encourage commitment.
Conclusion
An organization’s corporate image can build it or break it. It is therefore advisable that leaders create an organizational culture that is aimed at cultural excellence and increased organizational performance. Wells Fargo stands to benefit by reshaping its organizational culture.
References
Jarrett, M. (2017, April 24). The 4 Types of Organizational Politics. Harvard Business Review . Retrieved 16 April 2018, from https://hbr.org/2017/04/the-4-types-of-organizational-politics?referral=03758&cm_vc=rr_item_page.top_right
Ochs, S. M. (2016, October 6). The Leadership Blind Spots at Wells Fargo. Harvard Business Review . Retrieved 16 April 2018, from https://hbr.org/2016/10/the-leadership-blind-spots-at-wells-fargo
ISPE. (2017, February 8). How Leader Actions and Behaviors Influence Quality Culture. ISPE . Retrieved 16 April 2018, from https://www.ispe.org/ispeak/influence-quality-culture
Folkman, J. (2010). Top 9 Leadership Behaviors That Drive Employee Commitment. Zenger/Folkman . Retrieved 16 April 2018, from https://zengerfolkman.com/wp-content/uploads/2013/05/ZFA-9-Behaviors.pdf
Omisore, B. O. & Nweke A. N. (2014). The Influence of Power and Politics in Organizations (Part 1). International Journal of Academic Research in Business and Social Sciences , 4(7), 164-183. Retrieved 16 April 2018, from http://hrmars.com/hrmars_papers/The_Influence_of_Power_and_Politics_in_Organizations_(Part_1).pdf
