Unit III — Group Dynamics
23. Power and Politics
Power in organizations arises from multiple bases -- legitimate authority, control over rewards or punishments, expertise, and personal referent appeal -- and is amplified by others' dependency on the power holder. Political skill determines whether power is used to build legitimate influence or is seen as self-serving manipulation, which matters greatly in contested resource-allocation decisions.
- Legitimate, reward, coercive, expert, and referent power bases
- Dependency theory of power
- Political skill and influence tactics
- Coalition building
- Perceived fairness of resource allocation
- Share of capital budget historically won by each division head
- Frequency of informal lobbying meetings before formal budget reviews
- Employee perception survey on fairness of resource allocation decisions
- Number of cross-division alliances or coalitions formed before major decisions
- CEO/CFO time allocated to each division head outside formal meetings
At Solaris Industrials, a diversified manufacturer with three divisions (Industrial Equipment, Renewable Components, and Specialty Chemicals), only one large capital investment of Rs 40 crore is available this year, and all three division heads want it for expansion projects with strong business cases. Ramesh, the Industrial Equipment head, has 15 years of tenure, close personal rapport with the CEO, and a track record of consistently hitting targets, giving him strong referent and expert power. Sunita, the Renewable Components head, has the weakest personal relationship with the CEO but her division aligns most with the company's stated strategic pivot toward sustainability, and she has been quietly building support among board members. Vikram, Specialty Chemicals head, controls a key intermediate input that both other divisions depend on for cost efficiencies, giving him informal leverage despite a smaller growth case. The CFO must recommend an allocation, aware that whichever way it goes, perceptions of political favoritism could damage morale in the losing divisions.
Available capital
Rs 40 crore, one allocation
Ramesh's tenure and CEO rapport
15 years, weekly informal check-ins
Sunita's division strategic alignment
Matches company's sustainability pivot
Sunita's board-level lobbying
3 board members briefed informally
Vikram's dependency leverage
Supplies input to both other divisions
Projected ROI ranking
Renewable Components highest, Industrial Equipment second, Specialty Chemicals third
AAllocate based on strategic alignment (Renewable Components)
The CFO recommends the full Rs 40 crore to Sunita's division, citing alignment with the sustainability pivot and highest projected ROI, using a transparent strategic rationale.
BSplit allocation across two divisions with phased funding
The CFO proposes splitting the capital, e.g., Rs 25 crore to Renewable Components and Rs 15 crore to Industrial Equipment in year one, with Specialty Chemicals reconsidered next cycle.
CEstablish a transparent scoring committee for allocation
The CFO creates a cross-functional committee with predefined criteria (ROI, strategic fit, risk, dependency impact) to score all three proposals transparently before a final recommendation.
AAllocate based on strategic alignment (Renewable Components)
Strengths
- Signals that legitimate strategic criteria, not personal rapport, drive resource decisions
- Rewards highest projected ROI, supporting long-term financial performance
Risks
- Ramesh's strong relationship-based power could translate into resistance or reduced cooperation
- Vikram's dependency leverage (control over shared input) could be used to informally undermine implementation
BSplit allocation across two divisions with phased funding
Strengths
- Reduces the political fallout of a complete 'winner-takes-all' outcome
- Allows the highest-ROI project to still receive majority funding
Risks
- Splitting capital may under-fund both projects relative to their business-case thresholds
- Vikram may feel entirely excluded, intensifying his use of dependency leverage
CEstablish a transparent scoring committee for allocation
Strengths
- Reduces the influence of personal power bases and informal lobbying on the outcome
- Improves perceived procedural fairness even for divisions that lose the allocation
Risks
- Takes more time to set up and run than a direct CFO recommendation
- A committee process does not eliminate politics entirely; members can still be lobbied
How should the CFO recommend allocating the Rs 40 crore given the mix of legitimate strategic criteria and competing power bases (referent, expert, and dependency-based) among the three division heads?
The CFO recommends the full Rs 40 crore to Sunita's division, citing alignment with the sustainability pivot and highest projected ROI, using a transparent strategic rationale.
Strengths: Signals that legitimate strategic criteria, not personal rapport, drive resource decisions; Rewards highest projected ROI, supporting long-term financial performance. Risks: Ramesh's strong relationship-based power could translate into resistance or reduced cooperation; Vikram's dependency leverage (control over shared input) could be used to informally undermine implementation.
The CFO proposes splitting the capital, e.g., Rs 25 crore to Renewable Components and Rs 15 crore to Industrial Equipment in year one, with Specialty Chemicals reconsidered next cycle.
Strengths: Reduces the political fallout of a complete 'winner-takes-all' outcome; Allows the highest-ROI project to still receive majority funding. Risks: Splitting capital may under-fund both projects relative to their business-case thresholds; Vikram may feel entirely excluded, intensifying his use of dependency leverage.
The CFO creates a cross-functional committee with predefined criteria (ROI, strategic fit, risk, dependency impact) to score all three proposals transparently before a final recommendation.
Strengths: Reduces the influence of personal power bases and informal lobbying on the outcome; Improves perceived procedural fairness even for divisions that lose the allocation. Risks: Takes more time to set up and run than a direct CFO recommendation; A committee process does not eliminate politics entirely; members can still be lobbied.
Set the weight of each criterion (1–5), then score every alternative (1–5). The matrix is a thinking aid, not a verdict.
| Criterion | Weight | A | B | C |
|---|---|---|---|---|
| Behavioural impact | ||||
| Employee acceptance | ||||
| Feasibility | ||||
| Cost (higher = more affordable) | ||||
| Risk containment | ||||
| Long-term sustainability |
With your current weights, alternative A scores highest. A matrix only reflects the weights you chose. Evidence, ethics, feasibility and the people affected still belong in your judgement — you decide.
Apply French and Raven's power bases to identify what type of power each division head holds (Ramesh: referent/expert via tenure and rapport; Sunita: emerging legitimacy via strategic alignment and coalition-building; Vikram: power via dependency/resource control), and use dependency theory to explain why Vikram's leverage exists despite a weaker business case. Discuss how political skill and procedural transparency can reduce perceived favoritism regardless of the final decision.
- Short-term: any allocation decision will disappoint at least one powerful division head
- Short-term: a transparent process takes longer, delaying capital deployment
- Long-term: rewarding only relationship-based power over strategic fit can erode meritocratic culture
- Long-term: ignoring Vikram's dependency leverage could lead to subtle operational sabotage or reduced cooperation
- Long-term: how this decision is made shapes future willingness of division heads to build coalitions versus trust formal processes
- What type of power does each division head hold, and how does it differ in legitimacy and durability?
- Why can dependency create power even without formal authority or expertise, as in Vikram's case?
- How might Sunita's coalition-building among board members be viewed as legitimate influence versus manipulation?
- What would you do if the highest-ROI project belonged to the division head with the least political capital?
According to French and Raven's framework, power derived from control over a scarce resource others need is closest to:
Why does Vikram hold significant informal power despite having the weakest financial business case?
Which approach best balances strategic merit with managing the political risks from Ramesh's rapport and Vikram's dependency leverage?