Organizational Power and Influence Tactics - Case Study

Introduction

In every organization, there are different sources of power and influence tactics adopted by leaders depending on their positions. According to Bauer and Erdogan (2012), some of the sources of power within a business organization include expert power, coercive, reward, and legitimate power while some of the influence tactics include pressure, exchanging favors, and forming coalitions. While some organizations thrive on unrivaled leadership, others fail due to power struggles and uncalled for rivalries. Koch Industries is no exception. This essay analyses the sources of power and influence tactics in this privately owned organization. Despite being one of the most profitable family businesses in the US, Koch Industries has not been immune to internal power struggles and intrigues. Although the struggles are long and almost destructive, Charles finally secures his position as the unrivaled chief executive officer of the company.

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Koch Industries is a multibillion-dollar corporation owned by four brothers namely: Charles, David, Frederick, and Bill. Frederick is the eldest, followed by Charles, and finally, Bill and David who are twins. Although they inherit the business at an annual turnover of only $250 million, the brothers, with the leadership of Charles, manage to make it afford a turnover of $115 billion per year, making it one of the biggest private companies in the world (Schulman, 2015). However, the company has had its share of power struggles and internal battles. While Frederick and David seem to have taken the back seat, Charles and Bill are involved in a fierce power battle that threatens to kill the giant company. To make matters worse, their feud ends up in the corridors of justice and takes a toll on their widowed mother. This epic battle between Charles and Bill seriously tests the limits of their power bases within the company.

As they battle for the control of Koch Industries, both Charles and Bill utilize various sources of power within the company. At the time of turmoil, Charles is the chief executive of the company. As a result of his position, Charles derives his authority from the legitimate power. Legitimate power refers to the authority that one derives from the office or position they hold in an organization (Bauer and Erdogan 2012). This means that the other workers comply because they believe that the authority is legitimate. Charles has certain powers within Koch Industries because of the position he holds. As the CEO, all members of staff are expected to respect him and meet the terms of his leadership. Although Bill does not regard him as appropriate, David and other workers are said to have been totally submissive to him (Schulman, 2015). Under his leadership, the company grows in leaps and bounds, much to the consternation of his brother Bill, who accuses him of plowing back too much money at the expense of shareholders (Schulman, 2015). Although this claim may be legitimate, Charles is the CEO and his office gives him the power to make major decisions regarding the company.

On the same note, Bill is below Charles in the hierarchy of power at Koch Industries. The feud with his brother seems to stem from their childhood whereby Bill views Charles as a bully and inconsiderate big brother (Schulman, 2015). Bill is not ready to comply with his brother's directives despite the fact that he is the CEO of the company. He wants to be treated as an equal in the company hierarchy. As a result, he derives his authority from coercive power. According to Luthans et al. (2015), coercive power is a situation in which a leader applies force to get something done. They do this by threatening the employee(s) with punishment and other undesirable consequences. Bill wants to take Charles' position by force. He writes an eleven-page letter to Charles making unfounded allegations about the company secretly held assets and warning that the company ought to be subject to liquidity. The malicious intent of this letter is revealed by the fact that although the letter is addressed solely to Charles, Bill distributes it to some shareholders (Schulman, 2015). He later forcefully calls for a shareholders meeting though he later calls it off. Bill also gangs up with his eldest brother, Frederick, to attack Charles. These and other machinations are aimed at firing Charles. Although his coercion power does not succeed, Bill takes Koch Industries through a tough time as the battle for control continues.

Both Bill and Charles use various influence tactics in their battle for the control of Koch Industries. Influence tactics used by most managers include pressure, forming coalitions and exchanging favors (Luthans et al., 2015). One may use pressurize or force, gang up with others or favor others to get things done the way they want. In the case of Koch industries, both Bill and Charles apply the tactics of pressure and forming coalitions. Bill wants the liquidity of the company actualized if he cannot become the CEO. He does not see the need to plow back the profits for the company's growth and argues that there is no point in denying the shareholders a chance to use their money since it will only go back to the government if they die (Schulman, 2015). He pressurizes Charles and even writes him a long letter delving into the issue of liquidity. He also forms a coalition with Frederick and dissident shareholders to have his way. Finally, he succeeds as the company is taken public and he receives $470 million (Schulman, 2015). The pressure was too much and there was the need for peace in the family.

On a similar note, the main influence tactic used by Charles include pressure and forming coalitions. At one time, he tries to buy his eldest brother, Frederick, out of Koch industries but Frederick rejects the offer. He also threatens to fire Bill in a bid to stop him from creating unrest in the company but the board convinces him against the idea (Schulman, 2015). Charles, later, has no choice but to form a coalition with his loyalist, Howard Marshall II, an oil tycoon, to counter Bill and his circle of dissident shareholders who want Charles out to pave way for a new management. To weaken their voting power, Marshall promises to buy his son's stock whose value will make the rebellious shareholders fall short of the majority. It works out well as it catapults Charles faction to a 51% stake in the company (Schulman, 2015). Bauer and Erdogan (2012) posit that forming coalitions is workable in some situations and may yield great results. For Charles, this was a tremendous relief although he is later dragged into a long court battle by Bill concerning the assets of Koch Industries.

Conclusion

In the ultimate end, Charles emerges victorious in the enduring battle of control. I think Charles' discipline and focus are the two main elements that lead to his victory. First, he is viciously focused on the growth of Koch Industries. His dream is to oversee the growth of the company. Nothing will stop him from doing so; not even his brother's complaint that the 6% dividend offered to shareholders is rather stingy. He also derives most of his authority from legitimate power. One of the most important lessons on organizational power that emerges from the Koch's case is that for an organization to be successful, it is important for it to have a well-defined center of power. If there are too many centers of power, the organization is highly likely to fail due to the resultant conflicts. A good leader utilizes their position in the organization to instill positive change so as to achieve organizational goals. Therefore, were it not for the legitimate power and applicable influence tactics, Koch industries would have come crumbling down.

References

Bauer, T. N., & Erdogan, B. (2012). Organizational socialization outcomes: Now and into the future. The Oxford handbook of organizational socialization, 97-112.

Luthans, F., Luthans, B. C., & Luthans, K. W. (2015). Organizational behavior: An evidence-based approach. IAP.

Schulman, D. (2014, Jul). Koch vs. Koch. Mother Jones, 39, 16-27,64,2