Power in scaling businesses

Power in scaling businesses

Power tripping. Power games. Power hungry.

All too often we talk about power negatively in businesses.

But how we can use power to achieve growth goals is an opportunity for scaling businesses.

Businesses are complex systems. And power is our capacity to move energy through that organisational system. (h/t to Larissa Conte for that definition).

Everyone working in a business uses power – it’s all around us as we work. It is contextual to a particular situation and time.

Power exists in the relationships that we hold with other people in businesses. This is where power moves from being a latent thing to being an active force in business growth.

Or in other words, to get stuff done at work we need to collaborate with other people. We hold relationships with those people and the power influences what goes on a lot.

To be more conscious of how we use power in business, we need to think about the different types of power that we have.

Way back in 1959 John French and Bertram Raven defined five types of power and then added another type a few years later:

  1. Legitimate – where someone has the formal right within a system to make demands of others. They expect them to act in line with those demands. Traditional manager/subordinate relationships have plenty of this kind of power.
  2. Reward – where someone can give a reward for taking a particular course of action or achieving a certain result. A CEO giving a bonus to an exec for hitting a goal is a classic example.
  3. Expert – where someone has the capacity to influence because of skills or knowledge they have. Think of a deeply respected specialist in a business and they’ll typically have lots of expert power.
  4. Referent – a type of power where other people are drawn towards the holder of power. Think about someone in business with a clear vision or purpose that people are willing to choose to coalesce around – that’s referent power in play.
  5. Coercive – this is where someone has the power to use punishment or threat to get others to behave in a certain way.
  6. Informational – where someone shares or withholds information they have to influence others.

Think about the role you have in your business. You should be able to identify which sources of power you have a lot of and which you have less of.

But what does this mean for businesses that are scaling?

To set a business up to scale there are some important things to do to ensure we use power to support scaling:

  • Recognise how formal and informal power exists in the business. Go beyond the structure chart and think about how things really get done.
  • Have open conversations to surface the types and uses of power you have going on in your business. Think about how they relate to organisational values, culture and the experience you want staff and customers to have.
  • Set power boundaries so people use power towards the business’s goals. For example develop clear decision-making processes or governance structures. These provide clear boundaries for people using power in their everyday work.

Traditional organisations use hierarchy as the primary means to manage power. The concentration of legitimate, reward, coercive and informational power increases towards the top of the organisational pyramid. Power is typically seen as a finite resource to hoard and protect.

Progressive and agile organisations find ways to define different types of power structures. These distribute power more evenly across the business. They recognise the value that this brings. They see power as a limitless source of potential for growth in their people and business.

There’s no single right way to do this. What’s important to enable rapid scaling is finding ways that work for your business. And recognising these ways of managing power will evolve on the scaling journey.

The alternative is an unhealthy organisation that lacks power boundaries. This absence of boundaries leads to inadvertent or sometimes deliberate misuse of power.

If you don’t formalise power structures, you’ll end up with informal ones proliferating. These will soon become a drag on scaling the business.

Set boundaries for the use of power in a way that is appropriate for your business. Do this for the organisation you are now and and the organisation you want to become as the business scales.

A longer version of this article originally appeared in my email newsletter for founders and CEOs – Build. It features insights, techniques & thinking for those navigating the ups-and-downs of the scaling journey and developing their own leadership.

About SIMON

I work with technology-centric businesses as an interim Chief Operating Officer (COO), consultant and advisor. I created the B3 framework® for scaling technology businesses and I write a newsletter called Build for leaders who are building brilliant companies.