Power and risk management in organizational context - Essay Example

The relationship between power and risk management in organisational context of Learning Introduction Power is a vital element in the organization. The main reason for the existence of power in an organisation is to improve the performance and efficiency of the organization operation and to improve the quality of the products (Michael, 2014). Risk management also plays a similar role as that played by power. The main purpose to its existence is to encourage the quality operation of the organisation. This is majorly through identifying the risks involved in organization performance and providing the possible solution to the problem. Power and risk management work hand in hand in solving the challenges faced by the organisations. This paper it to make the reader understand what power is in accordance to organizational context. Furthermore, the reader is also to understand what is meant by risk management concerning organization context. Under risk management, the paper will talk of the principles of risk management and the integrated risk management. In considering power, the paper will talk about the various kinds of power which include Reward power, legitimate power, Expert power, and Coercive power and Referent power. Power in organisation context Power according to organization context is defined differently by various scholars. The description by Max Weber (1947) as reported by Lindley (2006); defines Power as the likelihood that a performer within a social relationship will be in a position to do whatever he or she desires despite the resistant. However, Pfeffer (1992) as reported by Walker (2011); defines Power as the potential ability of a person to change the course of occurrence, make people do things that they would rather not do and to overcome resistant. Hatfield & Rapson (1993) says that Psychologist Bertram Raven and John French (1959), confirms that power can be classified into five different categories. These grouping may include the Reward power, legitimate power, Expert power, and Coercive power and Referent power. Reward Power Reward power majorly depends on the resources and ability that a person has to reward others (Bertocci, 2009). For it to be effective, the target group must value the reward being offered. When considering an organisation, managers have many possible rewards. These rewards may include promotion, more responsibility, praise, and recognition. Some may also include pay increment, favourable working assignment, new equipment, and feedback (Robbins & Judge, 2009). Even though the managers have the power to implement positive reinforcement, the recipients are the one who hold the key. If the manager does not think that he or she is giving reward through listening, but subordinate sees this as rewarding, then, the manager poses a rewarding power. Legitimate Power This power is obtained from internalized value other persons giving legal right to the agent to sway them (Albrecht, Albrecht, Albrecht & Zimbelman, 2011). Some people perceive the responsibility to accept this power is closely related to coercive and rewarding power and is identical to authority. Legitimate power does not depend on the relationship with others but the role and position a person holds (Luthans, 2005). There exist three major sources of legitimate power which include the organisation, prevailing cultural value of a given society and group (Boucher & Weese, 1991). There are various forms of legitimate power; these forms include being assigned as an agent, representative of a powerful group or person (Pang, 2004). Each of these legitimate forms of power forms a responsibility to accept and be influenced. Expert Power Expert power is based on the limit a person attributes expertise and knowledge to power seeker (MCkenna, 2000). Experts are perceived as having a good understanding and knowledge in a given area that is well defined (Silber & Foshay, 2009). Having an expert power comes with a person being trustworthy, credible and relevant. The credibility of a person is determined by having the right credential and display of tangible evidence of knowledge (Weller & Weller, 2002). In various organizations, the staff specialist poses expert power in their working area but not outside their working area. Expert power is very selective and besides a person having credibility he or she must possess relevance and trustworthiness (Wordpresscom, 2015). For a person to have an expert power, he or she should also have relevance and usefulness. Expertise is the most fragile type of power. As firms become more and more industrially complex and specialised, the expert power of members at all levels becomes more vital (Kirst-Ashman, 2007). Coercive Power Coercive power depends on fear. People who pose coercive power have the capability to impose punishment on other persons (Daft & Lane, 2008). Coercive power always has negative implication and is always thought regarding physical force (Bass & Bass, 2009). Most of the individuals always exercise coercive power while relying on their physical strength, ability to withhold or grant emotional support from others and verbal facilities. This type of power is frequently used, and it is condemned more often and is very difficult to control (Dettmer, 2003). Regarding expectancy, this power comes from the others expectation that they will be punished if they do not abide by the desire of powerful persons or the organization policies and directives (Dettmer, 2003). Most of the behaviours evidenced in the organization could be explained regarding coercive power than that of rewarding power. Referent Power Referent powers come from the desire of a person to identify his or herself with agents wielding power (Daft & Lane, 2008). Other people grant this power because he or she is attractive and has a personal character or attractive resources (Luthans, 2005). For an instant, advertisers use movie stars, celebrities and the sports figures the buying public identifies with. Timing is a vital when it comes to referent power. In the organization content, most of the managers with referent power must be attractive to the subordinates (Houser & Ham, 2004). In summary, in the organization, the power possessed by a person can be obtained from the situational, structural and interpersonal basis. Mainly, the interpersonal power is obtained by a person as prescribed by the organisation and by the quality of a person (Conrad & Poole, 2011). While situational and structural power is usually determined by the hierarchy of the organisation structure (Shukla, 1996). This means that, the higher the position of a person as defined by the organization structure, the grater the power possessed by that person in obtaining resources and making a decision. The truth in the organization power is that most of the people are fighting to have it. The main difference between these people is the intention and the degree for the need of such a power. Whether a person is in need of high or low need for power, or whether the need for power is for personal or organization benefit, it should be studied because it can affect the performance of the organization (Nelson & Quick, 2012). Most of the challenges faced by the organization are mainly because of the ineffective use of power by the managers (Mccalley, 2002). Most of the effectiveness problem faced by the organization is cases where the manager made in charge of the business lacks the required knowledge and skills for the business. If the managers in charge have no sufficient capability, these managers will not be in a position to effectively utilize their powers professionally therefore contributing towards a reduction in the organizations performance (Henderson & Atkinson, 2003). There is also a situation where the manager who is in charge intentionally need power for their personal gain (Elder & Paul, 2002, Saiyadain, 2003). These kinds of managers will at long run bring no benefit to the organization. These managers will rather pretend than to sacrifice their sweat and mind. Risk management in organization context Risk management is an important foundation of decision making and good management in all the existing organizations, businesses, industries and institution (Schlegel & Trent, 2014). Risk management does not operates separately but needs to be built into existing process and structure of decision making to prioritize setting, financial reporting and program management (Protiviticom. 2015). Risk management should also support planning management, evaluation and audit, business continuity, development of corporate business plan and operation performance assessment. Furthermore, it should also support other key function throughout an organization at the branch, departmental and program level (Protiviticom. 2015). Including risk management into the organization structure and programs using risk management process that is consistent creates a unified incorporated risk management environment (Schlegel & Trent, 2014). Most of the organizations that practices risk management in an integrated way provide quality information that can be used by the organization to achieve its objectives. It is wise for risk management to be linked directly with the achievement objectives at every level of the organization (Protiviticom. 2015). Various organisations apply different steps in implementing integrated risk management (Borghesi & Gaudenzi, 2012). However, at a higher level, the organization may consider some elements when implementing, improving designing and conducting integrated risk management (Myerson & Designed By-Judd, 1996). These elements are organized as follows. Planning and designing the approach and process, integrated risk management implementation, practicing integrated risk management and continuously improving integrated risk management (Kouvelis, Dong, Boyabatli & Li, 2011). When an organization wants to design a risk management approach and process, it is vital for the organization to examine its internal and external context. By establishing the organization context, the objectives of the organization are articulated, and the external and internal parameters that are taken into account when managing risk are defined (AIRMIC, 1999). When conducting an external and internal scan, the organization must consider: Input from interested and affected parties to the public, parliament, clients and other stakeholders. Evaluation, strategic leadership, integrated performance information, accountability, results of audits, value and ethics, stewardship and reviews of organization risk management documents. Organisation must also consider external scanning factors which may include economic and social. Documents for Strategic departmental planning such as the departmental performance report, corporate plan, capital assets, report on priority and plans and functional plan (AIRMIC, 1999). Risk analysts do not only have the power to decide on what topics or on what questions about the risk are important but also to decide on the response mechanism in case of a risk (Waring & Glendon, 2001). The beneficiary of the pronouncement of risk analysis always has no choice put their trust and accept the validity of the declarations of the risk analyst. However, professionals have a different opinion (Waring & Glendon, 2001). This has clearly been evidenced in the in the public health crisis of the year 1999 that concerned the BSE (bovine spongiform encephalopy) prevalent in beef cattle (Waring & Glendon, 2001). The risk that was involved is the transfer of the disease from the beef cattle to the human. During that year, various professionals in the field of microbiologist provided the public with various views and opinion on how the disease might be contracted by the UK population. In the effort to reduce the risk of the prevalent, various parties were involved including the government, politicians, and interested groups. Each of these groups was providing their views on how to prevent the risks using the specific opinions or finding from various scientists. In support of their opinions, the politicians also named the group that was to be blamed for the economic damage of the beef industry, the loss of the public confidence and the health scare (Waring & Glendon, 2001). The feeling of not being in a position to check and test the validity of the announcement by the professionals is always not only linked to professionals relevant to that field of such risk as safety experts (Waring & Glendon, 2001). The problem is of a wide range including for an instant the car mechanics, electrician, bank managers, computer specialists, and lawyers (Waring & Glendon, 2001). Referring to the study of failure in stock control that is computerized, the manager of the company was quoted referring to the computer experts. The manager said that they were given a big orange folder having the details of the computers they were to be given. However, the manager confirms that the details in the orange folder did not mean much to them as they were all presented in computer terminology (Waring & Glendon, 2001). Because the manager could not understand the computer terminology used, he opted to be quite as he did not want to look stupid. The computer experts explained the terminology and provided all the details the manager was to know, but the manager still did not understand anything. However at the end, it was decided that the company was to continue with the plan (Waring & Glendon, 2001). The above scenario clearly shows the conflict between two different powers, the expert power, and the legitimate power. The manager having the legitimate power has the responsibility decision making. However, because the manager has no knowledge or understanding of issues related computer, he or she is not in a better to decide on such issues but gives room for the experts to decide on the issue (Waring & Glendon, 2001). Towards a potential model of power and risk behaviour Most of the concepts in an organization can be defined differently by various people. For an instant, an organizational structure composed of people coming from different places and who are from a diverse sub-culture has their definition of any of the organizational concept. To be specific the word success is perceived differently by people from a diverse location and at an individual perspective. Most of the corporate organizations define success in an organization concerning the organizations strategies, mission, and goals (Waring & Glendon, 2001). The corporate definition of success, the fail to identify that organization is not composed of a set of identikit programmable clones and robots of senior managers. The corporate has the power to manipulate the organizations visions and the success of various projects. However, when it comes to considering a powerful motivator which is the personal dimension of success such power is always limited (Waring & Glendon, 2001). A model for the understanding process of management concerning change and risk has been developed. The model has been confirmed by Waring and Glendon 1996. The process model is composed of eight components plus risk. Of the eight components, the three most important are power and political process, meaning of success and risks. A potential model for power and risk behavior The above model is obtain from Waring & Glendon, 2001. All organizations are faced with various risks that they need to encounter to be successful or be more competitive (Jordan, 2013). However, these risks when handled improperly may lead to poor performance or the closer SSof the organization. The risks faced by these organizations should be handled carefully by the top management in the organization who have the power to do so. Risk management and power share various common things for there to be success. Most of the organization poses power to bring success in the organization (Nelson, 1988). The power possessed by the managers assists them in decision making. The manager possessing expert power will understand the need to rely on the cause and effective analysis technique to decide on the best preventive and corrective action. Similarly, risk management also depends on the cause and effect analysis techniques to decide on the best corrective and preventive action. The power possessed by the managers enables to apply quality management strategy in the organization. These powers must be utilized by the managers to find a way to account for the uncertainty in the organisation (Nelson, 1988). In the normal operation of the organization, there is no existent of an absolute perfect quality product. The existence of a single poor product quality in an organisation can have a serious negative effect on the quality of another product, therefore, increasing the level of uncertainty (Martani, 2015). Similarly, effective risk management addresses uncertainty in an open way. It accounts for uncertainty by addressing the organization on the effective way of handling the uncertainty (Martani, 2015). The current market is very competitive, and most of the organizations are struggling to survive. For the organization to compete effectively in these competitive markets, the top management needs to be effective in decision making. The power obtained by the managers assists them in decision making which may contribute to the growth of the organization (Williams, 2013). Similarly, risk management facilitates the daily positive progress of the organisation. Sustainable strategies need to be developed and implemented by the organisation to help in improving the risk management while at the same time improving other aspects of the organisation. Consider the difficulty of managing a large supplier base. Meeting compliances mandates both abroad and domestically introduce series of challenges in an organisation that are never ending. This is the reason why in the current organization acquisition of power by the managers is important as this will allow the organisation to have a quality management system (Nelson, 1988). Depending on the position of the organisation in the global value chain, suppliers may play a critical role in the business. Similarly, the introduction of risk management in the modern quality management system will improve the management of the organisation (Michael, 2014). It provides the organization with a way to vet suppliers in a systematic way. Risk management entails establishing content, risk identification and assessment and acting in a systematic way to lower risks. The power acquired by the managers enables them to oversee the operation and to run the organisation. The manager will ensure that the organisation is operated in an effective way, and the manager may decide on various changes that need to be undertaken to improve the production of the business (Michael, 2014). The decision made by the managers is to encounter the challenges the organisation is currently facing. Similarly, risk management plays a role of overseeing various activities in the business. The risk management may determine the causal factor of the challenges that the organisation is currently facing (Dean, 2010). Furthermore, risk management can predict the possible challenges that the organisation may face (Dean, 2010). For an instant, risk management may study the quality of the suppliers product. As the quality of the suppliers product reduces over time the organization risk increases (Michael, 2014). Risk management can identify the trend and advice the organization accordingly on the measures to be taken. Power and risk management have integrated to a given extent. The organisation managers use their acquired powers to utilize the six sigma technique for reducing quality defect (Pfeifer, Reissiger & Canales, 2004). Similarly, risk management utilises the six sigma technique to lower the organisation risk by reducing deviation (Pfeifer, Reissiger & Canales, 2004). The power obtained by the managers enables them to improve the quality of the services and products in the organisation. This is the only way that the organisation can be more competitive in the current market (Kaigai Gijutsu Shiryō KenkyūJo, 1980). Even though power plays an important role in improving the quality of both the products and services, the quality is strengthened by adding risk management to the question. It is necessary for the organization to work hand in hand with the risk management experts to come up with a quality management system that is up to date. By the organization taking an integrated approach to power and risk management, the company can experience some great improvement that can lower the total cost of quality. Furthermore, the improvement will lower the risk and improve the quality of products and services in the organisation. Conclusion Power is very important to most of the people as it can be meant for promotion and status and also for prestige, ruling and leading. If these intentions are not directed to the organization objective and purpose, these powers will not benefit the organization. The truth is that power is needed by a person to contribute effectively to his or her organization. The wrong application of power such as in corruption and other unethical actions are the problems generated by the selfish nature of people in the utilization of power. In various occasion, power is always utilized by the managers in providing assistance and direction to the organization. When examining power from top to down, power provides structure to an organization, helps employees in performing better and allows the organization to attain its long-term goals. However, the power that comes from the bottom to the top can also be important. The bottom to top power can assist in giving the workers voice and also those groups of employees that have been marginalized. 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