Power Dynamics and the Stability of the Organizational
Environment:
What Effect does the Stability of the Organizational Environment have on the
Power-attaining behaviour of Low and High-power Individuals?
Student: Antony Cuvalay /Student No 10007938
University of Amsterdam
Abstract
Power dynamics have been recognised as a factor that influences organizational outcomes. However, unless promotions are linked to positive organizational outcomes, value can not be captured. Since the organizational environment influences the organizational hierarchy, the power dynamics are also influenced by the organizational environment. Nevertheless, scholars haven’t researched the influence of different types of organizational environments on the power dynamics extensively. In an attempt to explain the fluctuations of power dynamics in different organizational environments, the current study brings forward the stability of the organizational environment as an influence on the power dynamics. The results, however, didn’t show any significance for the moderating effect of the stability of the organizational environment on the relationship between power and power-attaining behaviours. The lack of significance may be attributable to flaws in the research design. Questions concerning the validity of the data, choice of instruments, and operationalization of the variables are analysed and discussed, leading to suggestions for future research. The preliminary conclusions based on the current research show that low and high-power individuals carry out the same amount of power-attaining behaviours in stable and unstable organizational environments. Based on these results, the hypothesis that the stability of the environment has a different effect on low and high-power individuals can not be confirmed.
Table of Contents
Abstract 2
I Introduction 3
II Literature review 7
1.! Hierarchy 7
1.1. Hierarchy & Organizations 7
1.2. Hierarchy & Power 9
2.! Power 11
2.1. Effects of Power 12
2.2. Power Dynamics 13
2.2.1. Power Attainment 14
2.2.2. Power Preservation 16
3.! Stability of the Organizational Environment 19
3.1. Stability in Organizations 19
3.2. Effects of Unstable Organizational Environments on Organizations 21
3.3. Effects of Unstable Organizational Environments on Individuals 22
III Theoretical framework 25
1.! Stability of the Organizational Environment & Power Dynamics 25
IV Methodology 28 1.! Research Design 28 2.! Sample 31 3.! Dependent Variable 32 4.! Independent Variable 33 5.! Moderating Variable 35 6.! Other Variables 37 V Results 39 1.! Manipulation Checks 39 2.! Descriptive Statistics 41 3.! Factorial Anova 41
4.! Simple Slope Analysis 43
5.! Correlations 43
VI Discussion 44
1.! Findings & Research Limitations 44
2.! Future research 48
3.! Conclusion 50
References 52
I Introduction
“Where globalization means, as it so often does, that the rich and powerful now have new means to further enrich and empower themselves at the cost of the weaker, we have a responsibility to protest in the name of universal freedom.” Nelson Mandela (2000).
In this historical quote the anti-apartheid revolutionary, politician and philanthropist Nelson Mandela refers to the former economic and political power holders in South-Africa as corrupt power holders. There are several ways to view individuals who control economic and political power (Kipnis, 1972). They can be viewed as being admirable for their ability to amass great power and admiration for the ways in which this power is used to influence society. But there is also profound suspicion that the power holders, no matter what their original motives are, will use their resources to exploit others and to further enrich themselves (Kipnis, 1972). When the latter is the case Nelson Mandela stresses the importance to protest. The goal of a protest is to destabilize the current environment in order to enact desired changes. In order to reach that goal most often the current power holders are replaced by others (Lehn & Zhao, 2006). This suggests that in unstable environments the power dynamics are different than in stable environments, and that unstable environments offer possibilities for individuals who want to attain power (Higgings, 2007; cited in Sligte, De Dreu, & Nijstad, 2011). This paper discusses the influence of the stability of the environment on the dynamics of power in a non-political, organizational context. In this introduction the concept of power in relation to an organizational environment will be described, in order to address the research gap on this topic.
Likely due to the positive outcomes that power can have for individuals in organizations, the effects of power have often been subject of investigation (e.g. Magee & Galinsky, 2008). To have control over valuable resources, that is, to own power, has positive effects for individuals, like a stronger job security and better financial rewards. Also associated with possessing power in an organization is the ability to influence others more easily and a higher
job effectivity (Magee & Galinsky, 2008). On the other hand, missing power in an organization is related to multiple negative effects (Keltner, Gruenfeld & Anderson, 2003). It is for instance associated with a lack of autonomy and control in one’s job, being vulnerable to unfair treatment, and experiencing lower job satisfaction and morale.
Power also has an effect on the organizational outcomes (Magee & Galinsky, 2008). The division of power is often done by determining the different positions and actors in an organizational hierarchy. In hierarchical organizations, policies and objectives are typically set or at least ratified by occupants of higher-level positions and are then communicated to lower participants who are charged with the responsibility to carry out the necessary actions. The division of power, leads to social order and facilitates social coordination in organizations (Magee & Galinsky, 2008). In addition, it provides incentives for the employees in an organization. Previous research suggests that individuals in an organization are motivated to move up the rank to fulfil material self-interest and their need for control (Tannenbaum, Kavcic, Rosnes, Vianello & Wieser, 1974). This can be beneficial for the organization, when rank is determined by dimensions concerned with the organization’s performance.
Although an organizational hierarchy establishes order, the organizational hierarchy may change. This happens for instance when two organizations come together through a merger or acquisition. When this happens not only the organizational hierarchy may change, but the whole organizational environment may change. One could say that during mergers and acquisitions the organizational environment is unstable. Which means that there may be changes in the elements of the psychological climate of both the formal organization (policies and procedures) and the informal organization (values, norms and interpersonal relationships). Also the power dynamics can change in several ways during times of organizational instability. Powerful individuals may lose, maintain or fortify their power position, and individuals with
less power may seize the opportunity to increase their power. Thus, during a merger or acquisition a lot can change for the members of an organization.
It is interesting to know how individuals can attain power in an unstable organizational environment considering the effects that power can have on the individual and the organization. There is sufficient research done concerning power attainment, without considering the effect of the stability of the organizational environment (e.g., Thibaut & Kelley, 1959). Due to research on this subject we know that how individuals change their power position is complex and encompasses many factors. For instance; personal characteristics and evaluations of an individual’s competences by others play an important role in power attainment (Blau & Scott, 1962). What not has been covered by the literature is what kind of effect the stability of the organizational environment has on power attainment. Do individuals show for instance more or less power-attaining behaviours in an unstable environment? And is there a difference between the power attainment behaviours of high-power individuals and low-power individuals in the different organizational environments?
To be able to answer these questions more knowledge is needed. What the effect of the organizational environment stability is on the power-attaining behaviour of low and high-power individuals, will therefore be the subject of investigation in this research. More precisely, the relationship between power, stability of the organizational environment and power-attaining behaviour will be investigated. The current research aims at contributing to the establishment of behavioural foundations in strategy by analysing the role of human behaviour in various organizational contexts. The research presents and tests a theory that provides clarity about human behaviour, the theory might help practitioners design controls and incentives to guide these behaviours.
The academic paper is structured as follows; first, a critical review of the existing literature is outlined. Second, a theoretical framework and a research design, which includes a
quasi-experimental design, are described. After this, the empirical results of this research will be outlined, followed by a discussion. Finally, implications for future research and the closing thoughts are given.
II Literature review
The following paragraphs discuss the main insights of the existing literature on the topic. I first explain why power plays a role of importance in almost all organizations by referring to power via organizational hierarchies. After this I explain how power fulfils this role by looking more closely to the antecedents of power. Finally, the role that the stability of the organizational environment has will be introduced, as a guiding determinant of power in organizations.
1. Hierarchy
The two following paragraphs will clarify why and how power is omnipresent in organizations. The first paragraph will take a closer look at the functions (why) that a
hierarchy fulfils in an organization. The second paragraph will take a closer look at the three important forces (how) that enable an organizational hierarchy to functions, and special attention will be given to power as being one of those forces.
1.1. Hierarchy & Organizations
The pervasiveness of power structures in organizations, that is hierarchy, suggests that it serves important social and organizational functions. As mentioned before, the division of power in organizations is settled via an organizational hierarchy. By identifying the functions that an organizational hierarchy serves, it is possible to explain the features of hierarchy and the forces that sustain them.
Firstly, hierarchy establishes social order and facilitates social coordination (Magee & Galinsky, 2009). Hierarchical order is psychologically appealing because it helps resolve individuals’ needs for stability, and organizationally because it is effective for the coordination of activity. Problems inherent to organizing groups of people working on the same task can be solved by establishing an organizational hierarchy. As a mechanism of social governance, an organizational hierarchy provides a solution to uncertainty and chaos. The human needs characterized by the desire for order, structure and stability are fulfilled by social order (Neuberg & Newsom, 1993).
The fact that an organizational hierarchy establishes order is not the only reason why it is so appealing. After all, egalitarian, balanced social structures can provide order as well (Krackhardt & Kilduff, 1999). It is that hierarchy is exceptionally effective in providing order within social groups. An organizational hierarchy provides clear lines of direction and submissiveness that simplify the coordination of behaviours. In an organizational hierarchy employees get appointed a specialized role. These hierarchically differentiated roles prescribe behaviour for both the superiors and subordinates, and these role prescriptions facilitate coordinated action. If these roles are not clearly communicated, the coordination suffers. In these situations, work tends to become confusing, inefficient and frustrating (Greer & Caruso, 2007). Not only does hierarchy increase group performance, it also leads to more satisfying work relationships. Research has shown that individuals prefer to coordinate with each other when one individual is dominant and the other submissive (Tiedens, Unzeuta & Young, 2007). It is perhaps counterintuitive that subordinates actually prefer dominant employees to similar subordinate employees. But considering how dominant and submissive behaviour clarify roles and facilitate coordination in task contexts, it becomes clear that the dominant individual directs submissive individuals, clarifying the path and tasks towards the common goal.
Another organizational function of hierarchy is, that it provides incentives for the employees in an organization. Individuals are motivated to move up the rank to fulfil material self-interest and their need for control (Tannenbaum et al., 1974). Achieving a high rank offers more possibilities to satisfy a set of control related desires, such as autonomy (Deci & Ryan, 1987), internal control (Rotter, 1966) and power (Winter, 1973). This, in turn, is beneficial for the organization, especially when rank is determined by dimensions concerned with the organization’s performance. Previous research on these career ladders has shown that people of lower rank who want to go higher up increase their effort towards accomplishing organizational goals (Baron, Davis-Blake & Bielby, 1986). Thus, when promoting employees is closely coupled with organizational goals, individual’s self-interest is aligned with organizational interest.
Thus, multiple functions can explain the necessity of hierarchies in organizations. In the next paragraph, three important forces that enable a hierarchy to function will be discussed. One of these forces (power) will be evaluated more closely.
1.2. Hierarchy & Power
Three of the most important bases of hierarchy are power, influence and status. Power is broadly defined as possessing asymmetric control over valued resources, such as information, money or decisions (Keltner, Gruenfeld & Anderson, 2003; Magee & Galinsky, 2008). Power exists by definition only in relation to others; low-power parties depend on high-power parties to obtain rewards and avoid punishments (Emerson, 1962). Due to the possession of power by high-level individuals in a hierarchy it is possible for them to decide what tasks the low-level individual has to carry out. Since the high-level individual possesses the knowledge and other resources needed to decide what tasks need to be carried out, the low-level individual is more
likely to accept the tasks given. Influence involves behaviours intended to obtain compliance with a request (Nolan, Schultz, Cialdini, Goldstein, Griskevicius, 2008).
The concepts of power and influence are different because power is a source of influence where compliance is not needed. Although the concepts are different they are also correlated with each other, for example, individuals who control resources often use their power to influence others (Kipnis, 1972). Thus, influence is an important factor in a hierarchy because it can increase compliance to a request. Status is also a construct which is closely related to power. Power involves a structural position which gives access and control over resources, whereas status concerns a social perception in which another person is attributed with a relative high degree of respect and admiration (Cheng, Tracy, Foulsham, Kingstone, Henrich, 2013). Although the two concepts are different they also tend to be associated with one another, as individuals with power are more respected and admired (Davis & Moore, 1945), and respected individuals tend to be given control over valued resources (Parson, 1940). Status is important for the functioning of a hierarchy, because it increases the likelihood that the high-level individuals indeed get the control over the valued resources which they need to execute their role effectively.
Due to it’s importance regarding the subject of this thesis, special attention will be given to power as one of the so-called pillars of hierarchy. A distinction needs to be made between two types of organizational hierarchies, to expose the complexity of power in an organizational hierarchy. The first kind of organizational hierarchy is the formal hierarchy. The formal hierarchy results from officially prescribed positions (Brass, 1984). In figure 1 actor C is for instance appointed as supervisor and has the formal authority to communicate the responsibility to carry out the necessary actions to subordinate actors D, E and F.
The second kind of organizational hierarchy is the actual power hierarchy. The actual power hierarchy may result from informal or emergent patterns of behaviour (Brass, 1984). For
example, the low-level individual (subordinate) may choose to informally modify the prescribed workflow or engage in information exchanges that do not follow the formal rules (e.g. withholding information). As these emergent interactions become recurring patterns of behaviour, the formal hierarchy is influenced and the actual power hierarchy changes. For example, in figure 1 actor C receives valuable resources (e.g. in the form of information) from actor D, E and F. If actor C chooses not to share the valuable information with his superiors, actor C is actually the actor with the most valuable information and thus has the most power.
Figure 1: Hypothetical Organizational Hierarchy
This section made clear that different actors in the organizational hierarchy may possess power. Although counterintuitive, sometimes low-level individuals possess more power than high-level individuals. In the next section, the antecedents of power will be subjected to an investigation.
2. Power
This part illustrates the important role of power in a hierarchical organization by looking more closely to the antecedents of power. First, the effects of possessing power (positive and negative) will be clarified, to explain why certain individuals modify the prescribed workflow
or engage in information exchanges that do not follow the formal rules, in order to gain more power to change the organizational hierarchy. After that, the next paragraph will be dedicated to the actions individuals can take to influence the power dynamics, and look more closely into power attainment and power preservation behaviours.
2.1. Effects of Power
There are positive and negative effects of power, with regard to the power-holder as well as their subordinates. Keltner et al. (2003) examined how power influences behaviour and found positive effects. In their meta-analysis they reviewed papers from different scientific fields, like neuroscience and social psychology. The authors concluded that power is associated with positive affect, attention to rewards, automatic information processing and disinhibited behaviour. Which in turn leads to increased rewards and freedom. These findings suggest that individuals in a hierarchical organization are motivated to attain more power because they want to increase their rewards and freedom. This seems like a clear statement, but there is a remark to be made here. As mentioned before, high-power individuals are not always high-level individuals in the formal hierarchy. Thus, high-power individuals will not always receive the (formal) rewards (e.g. salary) that more power is associated with. But it is to imagine that low-level individuals nevertheless are motivated to attain more power in order to receive more freedom. An employee who possesses a lot of valuable resources (e.g. knowledge) can decide better what necessary actions need to be taken than an individual with less valuable resources. This could lead to less directions from above and thus increase an individual’s freedom. The positive effects of power (increased rewards & freedom) are obvious reasons for individuals to want power in an organizational hierarchy. It explains why there are differences in the formal and actual power hierarchy; even without formal power, power can have positive effects.
But due to the experiments of Zimbardo (1973) and Milgram (1963) we know that power also has negative effects for the power holders, and especially their subordinates. Possession of power can lead to antisocial, immoral and unethical behaviour. In Zimbardo’s famous Stanford prison study, he assigned 24 clinically sane individuals randomly to be ‘prisoner’ or ‘guard’. The study was conducted in the basement of the Stanford University. They planned a two-week study into the psychology of prison life, but ended it after 6 intense days, due to emotional trauma experienced by the participants. The students quickly began acting out their roles, with ‘guards’ becoming sadistic and ‘prisoners’ showing extreme passivity and depression.
The Milgram experiment on obedience to authority figures measured the willingness of participants to obey a figure of authority, who instructed them to perform acts which conflicted with their own personal conscience. The experiment found that a very high proportion of people were prepared to obey, even if apparently causing serious injury and distress. In the experiments of Zimbardo and Milgram the power holders engaged in stereotyping, devaluing subordinates, selfishness and aggression. These insights showed that the power holder can be dangerous and can cause misery to the subordinates. Thus, subordinates have another reason to try to attain more power; in avoiding to be treated unfair by a superior.
Concluding, there are multiple reasons for individuals to want more power: an increase in their rewards and freedom, or a decrease in vulnerability to unfair treatment.
2.2 Power Dynamics
In the next section previous research on power dynamics will be discussed. Firstly, a paragraph on power attainment will explain in what ways individuals can actively gain power. This will be followed by a paragraph which will provide a closer look at power preservation in
order outline in what other ways power can be strengthened. Behaviours associated with power loss are not discussed. The current research focusses on behaviours associated with power gain.
2.2.1. Power attainment. First, research concerning power attainment in small groups will be discussed. The studies of Thibaut & Kelley (1959) and Bales, Strodtbeck, Mills & Roseborough (1951) have offered a broad understanding of the different antecedents of power in small groups. Their research showed that individuals with perceived superior individual characteristics get power in these groups settings, even if the perception is false. Especially the research done by Bales et.al. (1951) is valuable, because they made use of work groups in their natural settings. Their findings can be generalized to individuals in a small organizational setting. So if individuals actively alter the perceptions of others about their own individual characteristics, they can attain power in an organization.
Research has also been done on what personal characteristics can predict which individuals will attain power in groups. In the meta-analysis of Lord, De Vader and Alliger (1986) personal characteristics as high task competence, good social skills, and high general intelligence surfaced as important traits which predict power attainment. Eight of the 27 papers reviewed in the meta-analysis were based on studies in an organizational setting, using employees of actual organizations for their research. For the other papers, students were used to carry out the research. One of the eight studies within an organizational setting was the research of Greenwood & McNamara (1969). They investigated what personal characteristics amongst individuals in a business concern could predict power attainment. They found that power attainment is associated with showing structure, which is grouped under task competence in the meta-analysis, and not showing kindness, which is grouped under social skills in the meta-analysis. In their paper power attainment was measured as moving up the formal hierarchy, and labelled as leadership emergence. It is important to report that the meta-analysis
found contradictory results. The reviewed paper of Lawrence, Lamont and Lundstrom (1977) focussed on defining what personal traits can identify who is going to be a successful salesman, where success is defined as the managerial ratings of the salesman performance over a period of two years, and his sales volume. They didn’t find any personal trait that could predict success. Just like the paper of Greenwood & McNamara (1969), and all the other papers in the meta-analysis, the paper of Lawrence et. al. (1977) is more leaning towards traits which predict leadership emergence. Assuming that in most organizations moving up rank means that the individuals will have more access to valuable resources than before, it can be concluded that the personal characteristics that predict leadership emergence can be generalized to what personal characteristics predict power attainment. Thus, by increasing their personal task competence, social skills or general intelligence, individuals in an organization can attain power.
Research on how individuals attain power has also examined the influence of one’s relative position within social networks in the organization on power attainment (Brass, 1984; Granovetter, 1973). In figure 1 actor C is central in the network. He has the most (four) ties to other actors. The research on social networks suggests that the ability to control information, a valuable resource, contributes to power attainment. Power can be attained from the acquisition of diverse information obtained from ties. Since actor C has the most ties he has the most control over information and thus possesses power. By establishing new links, or obtaining more information from existing links, more power can be attained in an organization.
Based on these findings Anderson & Brion (2014) suggest three power-attaining behaviours:
I Obtaining control over valued resources, for instance by developing relationships with other powerful people.
II Increasing the value of the resources they already control.
III Changing the perceptions of others, with the goal to make others believe that they possess more valued resources.
Obtaining control over valued resources seems the most important and influential power-attaining behaviour. If a person doesn’t have any control over valued resources to begin with, it is difficult to increase the value of the resources he controls. It also seems difficult to change the perception of others to make them believe that they possess more valued resources if an individual doesn’t possess any valuable resources to begin with. So obtaining control over valued resources can be seen as the most important power-attaining behaviour. When an individual is good at obtaining control over valued resources more and more power attainment can be expected.
So, there is sufficient research on why people want power and how they get it. The next section will address the question whether a person who already attained power still needs to actively maintain or increase his power in order to preserve it, or can enjoy his power-holding position without the need to actively preserve or enhance it.
2.2.2. Power preservation. After an individual obtained power, there are several ways in which it can be preserved. For instance, Keltner et al. (2003) predict that power holders experience and express more positive affect. The affective consequences of power may contribute to the ability of power holders to maintain their power. For instance, power seems to act as a buffer against stress. Power holders have been found to have lower heart rates following stress-inducing tasks (Schmid & Schmid Mast, 2013). Power has also been shown to buffer stress-related responses in psychological ways, including decreases in stress
and health benefits, power also seems to decrease stress in social situations, which can lead to increased performance in task-based situations. For instance, Schmid & Schmid Mast (2013) found that power increases performance on social evaluation tasks; individuals primed with power were evaluated more positively by others, and these effects were mediated by
decreases in the power holders’ fear of negative evaluations. All together the evidence suggests that power holders can preserve their power due to the buffers to potential stressors. Power contributes to more positive affect, this enables individuals to perform (a valuable resource) better and persist in challenging and difficult environments, thereby outworking individuals with less power.
The discussed findings seem to suggest that power has some kind of self-reinforcing aspect, and that power is persevered due to this self-reinforcing aspect. Another factor that contributes to the idea of a self-reinforcing aspect is that once individuals possess power, they are perceived more positively than they should be according to the actual contribution (Rush, Philips & Lord, 1981). By attributing more positive characteristics (valuable resources) to the power holder, their power is fortified without any deliberate actions by themselves. These findings are based on a research by Rush, Philips & Lord (1981) in which they used students. That power is self-reinforcing in an organizational context is also suggested by Humphrey (1985). Humphrey (1985) tested the effects of expectations on evaluations within a formal hierarchy. The researcher assigned participants of his experiment to supervisor and subordinate roles in an organization simulation and found that subordinates rated supervisors more competent than fellow subordinates, even though they knew the roles were randomly assigned. These findings suggest that power indeed is self-reinforcing in an organizational context.
Ratings of an individuals’ skills and performance can also be affected by preconceptions. Darley & Gross (1983) found that observers who watched a girl take a test believed she was smarter and performed better on the test when they believed she was from a
higher rather than a lower socioeconomic background, even though they saw the same girl take the same test in both conditions. This validates that expectancies, whether determined by hierarchical position or by demographic background, provide observers with a pre-established judgement through which they process information. So, power can be preserved by the power holder without any attempt for action, purely as a result of expectations and beliefs by others, with automatic physiological and health benefits for the power holder.
But the power holder may also be evoked to engage in certain behaviours that preserve his/her power. According to Magee & Galinsky (2009) this is due to the phenomenon of behavioural confirmation. Behavioural confirmation means that individuals’ expectations lead them to behave in ways that cause others to confirm their expectations. When expectancies are formed, people often treat targets (e.g. power holders) in an expectancy-consistent manner and, as a result, elicit expectancy-consistent responses from these individuals. This leads to the fulfilment of these expectancies. In an experiment of Rosenthal & Jacobson (1968) this phenomenon is tested. They made teachers believe that some students would show dramatic intellectual growth during the course of the year, while other capable students would not. By the end of the year the average increase in IQ of the students that teachers expected to improve did grow twice as large as the increase in IQ of the control group of students. The scholars hypothesized that the expectancy of the teachers contributed to the difference. In an organization it could mean that the subordinates treat the power holders in a way that someone with power traditionally is supposed to be treated (e.g. accept authority, show respect, etc.), as a response the power holder starts to behave and act as a person who possesses power. This could lead to the strengthening and preservation of power. Although the power holder freely engages in the expectancy confirming behaviour, he/she is most likely not consciously engaging in power preservation behaviours.
Based on the evidence a conclusion about the impact of the power hierarchy in organizations can be given. The self-reinforcing aspects, the physiological effects, the health benefits, and the decrease in stress due to power enable power holders to maintain their power without the need to actively or consciously engage in certain behaviour. This clearly differs from power attainment, in that individuals most likely need to be active to attain power. Until now, the effects of power were taken to be the main cause of the dynamics of power in organizations. But there is possibly another factor that influences the power dynamics. In the next section the stability of the organizational environment will be introduced as a possible influential factor in the dynamics of power.
3. Stability of the organizational Environment
This part will introduce the role that the stability of the organizational environment has as a guiding determinant of power in organizations. The first paragraph explains what the stability of the organizational environment is. After this, the effects of unstable organizational environments on organizations will be reviewed, to clarify why some organizations move towards an unstable organizational environment. The last paragraph in this section will discuss previous research on the effects of unstable organizational environments on individuals. By taking a closer look at this clarity about why an unstable environment also influences the power dynamics will be provided.
3.1 Stability in Organizations
The stability of the organizational environment has a big influence on how organizations function, and could possibly also influence the power hierarchy in organizations. A merger or acquisition can be dangerous for the positions of power holders in particular. Lehn & Zhao (2006) concluded, after examining 714 acquisitions during 1990 to 1998, that 47% of the CEOs
of acquiring firms are replaced within firms, including 27% by internal governance, 16% by takeovers and 4% by bankruptcy. This suggests that power holders in an organization suffer from organizational environments that are unstable. The stability of the organizational environment encompasses all elements of the psychological climate of both the formal organization (policies and procedures) and the informal organization (values, norms and interpersonal relationships). Organizations in an unstable organizational environment are for instance organizations that currently are undergoing a merger or acquisition. In these situations, the policies and procedures are changing as well as the current values, norms and interpersonal relationships. The most common classification proposes four main types:
I vertical – the combination of two organizations from successive processes within the
same industry
II horizontal – the combination of two similar organizations in the same industry
III conglomerate – where the acquired organization is in a completely unrelated field of
business activity
IV concentric – where the organization acquired is in an unfamiliar but related field, into
which the acquiring company wishes to expand
In the next paragraph the effects of mergers and acquisitions on organizational outcomes, considering the four different merger and acquisition types, will be discussed. This is done to demonstrate that the organizational stability has a big influence on organizations outcomes. That paragraph is followed by a paragraph about the effects of mergers and acquisitions on individuals in organizations, in order to demonstrate the influences on the power dynamics.
3.2 Effects of Unstable Organizational Environments on Organizations
In order to understand why certain policy makers choose to engage in a merger or acquisition the outcomes of these actions will be discussed. When an organizational environment moves from stable to unstable there are all kind of effects on organizational outcomes. Mergers and acquisitions can lead to an improvement of an organization’s competitive position (Freeman & Cameron, 1993), due to the effects on an organization’s efficiency, waste reducing, and a more productive allocation of resources (Jensen, 1986). Mergers and acquisitions can also lead to increases in equity values, which are attributed to sources of real economic gains, such as synergy (Healy, Palepu & Ruback, 1992). But unstable organizational environments can also have a negative effect on organizational outcomes. For instance, the average returns to bidding shareholders from making acquisitions are at best slightly positive, and significantly negative in multiple studies (Bradley, Desai & Kim, 1988; Roll, 1986).
There are differences in the extent to how stable and unstable mergers and acquisitions can be, which also leads to differences in the organizational effects. It is to imagine that conglomerate mergers and acquisitions, and to a lesser extent concentric mergers and acquisitions, are likely to cause considerable instability. Conglomerate organizations are mostly defined in the literature as organizations that exhibit significant unrelated product-market or resource diversification (Rumelt, 1974). In these organizations the doings of the two merging organizations are completely different, due to the differences in product-market and the use of different resources. The employees most likely need to adjust to completely different situations, policies and procedures. Conglomerate organizations see diversification as a value-enhancing strategy (Campa and Kedia, 2002). One positive aspect of conglomerate organizations is suggested, since they are more likely to possess competences associated with creating, rather than simply acquiring value through merger and acquisition activity (Salter & Weinhold, 1978).
But there are also studies that say that diversification comes at an expense. Berger and Ofek (1995) compared the value of entire diversified organization to the sum of its segments. They concluded that diversified organizations have 13-15 percent less value than the sum of their segments would have independently. This expense on the stock performance of conglomerate organizations could be attributed to the unstable environment. Since they aggregate their financial performance from several divisions, there is more uncertainty in predicting their cash flows.
Mergers and acquisitions that are likely to be less unstable than conglomerate mergers are mergers between related organizations (horizontal and vertical mergers). The relatedness (e.g. in terms of resource or product-market similarity) of the two organizations decreases the need to adjust to completely new situations, policies and procedures. The relatedness of acquired organizations to their acquirers is often assumed to impact the performance of the acquiring organizations. The majority of literature on mergers and acquisitions suggests that acquiring related organizations results in an increased performance (Rumelt, 1974; Kusewitt, 1985). It is said that due to the relatedness managers can effectively employ their corporate conceptualization of the success necessities in the acquired organizations (Prahalad & Bettis, 1986). Familiarity eliminates or significantly diminishes the need for acquiring company managers to ‘learn’ the business of the acquired firm, and enables learning from the acquisition process per se (Hitt, Harrison & Ireland, 2001). Thus the stability of a familiar environment can have positive effects.
So, from the organizational perspective, there are a few reasons why mergers and acquisitions are desirable; they could result in an increase of value, an increased performance, increased efficiency and the possibility to tap into other sources of real economic gains. These are clear reasons for policymakers to initiate a merger or acquisition. The next section will
explain why this also influences the organizational hierarchy, by taking a closer look at the effect that an unstable organizational environment has on individuals.
3.3 Effects of Unstable Organizational Environments on Individuals
The stability of the environment also has a substantial effect on the employees in an organization. A merger or acquisition can be considered as a threat, an opportunity, or possibly as irrelevant (Ivancevich, Schweiger & Power, 1987). When mergers and acquisitions are viewed as a threat they are considered to be a source of uncertainty and can result in conflict, resistance, anxiety or negative evaluation of counter parts. Levinson (1970) and Cartwright and Cooper (1994) draw an analogy between merger and marriage, and underline that mergers are rarely marriages between equals. Employees of one organization regularly attempt to dominate the members of the other organization. They point out that balance rarely occurs because one group frequently tends to influence the direction of cultural and organizational change. Levinson (1970) states that this dominant behaviour is expressed in words like these:
-! “We’re smarter and better than they are. After all, we’re buying them.” -! “We’ve got to control them. They need our managerial know-how.”
-! “They’re out to get all they can from us. They want to be free to do things their own way, but they don’t want to be responsible for the results.”
These condescending attitudes facilitate efforts at manipulation and control which, in turn, produce disillusionment, disappointment, and a feeling of desertion in the other company (Levinson, 1970). Efforts at control are not always bad, but when control becomes a goal in its own right, it becomes ineffective. Controls are for instance related to inhibited creativity (Levinson, 1970). Trying to control the other directly influences the organizational hierarchy.
If an individual controls another person that possesses valuable resources he/she increases his own control over valuable resources, and thus increases his/her own power.
Another psychological consequence of a merger or acquisition is the feeling of loss. According to Cartwright and Cooper (1990), a psychological contract exists between the employee and his/her organization. When an organization ceases to exist or is fundamentally changed, that contract becomes unclear and has to be renegotiated. The psychological response of employees to the news that their organization has been taken over or merged with another, has been compared with the sense of grief experienced following the loss of a close friend or relative (Schweiger, Ivancevich & Power, 1988). Research on ‘loss’ more generally, states that it produces a conservative and nostalgic impulse in people to hold onto what they have, and that collective grief maintains a sense of community and increases cohesiveness (Freud, 1959), making new cultures and managerial practices even more difficult to introduce. The feeling of loss could also influence the organizational hierarchy. By trying to hold on to what they have, individuals are contributing to the continuation of the organizational hierarchy as they knew it before the merger or acquisition. Individuals are likely to defend the possession of power for those who already possess it.
Research (Brockner, 1988) points out that the stability of the environment can determine employees work behaviours (e.g. productivity, turnover) and attitudes (e.g., toward the organization, co-workers, and the job) (Brockner, Grover, Reed, DeWitt, & O’Malley, 1987; Brockner, Wiesenfeld, Reed, Grover & Martin, 1993). Brocker, Grover, Reed, DeWitt & O’Malley (1987) investigated how employees, who kept working in an organization after a colleague got fired, performed at certain tasks. They found that when individuals identified with layoff victims their work performance went down. This can influence the power hierarchy because a decrease in work performance (valuable resource) means a decrease in power. And possessing less power could mean that the organizational hierarchy may change. Others who
identify less with the lay-off victim could be the ones who now possess more power. During a merger and acquisition it is likely that lay-offs will take place due to the intention to reach a synergy effect.
Thus when policymakers decide for a merger or acquisition it can have a profound effect, positive and negative, on the individuals in the organization. Individuals may try to control the employees from the other organization, hold on to the status-quo, or for instance try to be less vulnerable to potential threats, which in turn influences the organizational hierarchy. In the next section, the new theoretical view, formulated in this paper, on the power dynamics in unstable organizational environments will be given.
III Theoretical Framework
This academic paper theorizes that power-attaining behaviour is influenced by the possession of power. In addition, this relationship is moderated by the stability of the organizational environment. There is strong evidence that the organizational environment influences the power dynamics in an organization. The next paragraph will give a broader explanation about how the different constructs relate to each other according to the formulated theory.
1. Stability of the Organizational Environment & Power Dynamics
It is to imagine that due to the increased need to form new teams, layoffs and new openings in an unstable organizational environment, low-power individuals could see opportunities of moving up the organizational hierarchy. Low-power individuals face the prospect on seizing more power, which means that they could realize a decrease in their vulnerability to mistreatment (Higgings, 2007; cited in Sligte, De Dreu, & Nijstad, 2011). It can be expected that low-power individuals try to grasp these opportunities actively by
engaging in power-attaining behaviours. In an unstable organizational environment, power holders may become threat-oriented (Scheepers & Ellemers, 2008) leading the power holders to become risk averse and more focused on preventing that someone takes over their privileges (Lammers, Galinsky, Gordijn & Otten 2008). For this reason, it is expected that they will engage in less power-attaining behaviours. Therefore, for an unstable organizational environment it is hypothesized that:
Hypothesis 1: There is a negative relation between power and power-attaining behaviours. Where low-power individuals engage in more power-attaining behaviours than high-power individuals.
In stable organizational environments the self-reinforcing aspects, the physiological, the health benefits, and the decrease in stress due to power enable power holders to strengthen and maintain their position (Humphrey, 1985; Magee & Galinsky, 2009; Schmid & Schmid Mast, 2013). Due to these reasons they have the ability to show that they possess power. This can also lead to expressing more power-attaining behaviours than low-power individuals. Low-power individuals do not have these benefits that come with possessing power. Low-power individuals in a stable organizational environment are expected to think and act to protect against a possible threat. And since attempts to attain power in stable environments are not likely to be successful (Maner, Gaillot, Butz & Peruche, 2007), it is hypothesized that for a stable organizational environment:
Hypothesis 2: There is a positive relation between power and power-attaining behaviours. Where high-power individuals engage in more power-attaining behaviours than low-power individuals.
The last hypothesis formulates the expected interaction effect. The hypothesis is partly based on the findings of Maner, Gaillot, Butz & Peruche (2007), they found that high-power individuals in an unstable organizational environments make less risky decisions than high-power individuals in stable organizational environments. They also found an effect for low-power individuals. Low-low-power individuals made riskier decisions in the unstable organizational environment than in the stable environment. This effect was not significant, thus possibly found by coincidence. When taking risks is assumed to be a type of power-attaining behaviour (Anderson & Galinsky, 2006), it can be theorized that high-power individuals show more power-attaining behaviours in a stable organizational environment, than in an unstable organizational environment and vice versa for low-power individuals. Therefore, it is hypothesized that:
Hypothesis 3: The relationship between power and power-attaining behaviours is moderated by the stability of the environment.
The proposed effect is that high-power individuals will express more power-attaining behaviours than power individuals in a stable organizational environment, and that low-power individuals will express more low-power-attaining behaviours than high-low-power individuals in an unstable organizational environment.
Based on the three hypotheses outlined in the theoretical framework section, the following conceptual model (Figure 1) could be drawn:
Figure 1: Conceptual Model
IV Methodology
In the following chapter the research approach and design of this paper are explained. First the design and procedure of the experiment will be presented. The section continues with a brief description of the sample and data collection method. Finally, an operationalization of the variables is outlined.
1. Research design
The research design used in this paper is composed of three instruments: A vignette study, two math assignments and a traditional survey questionnaire. The vignettes (Appendix, Vignettes 1 to 4) developed in this paper are used to measure the impact of the independent variable (power) and the moderating variable (stability of the organizational environment). The two math assignments are used to measure the dependent variable (power-attaining behaviour). The survey questionnaire was used as manipulation check and to test other variables (motivation and math skills) that could possibly correlate with the dependent variable of the study.
In order to test the hypotheses, a vignette experiment was used, also known as the factorial survey approach (Ludwick & Zeller, 2001). This type of research instrument was first
situation that contains precise references to what are believed to be important factors for the study it is used for (Alexander & Becker, 1978). For the current research vignettes were written and presented to respondents mainly because they are easy to distribute online. The use of vignettes has many advantages, compared to other instruments such as surveys and interviews, especially when human behaviour is the subject of investigation. (Alexander & Becker, 1978). The vignette contains concrete details outlined by a researcher, whereas questionnaires and interviews are often criticised for obtaining abstract judgments from respondents presented with limited information (Alexander & Becker, 1978). What perhaps is the most essential of the vignette technique is that the researcher has the possibility to systematically vary the characteristics of the situation described in the vignettes (Ludwick & Zeller, 1978), which enables the possibility to measure different dimensions of the independent or moderating variables.
Limitations of the vignette technique are mainly attributed to the fact that participants have to make decisions based on hypothetical situations. Individuals decisions or situations in real-life may strongly differ from those associated with the hypothetical situation described by the vignette (Ludwick & Zeller, 2001). Another problem associated with the vignette technique is that the stories could be inaccurate in describing the situations they try to portray, which makes them less generalizable to real-life. This could lead to problems with the validity (Ludwick & Zeller, 2001). Although these problems with the vignette technique need to be taken into account, the vignette technique is taken to be a reliable instrument for studying an individual’s behaviour, as it allows for constant manipulation across heterogeneous respondents. This leads to a high level of uniformity and control over the scenario, similar to those reached in costly laboratory experimental studies (Alexander & Becker, 1978).
In order to measure the power-attaining behaviours, the respondents had to make two math questions. The math questions were hard to solve, but if participants were willing to put
effort into the assignments they were possible to solve them without the use of a calculator. The current operationalization taps into the operationalization that measured status gain in the paper of Pettit, Yong and Spataro (2009). In their paper the scholars measured status gain by measuring time spend on an unsolvable question. They theorized that the more time spend on the question the more effort the respondents put in the assignment. And putting in effort in an assignment leads to status gain according to the scholars. In the current paper it was chosen not to use an unsolvable question due to the reason that participants likely would judge their chances of solving it to be low. This could lead to discouragement and could lead to problems with the validity, because effort might not be the construct that is being measured when participants are discouraged. Therefore, we chose to use two difficult math problems that could be solved by putting in effort. Participants were told upfront that they were going to make two math questions which could be solved with the help of pen and paper, but that the use of a calculator was not allowed. They were asked to make the questions without the help of others. These were the math questions:
I The highest building in the world (Burj Khalifa) has 163 floors of on average 5,08m. How high is the Burj Khalifa?
II You want to build a tower of 867,18m with as many floors of 4.47m as possible. How many floors will the building have?
A traditional survey questionnaire was used to collect data on the controls for respondents’ math aptitude and respondents’ motivation to perform on the two math assignments. These two variables could possibly cause differences measured on the math-assignments. In the paragraph other variables more information about how they are measured is given.
The vignettes, math assignments and questionnaire have been distributed online. This is done because of the flexibility and economic benefits that accompany this method of distribution. It also eliminates any time losses that might occur if surveys were distributed in another way, like regular post. A possible limitation of this way of distribution could be related to the fact that the respondents could access the survey only through a personal computer. The participants were randomly assigned to the conditions of a 2 (power position: high vs. low) x 2 (stability of environment: unstable vs. stable) between participant factorial design. In Table 1 an overview of the different conditions is given.
Table 1: The different conditions
Stable Unstable
High-power Condition 1 Condition 2
Low-power Condition 3 Condition 4
2. Sample
Mechanical Turk (MTurk) was chosen to recruit participants. MTurk is a crowdsourcing internet marketplace enabling individuals and researchers to coordinate the use of human intelligence. Researchers are able to post experiments and in exchange for money they get participants for their experiment. This allows researchers to recruit large samples quickly at low cost. However, the relative representativeness of MTurk samples raises some concerns over inferences based on data collected with MTurk, at least compared with those based on data from population-based samples, namely, generalizability (Levay, Freese, Druckman & 2016). The participants of the experiment were all American citizens. The mean age of participants on Amazon Mechanical Turk is 31.6 years (Levay, Freese & Druckman, 2016).
Striving to attain power will be measured as the amount of effort participants put into the assignment. Effort was operationalized as the amount of time participants spent on the two math assignments mentioned earlier in this chapter. The assignments were difficult math assignments which could be solved without a calculator if effort is put in the assignment. As mentioned before Anderson & Brion (2014) suggested three possibilities on how individuals can gain power;
I Obtain control over valued resources, for instance by developing relationships with other powerful people.
II By increasing the value of the resources they already control.
III Individuals can also change the perceptions of others, with the goal to make others believe that they possess more valued resources.
The current operationalization is hoping to tap into the second and third way of gaining power. Previous research has indicated that effort has a positive influence on value creation (Baker, 1992). For this reason, effort can be seen as a valuable resource.
Organizations buy a package of time and effort when they employ an employee (Becker, 1985). It is the employee’s choice to really put in the effort that they are getting paid for into the organization. That employees put in the needed effort is an essential part for the survival of organizations. Without effort no tasks can be done and tasks need to be done to create value for a company. In the experiment effort is measured as time spent on the math assignment. The reasoning here is, that the more time participants spend on the assignment the more effort they put into solving the math question. Thus the participants are trying to carry out a task for the company as best as they possibly can. The participants are told that the assignment is for the benefit of the company. Concluding, in the experiment the participants
also have to choose how much effort they will put into the assignment, just like in real situations in organizations. By putting in more effort they are increasing their own value. Thus, by putting in more effort, they are increasing the value of resources they already control.
By putting effort in the assignment the participants can also alter the perception of others, this taps into the third way of attaining power as stated by Anderson and Brion (2014). This is especially the case for the participants in the low-power conditions. They are
stigmatized as people without power. It could be that they believe that the reason why they are in this condition is attributed to the lack of valuable resources in the view of decision-makers. It are the policy makers who allocate resources to employees and estimate the value of certain resources. If the participants in the low-power conditions want to gain more power, they have to alter the perceptions by these people. This can be done by showing that they do possess valuable resources. In this experiment the way of doing that is by putting effort into the assignment. The participants in the low-power conditions are therefore also informed that their performance will be assessed by their supervisor. By doing this they are aware that they have a chance to alter the perception of the supervisor.
4. Independent Variable
In the current academic paper, vignettes are used to simulate a quasi-experimental scenario in order to measure the influence of the independent variable – power (High vs. Low). Each vignette describes an organizational situation. The participants are either the supervisor (high-power) or the subordinate (low-power) in a team of two. The teams consist of two people. The choice for a team of two is motivated by the fact that it provides clarity; if there will be any power-shifts for the team members there is no question in what direction that will be. The
subordinate will become supervisor and the supervisor will become subordinate if there are power-shifts in a team of two.
These aspects are designed to strengthen the manipulation of the independent variable power:
Participants are told that the supervisor; I Is in charge of the division of labour II Monitors progress
III Assesses the performance of the subordinate after they completed their tasks
IV Decides if the subordinate will be rewarded, according to the assessment by the supervisor.
In table 2 justifications are given per manipulation why that operationalization is chosen to include in the vignettes. The manipulations per variable are given with reference to a definition of the construct used in previous research. In table 3 the differences between low-power and high-low-power vignettes are given per operationalization. The respondents were asked to imagine the situation as vividly as possible.
Table 2: Justification of manipulation per variable
№ Operationalization Definition Key Reference
I Division of labour Power is defined as possessing control over decisions
Keltner et al. (2003) Magee & Galinsky (2008)
II Monitoring progress Power is defined as expressing control over valued resources like performance
Emerson (1962) Keltner et al. (2003) Magee & Galinsky (2008)
№ Operationalization Definition Key Reference IV Decide about reward Power is defined as possessing
control over money
Emerson (1962) Keltner et al. (2003)
Table 3: Difference in power manipulation between low and high-power individuals
№ Low-power High-power
I The supervisor decides upon which tasks you will make
You decide upon which tasks the subordinate employee makes II The supervisor will monitor
performance
You will monitor the subordinates performance
III Afterwards your performance is assessed by the supervisor
Afterwards you assess the performance of the subordinate IV The supervisor will decide if you will
be rewarded
You will decide if the subordinate deserves a reward
5. Moderating Variable
In the current academic paper, vignettes are used to simulate a quasi-experimental scenario in order to measure the influence of the moderator – stability of the organizational environment (stable vs. unstable). The participants are either made to believe that the company they work for has a stable or unstable organizational environment. These are the three manipulations that are used to implement this variable;
I The participants are informed that the supervisor is a senior and respected colleague II The participants are informed there are (not) any hierarchy changes expected
III The participants are informed the company is undergoing a merger at the moment
In table 4 justifications are given per manipulation why that operationalization is chosen for the vignettes. The manipulations per variable are given with reference to a definition of the
construct used in previous research. In table 5 the differences between the operationalization of a stable and unstable organizational environments are given.
Table 4: Justification of manipulation per operationalization
№ Manipulation Reasoning Key Reference
I Status of senior colleague Respect & admiration are associated with a firm grip on valuable resources
Davis & Moore (1945)
II Expected changes Expected changes in the organizational hierarchy are associated with seeing opportunities or threats as a result of a merger/acquisition
Cartwright & Cooper (1990) Ivancevich, Schweiger & Power (1987)
III Undergoing a merger/acquisition
A merger/acquisition is associated with shifts in the organizational hierarchy
Lehn & Zhao (2006)
Table 5: Difference in operationalization for stable and unstable environments
№ Stable Unstable
I The supervisor is a senior, respected employee in the company and has been the supervisor since the start of the team
-!
II There haven’t been any changes in the hierarchy yet and you don’t expect that there will be any soon.
The last weeks there have been several changes in the hierarchy and you expect that there will be more. You have the feeling that in your team there may be a power shift.
III -! The company you work for is
6. Other Variables
The study also measures the respondents’ math aptitude and respondents’ motivation to perform on the two math assignments. Math aptitude was involved as a variable to, by using statistics, exclude the possibility that math aptitude is what is being measured as dependent variable. Differences on time spent on the math questions could be attributed to differences in math aptitude. Math aptitude was measured by 2 self-report questions which can be seen in table 6. The participants could answer the first math question on a 7-point scale from agree to disagree and the second math question on a 5-point scale from poor to excellent.
The motivation of the respondents was measured to ensure, by using statistics, that motivation is not the construct that is being measured with the math-questions. It could be that differences measured on the math-questions are attributional to the motivation that
participants had and not to the amount of effort put into the assignment. To measure the motivation two different questionnaires are used. The two questionnaires both exists out of statements which could be answered with a 7-point scale from agree to disagree. To measure the motivation of participants in the high-power, stable organizational environment and the low-power, unstable organizational environment conditions, an approach motivation
questionnaire is used (table 6). To measure the motivation of participants in low-power, stable environment and high-power unstable environment conditions, an avoidance motivation questionnaire was used.
Table 7 gives an overview of how the conditions and motivation questionnaires were
matched. The avoidance motivation questionnaire was based on Elliot and Sheldon’s (1997) paper about avoidance motivation, and the approach motivation questionnaire was based on Elliot and Murayama’s (2008) paper on achievement goals. The reasoning here is based on the assumption that in a stable organizational environment powerful individuals think and act
so as to maintain and increase power (Bruins & Wilke, 1992; Maner et al., 2007). And that powerless individuals in a stable organizational environment think and act to protect against possible threat. As a result, having power leads to an approach motivation and lacking power to an avoidance motivation (Förster, Friendman, Özelsel & Denzler, 2006).
In an unstable organizational environment, power holders may become threat-oriented (Scheepers & Ellemers, 2008), leading the power holders to become risk averse and more focused on preventing that someone takes over their privileges (Lammers, Galinsky, Gordijn & Otten 2008). In contrast, powerless individuals face the prospect of moving up the
hierarchy, thus realizing positive affect (Higgings, 2007; cited in Sligte, De Dreu, & Nijstad, 2011). Thus, the type of motivation may switch when the organizational environment
becomes unstable.
Table 6: Statements used to measure Math aptitude & Motivation
№ Statement Math aptitude
Ma 1 On general I have a hard time making math assignments. Ma 2 I consider my math skills to be rather good?
Avoidance motivation
Avm 1 During the assignments I thought to myself, “what if I make these assignments poorly?”.
Avm 2 I worried about the possibility of making the assignment poorly. Avm 3 My fear of performing poorly is often what motivates me. Avm 4 I wanted to avoid doing the assignments poorly.
Avm 5 I am afraid that other people think I’m not smart. Avm 6 My goal was to avoid performing poorly.
Approach motivation
Apm 1 It was important to me to do better than the supervisor/subordinate. Apm 2 My goal was to get a good reward.
Apm 3 I was striving to demonstrate my ability relative to the supervisor/subordinate. Apm 4 I was motivated by the thought of outperforming the supervisor/subordinate.
