Bases of Power and Issues Observed
Background
The organization chosen for this report is General Motors Corporation, the US-based automobile maker that has a long history of success but is currently in the period of crisis. Detroit hosts the headquarters of General Motors Corporation famous worldwide for producing the car brands like Cadillac, Chevrolet, Buick, etc., and spare parts for them. General Motors Corporation has a vertical organizational structure headed by the Board of Directors and the CEO. Current financial and production issues of the company are associated with the global economic recession and result in the need for the company to be reformed.
Bases of Power Applied
Theory of Power Bases
The scholarly opinions often connect the currently experienced issues of General Motors Corporation with the improper development and usage of the so-called basis of power. Scholars like DuBrin (2009) and Griffin and Moorhead (2009) argue that the idea formulated by French and Raven (2004) in 1959 might be applicable to General Motors’ crisis (DuBrin, 2009. P. 48; Griffin and Moorhead, 2009, p. 98). Accordingly, there is a need to consider this idea, which is also referred to as the theory of social power by French and Raven (2004).
The major principle of this theory is that any kind of power, whether in the society or in a particular organization, has five major types, also known as the bases of power, derived on the basis of the resources and assets the organization uses for their execution (Gomez-Mejia, 2002, p. 5). These five bases are the legitimate, coercive, reward, expert, and referent powers. Later, the sixth base, the information power, was added by French and Raven (2004, p. 119). The main point about each of the bases of power is that the organization that exercises them cannot embrace all power bases and should have appropriate resources, either tangible or intangible, to develop them (Houser & Ham, 2004, p. 116).
Specific General Motors Corporation Bases of Power
Thus, legitimate power, according to French and Raven (2004, p. 139) is based on the legal force of contracts and agreements; coercive power is exercised as a result of the organization’s power over its business partners; reward power is the attempt to motivate performance by rewarding its positive outcome (Salem, 2004, p. 305; Moriguchi, 2005, p. 51); expert power is the competitive advantage used by the organization whose experience in an area of activity can be an asset (Salem, 2004, p. 305); the use of referent power is in motivating performance by joint goals; the information power is another competitive advantage based on possession of certain information that can be used to benefit the organization (Salem, 2004, p. 305).
Based on these considerations, the bases of power applied by General Motors Corporation can be limited to three types leaving space for discussion of the potential use and profitability of implementing other three bases discussed. Thus, according to the analysis of the bases of power in the North American automotive market carried out by Turner (2007), General Motors Corporation implements the coercive, reward, and the information power bases (pp. 232 – 233). The examples of each of the bases of power being properly applied by the company under consideration can be found throughout its history, but the current paper will focus only on the recent ones observed in the largest General Motors’ markets in the United States, Europe, and Australia.
Proper Application of the General Motors Bases of Power
Coercive Power
In more detail, the most notable basis of power that is currently used by General Motors Corporation is the coercive power. As can be observed from the ideas expressed by French and Raven (2004, p. 139) and Wood and Wallace (2004, p. 181), the coercive power is the ability of the company to exercise its influence and dictate its conditions to its partners, suppliers, and dealers. The recent financial issues experienced by the company under analysis made it exercise the coercive power in relation to its dealers on May 15, 2009 (DuBrin, 2009, p. 193). The execution of the coercive power of General Motors Corporation became possible due to the influence the company has over its dealers in the United States.
The essence of the coercive power implementation by General Motors Corporation obviously lays in the economic difficulty the company experience in 2009. According to DuBrin (2009), from the market share of 52% that General Motors Corporation held in 1960s, nowadays the company holds 20% only (p. 194). Here the idea by Brooks (2006, p. 65), who argued about the recessions’ being the major driving forces of coercive power instances, can be applied as it is the plan of the company to reduce the currently operating number of 6,200 dealerships in the United States to the level of 2,600 dealerships by the end of 2010. In spite of being rather unfavorable for employment rates, the coercive power is properly implemented by General Motors Corporation as a means of saving its foundation from bankruptcy.
Reward Power
The second properly implemented basis of power that General Motors Corporation can be proud of is the reward power. As can be learnt from the works by Maloni and Benton (2000), Thye (2000), and Wright (2004), the major purpose of the reward power is to motivate the performance of the organization and either establish or develop its partnerships and cooperative relations with business partners, distributors, retailers, and domestic and/or international dealers (Maloni and Benton, 2000, p. 43; Thye, 2000, p. 411; Wright, 2004, pp. 7 – 8). Acting according to these universally accepted principles of power exercise, General Motors Corporation applies its reward power to all the key stakeholders of the company with the special emphasis on domestic suppliers, business partners, and international dealers.
In more detail, one of the examples of the reward power by General Motors Corporation is described by Miller (2008) in his work concerning the importance of the organizational communication for the business development. Thus, in 2008 General Motors rewarded its Supplier of the Year 2007. This title was attributed to the Australian Noble Park-based company Mett (p. 89). The main motivations for General Motors to introduce such a reward included the need to demonstrate the appreciation of the cooperation with suppliers and the desire for further work on joint goals (Hayton, 2005, p. 184). Needless to say, this application of the reward power boosted the activity of Mett for 2008 considerably (Miller, 2008, p. 91). The supplier discount policy by General Motors Corporation also deserves mentioning in this respect as another proof of the company’s proper understanding and practicing of the reward power.
Information Power
The third example of the properly and successfully implemented basis of power is the usage of information power that allows General Motors to preserve considerable financial assets even in the light of the currently observed and reported financial crisis shaking the company (Griffin and Moorhead, 2009, p. 111). As Lines (2007) argues, information power is the ability of the organization to use the information it possesses as either a competitive advantage or a means of protection against potential risks (pp. 145 – 146). The recent example of General Motors Corporation’s activities proves this theory and illustrates how the company’s assets and efforts become concentrated and focused in the context of the crisis.
The essence of the information power of General Motors is the decision that the company made on November 4, 2009, not to sell its Opel manufacturing facility in Europe to the joint Canadian-Russian enterprise Magna. The problem with the deal was that the economies of the number of EU countries are dependant upon automotive industry as such and Opel plants’ operation in particular. Magna announced plans of production rates’ reduction and staff cutting, and the EU competition committee was ready to take measures against General Motors in case if the deal was completed. Thus, possessing the information about the potential consequences of the deal allowed General Motors Corporation to make the most reasonable decision at the moment and cancel the deal. Accordingly, General Motors demonstrated how information power can be used by the company for protection against unwanted risks and issues.
Problems Observed
Improper Application of General Motors Base of Power
Any company cannot have the totally perfect organizational structure and the procedure of handling its operations (Ballou et al., 2000, p. 15; Thang, 2007, p. 114). General Motors Corporation is not an exception, and apart from having the properly implemented bases of power, this company displays the signs of improper usage of another basis referred to as the referent power. According to Rahim (2001), Miner (2006), and Huczynski and Buchanan (2007), the major idea in the referent power is the appeal that organization might make towards its partners, suppliers, and/or dealers concerning the joint goals and potential mutual benefits for both sides, i. e. organization and its partner, in case of the success of an activity (Rahim, 2001, p. 193; Miner, 2006, pp. 128 – 129; Huczynski and Buchanan, 2007, p. 27). As the analysis can show, General Motors uses the referent power not for these purposes.
The already discussed plan announced by General Motors Corporation to cut the number of its dealerships around the United States can serve as an example for this point as well (DuBrin, 2009, p. 193). The announced motivation for the plan was the need to save money and protect General Motors from bankruptcy, and the reference was made to the joint goal of further development that the company and the dealerships might carry out after termination of their cooperation. However, the actual result of the activity, as expected by scholars like DuBrin (2009) and Griffin and Moorhead (2009), is the closure of the dealership and loss of thousands of jobs for their employees. Therefore, referent power is implemented improperly by General Motors Corporation as its theoretical outcomes do not match the actual ones.
Lack of Potentially Applicable Base of Power in General Motors
In the light of the above discussed improper implementation of the referent power by General Motors Corporation and given the critical financial conditions of the company, special importance should also be attributed to the lacking basis of power that might allow General Motors to quicker recover from the crisis. Consideration of the scholarly research works in power theory and the role of human resource management and legal considerations for the organizational success (among others, the works by Haines and Jost (2006), Kirkeby (2000), and Ward (2001)), the potential for the profitable usage of the legitimate power by General Motors look rather attractive.
As well, Boxall (2000) argues that legitimate power can provide an organization with the means of controlling its performance and its employees and partners with the protection tools against vulnerable firings, staff cuttings, or termination of dealership agreements (pp. 184 – 185). Therefore, legitimate power might serve as the basis of power that would allow General Motors Corporation to have more clarity about its performance and relations with the key stakeholders. First, legitimate power is the obligation to operate only according to the concluded agreements and responsibility for any violation of the latter (Kurland, 2000, p. 430). Second, legitimate power protects General Motors’ partners and dealers and ensures that the latter’s employees will not lose their jobs without any compensation (Rollinson, 2005, p. 91). Finally, General Motors will have confidence about its financial conditions as a result of protection provided by law after legitimate power implementation.
Additional Comments and Recommendations
Thus, after the bases of power in General Motors Corporation are considered and assessed as for the proper, or improper, character of their implementation, it is possible to present certain recommendations concerning the further development of success in coercive, reward, and information powers and correction of the state of the referent power through the usage of the legitimate power. In fact, General Motors is strongly recommended to put more emphasis on the development of its human resources management as scholars like Cardy (2000, p. 165), Ichniowski (2003, p. 164), and Seperich (2005, pp. 87 – 88) view human resources as the fundament on which organizations can build up their plans of recovery in the period crisis.
Also, David (2001), Robbins et al. (2004) and Becker (2007) argue that insufficient human resource management might be the cause for any of the issues that General Motors Corporation currently experiences (Robbins et al., 2004, p. 115; Becker, 2007, p. 81). Drawing from this, it is recommended that General Motors Corporation should introduce legitimate power implementation, work on understanding the needs of its key stakeholders, and stress the importance of human resources management through implementing employee satisfaction checklists and surveys.
Conclusions
The above-presented discussion allows making the conclusion about the current situation in General Motors Corporation regarding the bases of power it adopts and the financial issues it experiences. Thus, General Motors has three bases of power, i. e. coercive, reward, and information powers, properly implemented. At the same time, in the light of the current financial crisis in the company, its referent power displays signs of improper implementation. To solve this problem and be better prepared for crisis recovery, General Motors Corporation should develop the framework for legitimate power development and focus more on the issues of human resources management involved in this aspect.
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