What role does power play in leadership? Furthermore what role does power play in entrepreneurship? And how can people use power while in a leadership position or in entrepreneurial state of mind? In 1959 two sociologists named John French and Bertram Raven defined the bases of power in a study which divided power into conceptual forms which can be applied in practice. Observation of any leader for a period of time will result in observer coming to an understanding that leadership and power are often closely related, intertwined, and influenced by each other as people tend to follow leaders with power.
Leaders and entrepreneurs for that matter are able to hold power in ways which advance their practice as well. There are distinctions between leaders and entrepreneurs as leaders operate in existing organizations, while the entrepreneur creates a new one. This is perhaps the central difference between the two while entrepreneur creates the road; it is the leader who turns that road into highway.
Power through the entrepreneurial mindset provides the tools needed to not only lead followers but to create as well. Power beholden by a leader with entrepreneurial orientation that enacts through risk taking, innovation, and proactiveness enables the creation of organizations and even empires. The means from which to apply entrepreneurship and leadership are accomplished through power. In 1965 Raven revised this model of power to what we know it to be in the present day which comprised of the following:
1. Legitimate power occurs when the follower complies because it is believed that the leader has the right to make the request therefore the follower has the obligation to comply. This form of power comes with a role, position, or title which does not necessarily mean the person who holds it is the leader. Nonetheless, this form of power can be easily lost once the role, position, or title is not held no longer with the ability to administer certain feelings of responsibility and obligation to the beholder.
2. Referent power takes place when the follower complies because of admiration or identification with the leader with a desire to gain the leader’s approval. People who are identifiable or admirable such as role models, popular figures such as celebrities, entrepreneurs and military leaders who evoke admiration and even a select group of people who are charming and evoke charisma are regarded to hold referent power. This form of power bestows a sense of belonging, acceptance, and approval to a person influenced by it.
3. Expert power happens when the follower complies because it is believed that the leader has special knowledge about the best way to do something. Because of the perception of expertise which forms this power base people are convinced to trust the beholder as a consequence of superior knowledge, skills, and abilities.
4. Coercive power transpires when the follower complies in order to avoid punishment which is controlled by the leader. Coercive power is forced compliance through the demonstration of punitive behaviors such as harms or threats if compliance is not given. This may give rise to a number of unhealthy behaviors, underperformance, and dissatisfaction. Coercive power also lends itself easy to abuse in various contexts.
5. Reward power materializes when the follower complies in order to obtain rewards controlled by the leader. The ability to lessen undesired things or increase and provide things which are wanted is the primary driver of motivation behind reward power. People tend to perform better when they are getting something out of it as a result. This can be in the form of things that hold both intrinsic and extrinsic value such as Impersonal material resources e.g. wages, food, awards or reinforcements that are personal e.g. acceptance, smiles, verbal compliment.
It is important to note that when rewards are consistently given it lessens their impact and effectiveness as people become dulled by becoming use to receiving it. It is important that the reward has perceived value to other people whether it is increased quantity or a new reward of value.
6. Informational power comes about through the leader’s potential to utilize information by way of rational argument, persuasion, facts, manipulation of information in order to create a base of power from which the follower complies. This is manifested in the way information is exchanged with others, how this information is limited, informational secrecy from certain people, how this information is organized and increased, and perhaps the way it is falsified in order to gain an advantage.
Out of these sources of power the positional dependent power sources are legitimate, reward, and coercive while conversely the non-positional personal power sources are informational, expert, and referent. While entrepreneurs must also have strong leadership and management skills but also strong creative and expressive abilities, the utilization of power in entrepreneurship becomes handy during political aspects of bringing the business into existence and while solving problems and implementing strategies as the executive in order to sustain and grow the business. As long as people shall walk the earth power will play a significant role in leadership and entrepreneurship.