In projects, a very important function required of a project manager is influencing the organization—in other words, "making things work". That involves having a good knowledge of both the formal and informal systems of the home organization of the project, as well as the client, subcontractors, and other stakeholders. The ability to influence the organization requires understanding the mechanisms of power and politics.
By power we normally mean the potential ability to influence behavior, change a situation in order to overcome resistance, and make people do things they would have not done otherwise. In general, it involves influencing opinions, decisions, and methods.
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There are a number of types of power that can be present in an organization. The list includes:
Legitimate—Formal title or position
Reward—Ability to provide positive consequences
Coercive—Ability to provide negative consequences
Purse String—Budget control
Bureaucratic—Knowledge of the system
Referent—Association with someone else’s power
It is quite clear that in different situations we are dealing with a different balance of the types of power, In projects, we normally talk about a combination of formal (legitimate) power, power types that have to do with owning resources (rewarding, purse string), and informal powers (charismatic, referent, etc). It is easy to see that the type of power the project manager has in any concrete project depends largely on the type of organization and on internal company policies. For instance, a good matrix organization has a reward budget for the project team as a part of the project budget and thus allows a project manager to use a reward type of power. He or she is not normally responsible for salary payments for team members. Similarly, if a company has a policy of employing project managers with high technical backgrounds in the field, the project manager is able to use the power of the technical expertise with the team members. Unfortunately, this type of power does not really work well in projects because the project team normally brings together people of quite different technical backgrounds. It could well be that a project manager is just not able to be an expert in all those technical areas.
In general, we can combine the presented types of power into two major groups. Position-based powers, or authorities, include formal, legitimate, purse-string, reward, coercive. Person-based powers, or influence, include technical, charismatic, referent. A good project manager in a reasonable project-oriented organizational structure uses both types of power with more accent on influence. In reality, direct formal powers very often do not work with all the project stakeholders. This is especially true with the external project environment of clients and governmental bodies. The third type of power a project manager can use is accountability—power obtained through agreement—in other words, the responsibility of the people on a project team and the other project stakeholders to follow both formal and informal agreements with the project manager. According to good project management practices, the team members are supposed to formulate their accountability in terms of both results and performance indicators. This type of power can be described more or less as the ability of a project manager to make project team members fulfill the work according to their own promises.