Reward Power | Types of Leadership Power | Sample Business Plan

Reward Power


 

Reward power is an approach where a person in a leadership position attempts to influence the behavior of subordinates by offering something they may desire. This is a carrot and stick approach to leadership and example rewards may be money or a promotion. Implementing a system of reward can be a great way to motivate employees and it will incent those that are motivated to succeed. The down side to this approach is that it can create a “cut-throat” environment where those that are ambitious and truly incented by the reward may be willing to throw the less ambitious, or other ambitious, “under the bus” to gain the reward. An example of this approach can be illustrated in a sales situation. Consider an insurance broker that sells MetLife and NY Life. Both life insurance products are of the same quality and value, but MetLife wants to increase revenues so they resort to a promotional campaign and offer brokers an additional 10% on premiums for each life policy a broker sells. This reward will most likely incent the broker to focus his sales efforts on promoting and selling MetLife over NY Life.

 

Now let’s consider another example that generates a cut-throat scenario. A car dealership has been flat on sales so to generate some excitement among their salesmen (and women), and to get them to be more aggressive, or persuasive, they offer a $3,000 bonus for the salesman that sells the most cars as long as the salesman sells more than 20 cars this month (let’s assume 20 cars is realistic- this is theoretical). There are 2 things that can go terribly wrong with this reward. The first is this reward may entice the sales force to be overly aggressive with potential customers and they may even resort to dishonest and overly manipulative tactics to make the sale. This could prompt them to take a Machiavellian approach; by any means necessary. This will have an adverse effect on your customers.

 

The next potential problem with this approach is it may incent the sales force to be more aggressive with one another. If they have a rotation of helping customers and say it is Jim’s turn to assist the next customer and Sally sees the next customer approaching the lot driving in a $40,000 car, but Sally knows Jim just went to the restroom to wash his hands. She knows this sale could be a big sale that could put her 1 up on Jim, which could mean the $3000 bonus as the end of the month is approaching. Rather than letting Jim know a customer is roaming the lot (which she would do under “normal” circumstances), she rushes out the door to help the customer. When Jim comes out of the restroom he sees Sally with the customer and this creates some animosity, to say the least. In looking at this scenario it not only created friction between employees and customers, but also among employees. This is just something to consider when reviewing your options with Reward power.

 


Other Types of Power

 

Coercive Power
In contrast to reward power, coercive power attempts to influence behavior by implementing punishment for a particular behavior. This type of power places an emphasis on instilling fear to change behavior.

 

Legitimate Power
Legitimate power is a belief that the title of a position, and the individual that holds it, is entitled to exert influence on subordinates solely based on the status of their position within the organization and that subordinates have an obligation to accept it.

 

Expert Power
This power is generally bestowed upon a person based on their years of experience within an industry, their education, or honor’s they may have received for a particular topic.

 

Referent Power
Referent power occurs when an individual views their goals or objectives as similar to that of another individual.