MBA - Managing People (HRP052N) Mukesh Kumar

Legitimate Power and Illegitimate Motive:

How the CFO Toppled the CEO

Introduction

T he aim of this paper is to draw upon my experience at HHH with

the help of relevant theories and to critically analyse the issues
relating to the subject of power and politics within HHH. HHH is
one of the top 5 IT companies in India, where I had my first lessons of
corporate culture and politics in the workplace. This reflection on my
career experience dates back to about 7 years, and is primarily centred
around the CEO and Chief Financial Officer (CFO) of HHH. My job at HHH
was to take care of technical requirements and assessment of the IT
infrastructure. I was working on the project to scale up the mail server of
HHH when i had a tough time dealing with the Machiavellian CFO and
the dominant finance department despite having the support of the
CEO. Today HHH is a very successful organization with IT businesses in
US, Europe and Asia.

Power and Control of Resources

There was only 1 mail server designated for the whole IT setup, which
started crashing quite often due to heavy load, it needed to be
upgraded. The CEO was in favour of upgrade but the CFO (Chief Financial
Officer) was against it and denied any funds for the upgrade. Very soon, i
was informed by my senior manager that the CFO was a distant relative
of the organization group chairman (a billionaire), and then the story
became self explanatory to me.

“Power comes from being in the right place”

(Pfeffer, 1992, p.69)

Denial of funds allocation for the up-grade of the mail server meant that
the CFO was not willing to allow the CEO to take any charge on financial
resources of the organization. This endorses the view of Salancik and
Pfeffer (1977), who maintained that powerful people tend to influence
decisions about the allocation of strategic resources. They propounded
that certain resources are key in organizations and owner of these

Page 1 of 9
MBA - Managing People (HRP052N) Mukesh Kumar

resources exert great power and influence. Also, Handy (1999) stated
that possession of valued resources is a useful basis for influence. Truly
the CFO was a classic case for their theory as he held a commendable
control over finances of the organization. It is suggested by Pfeffer
(1992) as well, who argued that control over resources is most
fundamental source of power. I am in agreement with this resource
allocation theory of power, however, the ability of CFO to take charge of
finances was partially due to his personal closeness with the chairman
apart from his legitimate designation. This is also argued by Greenberg
and Baron (2008) who stated that to gain power one must connect
oneself with more powerful others.

CFO and the finance department proved to be the dominant forces

within the organization. The Mail server was not upgraded in-spite of a
number of crashes due to overload. Perhaps, the CFO had his own
agenda and vision. This behaviour of CFO can be explained with the
findings of Morgan (2006) who contended that politics of organizational
decision making often involves intentionally preventing crucial decisions
from being made in order to facilitate/foster the personally desirable
decisions suitable to ones agenda. Handy (1999) also suggested that
individuals have their own personal interest or they have values or goals
which they would like to have adopted by the organization. Mangham
(1979) argues that most significant organizational decisions are the
outcome of social & political forces and are partly influenced by
evidence and rational argument.

Ethical and Rational Perspective

Perhaps my senior manager was politically correct to take orders blindly,

keeping the technical need of the hour behind and working for his
superior’s agenda. This is supported by Cavanagh et al. (1981), who
contend that a political behaviour is ethical and appropriate only if the
behaviour respects the rights of all affected parties and the behaviour
respects the canons of justice – a self evidently correct judgment of
what is equitable & fair. Their view is in contrast to that of Buchanan
and Badham (1999) who concluded that while organizational politics can
be managed, it cannot be ‘managed away’. Here Cavanagh et al. Focused
on ethics and rationality whereas Buchanan and Badham focused on the
political behaviour. I believe it is not always politics that makes people

Page 2 of 9
MBA - Managing People (HRP052N) Mukesh Kumar

go ahead in career, often people with high values and ethical conduct
reaches the top positions.

Seemingly, the CFO was in full control of the organization, and as

asserted by French and Raven (1968) access to top-level directors and
control of money is one of the basis of power. The CFO’s connection to
the Group Chairman, and the legitimate full control of the finance
department, approves of their findings. I would agree that control of
resources in organization is crucial for political power. This was also
suggested by Hickson et al. (1971) who stated that certain subunits in
organizations flaunt more power than others. He argued that a
department derives power by way of being a central force in the work
flow of the organization. Here the finance department and its powerful
CFO were instrumental in any strategic decision making. It signifies that
power may lie in subunits at horizontal level, however, there is a vertical
power ladder as well, which if absent may strip-off some of the power
from the subunit. Knowing someone more powerful than oneself is the
key to become powerful in organizational context. This relates to the
hierarchy of power in an organization.

“Power tends to corrupt, and absolute power corrupts absolutely” -

(Lord Acton, 1887)

The CFO was able to effectively control “change” in the organization and
avoided the upgrade of mail server, which was against the mission of the
IT department. This is evident by the argument of Baldridge (1971) who
contended that there is no overarching organizational goal to which all
members subscribe & even if there is a written company ‘mission
statement’, decisions are rarely made which further its achievement. In
this case, rationality was proved smaller than power, and i assumed that
big organizations were meant to be like political parties where personal
agendas took precedence over organizational requirements. As
Pettigrew and McMulty (1995) contend that power is about producing
intended effects in line with one’s perceived interests, and as supported
by the argument of Egan (1994) who contended that power inhabit the
shadow side of organizations, arising when rationality fails, and is linked
to the growth of informal practices in the organization. I, my team and
the CEO failed to bring required ‘change’ in the IT infrastructure
primarily due to lack of power, this view is endorsed by Buchanan and
Page 3 of 9
MBA - Managing People (HRP052N) Mukesh Kumar

Badham (1999) who stated that the change agent’s effectiveness is

considerably enhanced if he or she can indulge in some ‘power assisted
steering’ to compliment the traditional humanistic roles of social
engineer and therapist facilitator. No change can survive without some
powerful people behind it, for me that was a lesson to be learned and
treasured. Contrary to this, the CFO was astute enough to fortify his
position by facilitating changes (calling up external consultant and not
upgrading the mail server) that benefitted his agenda (George, and
Jones, 2005) and weakened the CEO. He successfully made a case
against the CEO and won the political game. Subsequent crashes of mail
server despite fixes by external consultant created enough dissent and
voices within the organization, ironically weakening the standing of the
CEO and not the CFO. This is in contrast to what Pettigrew (1973) and
Burns (1961) stated that politics is inappropriate in business because it
undermines rationality. CFO’s political behaviour undermined
rationality.

Illegitimate Power

The paradox of power seems to be that you have power only if you are
in a superior position and are opposed in what you want to do by peers
or subordinates. When you want to do something against the resistance
of subordinates, it is termed legitimate authority. When subordinates do
something against superiors, it is considered illegitimate resistance.
Mintzberg (1984), and Gandz and Murray (1980) argue that
organizational politics is defined as illegitimate use of power to achieve
illegitimate ends. It is about the clash of personalities and designations.
The organization is considered to be a political arena where either you
play the game and try to win or accede to others superiority. The CFO
fits well in this scope of power as he exploited his relationship and
position to his ends undermining the loss of organization due to mail
server outages. He was tactical in his approach to achieve his political
goals. He perhaps won the political game but at the expense of
organizational goals, which is not good political behaviour as contended
by Cavanagh et al. (1981), who stated the political behaviour need to be
justified equitable and fair. Here morality and efficiency were not hand
in hand with each other; the CFO’s apparent quest for power
overshadowed morality and thwarted organizational efficiency, but he
was efficient enough to achieve his agenda. In my view illegitimate use

Page 4 of 9
MBA - Managing People (HRP052N) Mukesh Kumar

of power becomes organizational crime deterring organizational success

and it dissuades employee performance. However, the resistance to
such an exercise of illegitimate power is always bleak as it is often high
positioned and politically well connected people who lay claim to
illegitimate powers. The old dictum of haves and have nots come into
play here and justly distinguishes between powerful and powerless
contenders.

“People will readily admit that governments are organizations. The

converse – that organizations are governments – is equally true but
rarely considered.” (Long, 1962, p.32)

Coalitions and Informal Relationships

The boss viz. the CEO held a ceremonial designation; the power to
influence decisions lied with the CFO. The CFO proved to be an ally of
the billionaire chairman, basking more power than the CEO, simply due
to his political allegiance. He was able to overcome any resistance due to
the magical equation between him and the chairman, even the top
executive; the CEO failed to surmount him. It will be appropriate to bring
forth the conclusions of Cyert and March (1963) in this context who
contended that politics is all about coalitions and empires. The
connection between the CFO and the chairman was strong enough to
bypass any resistance. This view is criticised by Kipnis et al. (1984), who
contend that people should not use vigorous influence styles but less
vigorous styles that rely on reason and logic. Being politically strong may
lead to negative influences within the organization.

Political allegiance or networking benefits some and reprimands others.

As Duverger (1972) states that in organizations political coalitions
emerge out of informal relationships among participants. In HHH, the
CFO was a distant relative of the billionaire chairman and simply swept
all the powers and even sidelined the CEO. Duverger (1972) suggests
that it is the informal relationship that forms basis of formal power
equations. In the case of HHH, it seem to be correct to some extent,
however, there was more to it that the CFO was able to exploit. The CFO
was clever enough not to allocate funds required by the IT infrastructure
team under the CEO in the garb of some financial constraints of the
organization. He beautifully exploited his position as finance head and

Page 5 of 9
MBA - Managing People (HRP052N) Mukesh Kumar

diverted funds only to places where he had his stronghold and

deliberately worked against the interests of the CEO. Maybe, his
ambition to become CEO was driving his tactics. This is in contrast to
what Kipnis et al. (1984) contended, they argued that reason should be
preferred to influence decisions, peers, superiors and subordinates.
Here, the CFO used his political connections instead of rational, logic or
reason.

Concept of Ingratiation, Machiavellianism and Career Growth

“Nice guys finish last” – Leo Durocher (1905-1991)

Interestingly, within 6 months time of going live in operations, the CEO

of HHH was changed. Our former CFO became CEO. Power was key
indicator of decision making in the organization, and determined who
remains and leaves the organization. The former CEO could not muster
enough resistance to the CFO and finally exited amicably. Ingratiation
seemed to have worked as stated by Allen et al. (1979). Allen et al
contend that ingratiation is a key attribute of managers at senior level.
This is in stark contrast to what Machiavelli (1961) suggested that
people who have formal power tend to remain in their positions of
authority longer than people who rely on informal power. CEO despite
being in formal power had to leave the company.

“Contrary to the cliché, genuinely nice guys most often finish first or
very near it” – Malcolm Forbes (1919-1990)

I would include what was stated by Bacharach and Lawler (1980) that
survival in an organization is a political act, corporations, universities &
voluntary associations are arenas for daily political action. The concept
of Political allegiance can be aptly applied in this case. As advocated by
Pfeffer (1992) that it is imperative to know the “Right” people in the
organization to be a successful manager. Well connected people are
“The powerful people”. However, this has been criticised by Graham
(1996), who argued that managers with high Machiavellian scores did
not have more successful careers, also Gemill and Heisler (1972)
contended that manager with high mach scores suffered high job strain
and dissatisfaction. However, the irksome downside is that, worthy and
hard working people loose ground & career growth, and instead

Page 6 of 9
MBA - Managing People (HRP052N) Mukesh Kumar

politically savvy people take the lion’s share in spite of not being worthy
of it. The gruesome reality of modern organization’s culture laden with
ruthless competition among managers, call for one to be a smart worker
with good political connections and not just be a hard worker.

Due to biased decisions of the devious CFO, the operations suffered a

lot; however, the CFO himself gained a lot of political ground for himself
and soon became the CEO. This can be explained by the argument of
Pettigrew (1973) and Burns (1961) who suggested that politics is
inappropriate in business because it undermines rationality. The tactics
and agenda behind CFO’s directives were crude and shrewd and he aptly
proved his Machiavellian skills. Also, as stated by Brunsson (1985) that
rational decisions do not always provide a good basis for appropriate
and successful action, it looks like that the tactics of CFO were in the
good interest of the organization. Though, he was able to drive results
for the company later on and the company grew exponentially under
him, but there was no explanation as to why the same growth could
have not been achieved with the former CEO in place who is currently
heading a big International hedge fund company in India. The question
itself is highly questionable, and exposes the brutal face of ideological
hegemony in today’s organizations.

References:
Page 7 of 9
MBA - Managing People (HRP052N) Mukesh Kumar

Allen, R. W., Madison, D. L., Porter, L. W., Renwick, P. A., and Mayes, B. T. (1979),
“Organizational Politics: Tactics & Characteristics of its Actors”, California Management
Review, vol. 22, no.2, p.p. 77-83

Bacharach, S. B. and Lawler, E. J. (1980), Power and Politics in Organizations, San Francisco :
Jossey-Bass

Baldridge, J.V. (1971), Power and Conflict in the University, New York: John Wiley

Brunsson, N. (1985), The irrational organization: irrationality as a basis for organizational

action and change, Chichester: John Wiley

Buchanan, D. A., Badham, R. J. and (1999), Power, Politics, and organizational change:
winning the turf game, London: Sage

Burns, T. (1961), Micropolitics: Mechanisms of Institutional Change, Administrative Science

Quarterly, Vol.6, no.1, pp.257-281

Cavanagh, G. F., Mobery, D. J. and Velasquez, M. (1981), “The ethics of organizational

politics”, Academy of Management Review, vol. 6, no.2, pp. 363-374

Cyert, R.M., and March, J.G. (1963), A Behavioural Theory of the Firm, Englewood Cliffs, NJ:
Prentice-Hall

Duverger, M. (1972), The Study of Politics, London: Nelson

Egan, G. (1994), Working the shadow side: a guide to positive behind-the-scenes

management, San Francisco: Jossey-Bass

French, J. R. P., Jr. and Raven, B. (1968), “The Bases of Social Power” in Group Dynamics, 3 rd
ed., p.p. 259-269. Dorwin Cartwright and Alvin Zander (eds). New York: Harper and Row

Gandz, J., and Murray, V.V. (1980), “The Experience of Workplace Politics”, Academy of
Management Journal, vol. 23, no.1, p.p. 237-251

Gemmill, G.R. and Heisler, W.J. (1972), ‘Machiavellianism as a factor in managerial job
strain: job satisfaction and upward mobility’, Academy of Management Journal, vol.15, no.1,
pp.51-62

George, J. M. and Jones, G. R. (2005), Understanding and Managing Organizational

behaviour, 4th ed., Reading, Mass; Harlow: Addison-Wesley

Graham, J.H. (1996), ‘Machiavellian project managers: do they perform better?’,

International Journal of Project Management, vol.14, no.2, pp. 67-74

Page 8 of 9
MBA - Managing People (HRP052N) Mukesh Kumar

Greenberg, J. and Baron, R. A. (2008), “Behaviour In Organizations”, 9th ed., Upper Sadle
River, N.J.: Pearson Prentice Hall

Handy, C. B. (1999), Understanding Organizations, 4th ed., London: Penguin Books

Hickson, D.J., Hinings, C.R., Lee, C. A., Schneck, R.E. and Pennings, J.M. (1971), “A Strategic
Contingencies’ Theory of Intraorganizational Power”, Administrative Science Quarterly,
vol.16,no.3 p.p. 216-229

Kipnis, D., Schmidt, S. M., Swaffin-Smith, C., and Wilkinson, I. (1984), Patterns of managerial

influence: Shotgun managers, tacticians, and bystanders, Organizational Dynamics, vol.23,
no.2, pp.58-67

Long, Norton E. (1962), “The Administrative Organization as a Political System” in Concepts

and issues in Administrative behaviour, S. Mailick and E. H. Van Ness (eds.), Englewood
Cliffs, NJ: Prentice Hall

Machiavelli, N. (1961), The Prince: translated with an introduction by George Bull,

Harmondswoh : Penguin Books

Mangham, I. (1979), the Politics of Organizational Change, Westport, CT: Greenwood Press

Mintzberg, H. (1984), “Who Should Control the Corporation” California Management

Review, vol.27, no.1, p.p. 90-115

Morgan, G. (2006), Images of Organization, London: Sage

Pettigrew, A.M. (1973), The politics of organizational decision making, London: Tavistock

Pettigrew, A. M. and McMulty, T. (1995), Power and influence in and around the
boardroom, Human Relations, vol. 48, no.8, pp. 845-73

Pfeffer, J. (1981), “Power in Organizations”, Marshfield, MA: Pitman Publishing

Pfeffer, J. (1992), “Managing with Power: Politics and Influence in Organizations”, Boston,
MA: Harvard Business School Press

Salancik, G.R., and Pfeffer, J. (1977), “Who Gets Power – And How They Hold on to it: A
Strategic Contingency Model of Power”, Organizational Dynamics, vol.5, no.2, p.p. 3-21

Page 9 of 9