Power: How Can Low Power Decision Makers Be Credible?

An important question that power, as control of resources, raises for decision governance is this: How to make sure that specific decision governance is credible when specific individuals whom it assigns roles have different levels of power (occupy different levels in a power hierarchy)?

“A number of examples illustrate that parties’ relative position of power depends critically on the specific resource. A government institution can have control over whether legitimacy (a valued resource) is conferred upon a financial company, but, over time, the financial company can also have power over the government via lobbying and campaign contributions. A manufacturing company can have power over its suppliers, but that same company can become dependent on the supplier if that supplier develops a monopoly. A community organization can have power over a real estate developer and vice versa. And some sources of power are only loosely correlated with, independent of, or in conflict with the formal hierarchy, leading formally low-ranking members to hold more power than their position would suggest (Mechanic, 1962). A supervisor can control a subordinate’s career advancement, but a subordinate can have technical expertise on which her supervisor depends. Employees that are responsible for critical and non-substitutable core procedures can hold power over middle managers, whose performance depends on the successful completion of various procedures by their employees (Kotter, 1977).” (Magee et al., 2008)

Ensuring that a decision‐making process remains credible, even when individuals have vastly different levels of power, often hinges on creating institutional safeguards and incentive structures that align the interests of powerful stakeholders with the broader objectives of the decision governance. In such arrangements, high‐power individuals—those who can veto, manipulate, or withhold critical resources—must see value in supporting a process that might reduce their direct control over those resources. Specifically, they need confidence that any redistribution of authority or resources within the governance system will not threaten their core interests. Instead, it should promise a longer‐term gain—whether through reputational benefits, a more stable environment in which to exercise influence, or reciprocal commitments that offset any immediate loss of authority.

This text is part of the series on decision governance. Decision Governance is concerned with how to improve the quality of decisions by changing the context, process, data, and tools (including AI) used to make decisions. Understanding decision governance empowers decision makers and decision stakeholders to improve how they make decisions with others. Start with “What is Decision Governance?” and find all texts on decision governance here.

Credible Commitments

Credible commitments help ensure that promises made to both powerful and less powerful stakeholders are explicit and enforceable. For example, an organization could establish a multi‐stakeholder council with legally binding authority over specific resource allocations. This would oblige high‐power actors, including major shareholders or senior executives, to abide by decisions once a formal vote is reached. Another illustrative case is a company that commits to a long‐term capital‐investment plan, codified in a formal contract with multiple milestones. By doing so, it limits the ability of any single powerful stakeholder to unilaterally withdraw support or reallocate funds, given that doing so would trigger penalties, reputational damage, or legal repercussions (North, 1990; Williamson, 1996). In the public sector, constitutional checks and balances can serve a similar purpose, preventing any one branch of government from overturning established rules without extensive oversight or judicial review.

Incentive Alignment

Incentive alignment can be achieved through structural mechanisms that distribute the benefits of compliance more broadly, thus making it rational for powerful actors to support decisions that might initially appear to challenge their authority. A practical illustration is tying executive compensation to long‐term performance metrics, such as sustainable profitability or stakeholder satisfaction. Under this arrangement, top managers might voluntarily relinquish unilateral power over certain budgeting or hiring decisions, secure in the knowledge that doing so will likely boost collective outcomes—and thus their own rewards—over the longer run (Pfeffer & Salancik, 1978). In another instance, a public‐private partnership might grant certain tax advantages or regulatory leniencies only if corporate partners strictly adhere to inclusive decision‐making processes. By linking compliance with tangible benefits, high‐power actors are more inclined to lend their support and avoid undermining the governance system.

Sustaining Trust and Long‐Term Gains

Over time, these structures can engender trust, diminishing the likelihood that individuals will use their power to seek unrestrained control. Moreover, repeated interactions reinforce the idea that a short‐term display of unilateral power may prove less beneficial than abiding by the existing rules and sharing responsibilities with others (Ostrom, 1990). Communicating a clear organizational case for decision governance—such as securing the institution’s long‐term legitimacy, protecting brand value, or preventing costly legal disputes—can further help powerful stakeholders justify resource sacrifices or new procedural constraints for the sake of greater collective gains.

References

• Magee, Joe C., and Adam D. Galinsky. “Social hierarchy: The self‐reinforcing nature of power and status.” Academy of Management Annals 2.1 (2008): 351-398.
• North, D. C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press.
• Ostrom, E. (1990). Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press.
• Pfeffer, J., & Salancik, G. R. (1978). The External Control of Organizations: A Resource Dependence Perspective. Harper & Row.
• Williamson, O. E. (1996). The Mechanisms of Governance. Oxford University Press.

Definitions

• Credible commitment: A binding arrangement that reassures participants that the agreed‐upon rules or resource allocations will not be arbitrarily changed, thus lowering the risk of unilateral actions by powerful actors (North, 1990).
• Incentive alignment: A strategic arrangement of rewards, responsibilities, and risks such that each participant, including those with power, derives tangible benefits from adhering to the agreed‐upon rules (Pfeffer & Salancik, 1978).
• Power hierarchy: An organizational or social structure in which some actors possess greater authority and control over resources than others, allowing them to dominate decision‐making processes.

Decision Governance

This text is part of the series on the design of decision governance. Other texts on the same topic are linked below. This list expands as I add more texts on decision governance.

Introduction to Decision Governance

1. What is Decision Governance?
2. What Is a High Quality Decision?
3. When is Decision Governance Needed?
4. When is Decision Governance Valuable?
5. How Much Decision Governance Is Enough?
6. Are Easy Options the Likely Choice?
7. Can Decision Governance Be a Source of Competitive Advantage?

Stakeholders of Decision Governance 

1. Who Is Responsible for Decision Governance in a Firm?
2. Who are the Stakeholders of Decision Governance?
3. What Interests Do Stakeholders Have in Decision Governance?
4. What the Organizational Chart Says about Decision Governance

Foundations of Decision Governance

1. How to Spot Decisions in the Wild?
2. When Is It Useful to Reify Decisions?
3. Decision Governance Is Interdisciplinary
4. Individual Decision-Making: Common Models in Economics
5. Group Decision-Making: Common Models in Economics
6. Individual Decision-Making: Common Models in Psychology
7. Group Decision-Making: Common Models in Organizational Theory

Role of Explanations in the Design of Decision Governance

1. Explaining Decisions
2. Simple & Intuitive Models of Decision Explanations
3. Max(Utility) from Variety & Taste
4. Expected Uncertainty to Unexpected Utility
5. Perceptiveness & Experience Shape Rapid Choices

Design of Decision Governance

1. The Design Space for Decision Governance
2. Decision Governance Concepts: Situations, Actions, Commitments and Decisions
3. Decision Governance Concepts: Outcomes to Explanations
4. Slow & Complex Decision Governance and Its Consequences

Design Parameters of Decision Governance

Design parameters of decision governance, or factors that influence decision making and that we can influence through decision governance:

• Factors influencing how an individual selects and processes information
• Factors influencing information the individual can gain access to

Factors influencing how an individual selects and processes information in a decision situation, including which information the individual seeks and selects to use:

1. Psychological factors, which are determined by the individual, including their reaction to other factors:
   1. Attention:
      • Attention Depends on Stimuli & Goals
      • Motivated Reasoning: How To Detect And Mitigate Its Risks
   2. Memory:
      • Selective Memory Can Be Desirable
   3. Mood
   4. Emotions:
      • Emotions Mediate Decisions Always and Everywhere
   5. Temporal Distance:
      • Why Perception of Long Term Outcomes Should Be Influenced First?
   6. Social Distance:
      • Increased Social Distance (Over)Simplifies Explanations
   7. Expectations
   8. Uncertainty
   9. Attitude
   10. Values
   11. Goals:
       • Goals: How Goals Shape Decisions
       • Goals: How Goals Form and Change
       • Goals: Factors That Stabilize and Destabilize Goals
       • Goals: Factors Influencing Goal Selection
       • Goals: How to Improve Alignment to a Team Goal
       • Goal Displacement: What It Is And How To Mitigate It
   12. Preferences
   13. Competence
2. Social factors, which are determined by relationships with others:
   1. Impressions of Others:
      • Impressions Of Others: How They Influence Decisions And How To Regulate Them
   2. Reputation
   3. Social Hierarchies:
      • Social Hierarchies: Why They Matter for Decision Governance
      • Social Hierarchies: Benefits and Limitations in Decision Processes
      • Social Hierarchies: How They Form and Change 
      • Power: Influence on Decision Making and Its Risks
      • Power: Relationship to Psychological Factors in Decision Making
      • Power: Sources of Legitimacy and Implications for Decision Authority
      • Power: Stability and Destabilization of Legitimacy
      • Power: What If High Decision Authority Is Combined With Low Power
      • Power: How Can Low Power Decision Makers Be Credible?
   4. Social Learning:
      • Social Learning: Impact on Decision Making Behavior
      • Social Learning: How to Accelerate It
      • Social Learning: How to Use It to Accelerate Adoption of Decision Governance

Factors influencing information the individual can gain access to in a decision situation, and the perception of possible actions the individual can take, and how they can perform these actions:

• Governance factors, which are rules applicable in the given decision situation:
  1. Incentives
     • Incentives: Components of Incentive Mechanisms
     • Incentives: Example of a Common Incentive Mechanism
     • Incentives: Building Out An Incentive Mechanism From Scratch
     • Incentives: Negative Consequences of Incentive Mechanisms
     • Crowding-Out Effect: The Wrong Incentives Erode the Right Motives
     • Crowding-In Effect: The Right Incentives Amplify the Right Motives
  2. Rules
     • Rules-in-use
     • Rules-in-form
  3. Institutions
• Technological factors, or tools which influence how information is represented and accessed, among others, and how communication can be done
• Environmental factors, or the physical environment, humans and other organisms that the individual must and can interact with
  1. Detail: Level of Detail Can Influence Probability Estimates

Change of Decision Governance

1. Public Policy and Decision Governance:
   • What is the Role of Public Policy in Decision Governance?
   • Dynamics of Public Policy Development
   • How Does Public Policy Influence Decision-Making?
2. Compliance to Policies:
   • Adapting a Decision Process to Comply with a Policy
   • How a Decision Process Can Create Evidence of Compliance
3. Transformation of Decision Governance
   • Punctuated Equilibrium: How to know if a Decision Process is ready for disruption
   • Policy Windows: What They Are And When They Occur
4. Mechanisms for the Change of Decision Governance
   • Incrementalism: What it is, and when/how to implement it in decision governance
   • Governance Dynamics: Change Driven by Cases and Principles
   • Governance Dynamics: Case-Based Development of Decision Governance