Power plays a crucial role in procurement and across the supply chain. Understanding the 6 types of power can help procurement professionals approach key activities more effectively, from sourcing and negotiating to supplier management and conflict resolution. Each type of power can influence outcomes differently, and knowing how to identify and use them is essential for strategic decision-making.
When working in the function, power can be used for various activities such as:
- Sourcing
- Negotiation
- Relationship building
- Expediting
- Supplier and contract management
- Conflict resolution
- Managing change
Knowing who has the power in an activity or situation, and which type, is a key skill to help create the optimum strategy to achieve the task in hand.
The 6 Types of Power in Procurement
Power in procurement is typically categorised into six distinct forms:
| Type of Power | Description |
|---|---|
| Legitimate | Legitimate This comes from the belief that a person has the formal right to make demands, and to expect others to be compliant |
| Reward | This results from one person’s ability to compensate another for compliance |
| Informational | This comes through obtaining information and data through research |
| Expert | This is based on a person’s high levels of skill and knowledge |
| Referent | This is the result of a person’s perceived attractiveness, worthiness and right to others’ respect |
| Coercive | This comes from the belief that a person can punish others for non-compliance |
Each type of power has a different use case and ethical implication, particularly in negotiation scenarios.
Power in Practice: The Negotiation Example
Let’s take preparing for a negotiation as an example to discuss the importance of knowing who has the power and which types of power will be involved.
Whilst conducting the due diligence in readiness for a negotiation a buyer may ascertain that the supplier is a monopoly. In this situation the supplier has legitimate power. Being the only provider in the market place means that they can call the shots and the buyer has no power to go elsewhere.
Reward power as stated in the table above is the ability for one person to compensate another for doing a good job. This type of power is useful in an operational environment to help motivate stakeholders but in negotiation we must exercise caution as there is a close link with bribery if we are giving or accepting something in return for an action.
Expert power in a negotiation scenario relates to bringing in a SME (subject matter expert) such as an engineer to help with specifications or a member of finance to help with budgets.
Informational power is a power that can be gained prior to a negotiation by conducting research and gathering data. Information prior to a negotiation can include conducting a STEEPLE or Porter’s 5 Forces analysis to understand the external factors and competition in relation to a particular supplier or commodity.
Referent power is a good tool to have in procurement and negotiation. Referent power occurs when people like you and want to work with you. Having referent power makes negotiation much easier. This type of power can be gained by being trustworthy and being an open and clear communicator.
Finally Coercive power. This is the negative type of power. Coercive power should not be promoted but sadly it does exist in procurement. In our negotiation example, a supplier could threaten a buyer that if they do not agree to a price rise they will terminate the contract. This is not conducive to building a collaborative relationship and suppliers working in this way should be avoided if possible.
Power can be Held, Gained, or Earned
To conclude, power can be naturally occurring i.e. a CPO will have legitimate and hopefully expert power, power can be gained i.e. researching to gain informational power, power can be referent i.e. achieved through being a well-rounded and fair professional and power can be coercive i.e. forceful and linked to punishment. Understand what power you have in your role and try to establish the power of stakeholders with which you are working to give you the best opportunity to get optimum results and work in an efficient manner.
This blog post was written by Katie Jarvis-Grove, one of the trainers here at Oxford College of Procurement and Supply. Explore our full range of CIPS qualifications or get in touch to learn more about advancing your procurement career.