MGT 420 Mod 1 Case Study
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Case Study 1: Influence Tactics and Sources of Power
*****
Trident University International
MGT 420 Power Influence and Persuasion
Dr. *****
2023
The Koch brothers have been battling over controlling their family business since the beginning. The legacy founder, Fred Koch, started his company in the 1900s within the oil industry and spent most of his time fighting over more giant corporations to edge into the industry. Starting small, he noticed that the larger companies volleyed for control of the industry and tried to shut him down despite his discovery of refining oil (Tomsho, 1989). From the onset, the company was very successful and, as a result, would eventually become the largest company in the United States. The family's company has primarily focused on the oil industry. However, it has expanded slightly to include some supply chain ownerships for the drilling chemical creation and others outside the specific industry, such as coal mining and owning cattle (Tomsho, 1989). The family's primary focus of contention is the twin brothers Fred and William. The brothers would lead their factions within the family, followed by David and Charles. Throughout their childhood, all four brothers spent significant time with their father, learning about the industry and how to run the business (Schulman, 2014). The stiff
1
competition within the family created divides at an early onset that, in many ways, continue today.
Sources of Power
Charles Koch would eventually take over the company from his father and, as CEO, would develop a different source of power within the family business. Filling the role of the CEO, he had legitimate power because he was chosen to represent the Board of Directors and the company while also holding a controlling stock in the company (Luthans et al., 2015). Before joining Koch industries, he attended MIT and worked for a business consulting firm. His experience honed his aggressive nature and was later instrumental in his position as his father's
protégé and eventual successor. Before his father's death, he showcased his ability to run teams and manage the company well. His capabilities gained expert power among the other leaders and his younger brother David. As Charles led the company's charge, he and his brother
David revitalized it and expanded its capability to become even more successful. The success showcased his expert power and his credibility (Luthans et al., 2015).
Charles's twin brother William struggled to obtain the type of power that Charles obtained early on. William had legitimate power because of his holdings within the company however struggled to maintain control (Sytch, 2015). William tended to rely on his education rather than his expertise as a power source. As a result, he was typically seen as selfish and indecisive (Schulman, 2014). Even as a salesman for the company, he tended to be too analytical and overly meticulous when making decisions. He was not seen to have expert power
within his team because he had difficulty making decisions. Because of his stature in the
2
company and its chemical engineering degree, William felt that power should have just been given to him. He did not understand why Charles would manage them carefully and only give them a small budget with requirements to report his activities (Tomsho, 1989). William's expectation of power in the treatment he received caused a rift between the two brothers and fostered animosity due to his jealous nature of William (Schulman, 2014).
Influence Tactics
Throughout the conflict within Koch Industries, the brothers sometimes showcased immature tactics. The rivalry among the brothers often resulted in lawsuits and public defamation published in the press. William consistently used his knowledge and influence over the company to sway shareholders and family members. As an engineer, he was used to using logic and reason for his arguments and consistently used his rational persuasion to pick family members against each other and information gathered to private investigators to conduct proxy fights with individuals and business subsidiaries. He leveraged his knowledge to consult company rivals and even the government with a quid pro quo or give-and-take tactic (Bauer & Erdogan, 2012). William consistently accused his brother Charles of not disclosing information to stakeholders regarding the company's assets and information. William consistently claimed that Charles was hoarding power. This tactic was used to convince some shareholders to remove Charles as CEO and state that William is the company's leader. The failed tactics resulted in William losing his shares by selling the holdings to stakeholders. The loss of the shares eventually led to Charles gaining over 50% of the company and solidifying Charles's control, and William no longer had a stake in the company. Charles also
used coalition tactics to bring the board together to maintain stability within the company.
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