The results of the power analysis are shown graphically in Figure 1. The stakeholders are listed in descending order of importance on the Y-axis, and their importance is shown on the X-axis.
A powerful stakeholder is both relevant and important. The Individual Customer, the Finance Department, the CEO, and the IS Department are the most powerful stakeholders. These stakeholders are relevant to most organizations. They can significantly affect or be affected by a discontinuity in the information system. A powerless stakeholder is neither relevant nor important. That stakeholder does not significantly affect and is not significantly affected by an information system discontinuity. Relatively, the Local Government, State Government, and Outsourcers are the least powerful stakeholders.
The power of a stakeholder is derived from the way that stakeholder affects or is affected by an IS discontinuity. These affects vary considerably across stakeholders. These differences lead to their different bases of power. Understanding these bases of power can help increase those stakeholders’ satisfaction by determining and managing each stakeholder’s expectations. It will help a business continuity planner develop a coherent overall strategy for IS continuity while at the same time responding to the particular needs of each stakeholder.
There are five bases of power according to French and Raven1 . They are coercive, reward, referent, legitimate, and expert power. Coercive power is the ability to persuade a person or a unit to act or not act in particular ways. Reward power is the ability to reward or punish particular actions. Referent power is derived from one’s association with or relationship to another entity that has power. Legitimate power is that which formal rules, policies, and procedures confer. And, expert power is, as the name suggests, derived through knowledge and expertise in a field.
Amongst owners, creditors, and insurers, the last have the most power, the stockholders a little less, and creditors the least. The insurers can reward a company with lower premiums for risk and business continuity insurance. That is the primary source of their power. A secondary source of their power could be their knowledge of risks – expert power. This knowledge can be used to assess and alleviate the risks of an information system discontinuity. The owners and the creditors have legitimate power to protect their investment in stock and debt. Beyond that, they do not have a direct stake in the continuity of an information system. Currently the risk of an information system discontinuity does not appear to be a major concern of stockholders and creditors. Virtually no annual report highlights this risk. Only Amazon.Com, the Internet bookstore, has highlighted it in its initial public offering.
Among top management the CEO has the most power. Next in order are the CFO, Board of Directors, CIO, Controller, Marketing Chief, COO, and Sales Chief. These top managers have legitimate power to expect continuity of information systems. Among these, the CIO also has expert power based on ones knowledge of managing the risks. This expert power if used effectively can set expectations and fulfill them. The CEO, and probably the CFO too, have reward power. They can allocate resources for IS continuity. Last, as information systems become central to these top managers’ functions their expert power will increase in importance. For example, increased reliance on electronic fund transfer will increase the reliance on the CFO’s expertise in that field. Similarly, electronic commerce will enhance the power of the marketing and sales chiefs that are knowledgeable about the same.
Among functional departments the IS department has the most power followed by Finance, Production, Business Continuity, Accounting, Marketing, Sales, Human Resources, Corporate Security, Purchasing, Facility Management, Risk Management, and R&D departments in that order. It is not surprising that the IS department ranks highest. It has legitimate power to ensure IS continuity. It has or ought to have the expertise to do so. It should be able to coerce people to fall in line and reward people for the same. Last, it can also draw upon referent power, should the top management make IS continuity a corporate priority. The power of the business continuity department can be similarly explained.
All other departments within an organization have legitimate power. Much of the differences in their power may be due to variations in their legitimate power based on their centrality to the organization, their dependence on information systems, and their need for continuity of operation. The greater the centrality, dependence, and need of a department the greater its power, and vice-versa. Thus, the Finance department that is central to almost any organization and is dependent upon the continuous operation of the information system is powerful. On the other hand, the R&D department that is probably not central to many organizations and is often not dependent on the continuous operation of the information system is very much less powerful.
In organizations where the information systems are decentralized the departments can also wield a considerable amount of reward power. They can provide or withhold resources for IS continuity. Since these departments are most knowledgeable about their areas, they can wield expert power too. Such expert power can be high in the context of highly specialized and sophisticated departmental information systems.
The Individual Customers are the most powerful stakeholders. The Institutional Customers are a little less powerful, but still close to the top. However, the Suppliers are relatively much less powerful. The power of the Customers emanates from their ability to reward the organization with their loyalty. To the extent customer satisfaction is the ultimate goal of and organization the customers will be the most powerful stakeholders.
Continuity of IS operations is more in the organization’s interest than the supplier’s is. The greater the organization’s dependence upon a supplier, the greater that supplier’s power and vice versa. Thus in a sense the power of a supplier can be called reverse-reward power. By ensuring continuity of information systems operations an organization can reward itself, but by not doing so it can punish itself.
The power of Software Vendors, Hardware Vendors, Telecommunication Network Vendors, and Business Continuity Service Providers is the same as that of the Suppliers. That of the Business Continuity Consultants is lower, and of the Outsourcers still lower.
Vendors have expert power. They sell their expertise for a price. The credibility of their expertise is at stake in the information system’s continuity. It is in this sense that these vendors are stakeholders. Should their expertise be validated they could be rewarded by the organization with more business. On the other hand, if their expertise is invalidated they could be punished by the same organization with loss of business. Thus, like the suppliers these vendors too can be said to have reverse-reward power derived from their expertise. The low power of Business Continuity Consultants and Outsourcers is probably a reflection of their low relevance more than their low importance.
The governments have relatively little power as stakeholders. They have primarily coercive power through regulatory and other governing mechanisms. Their stake in a particular information system’s continuity is somewhat indirect in the sense that they have the responsibility to protect the interests of the public at large. However, agencies such as the Federal Emergency Management Agency (FEMA) that have considerable experience in managing discontinuities can have expert power. But for them to have such power, their importance and relevance has to be recognized by those responsible for ensuring continuity of information systems.
This paper presents a portrait of the power of stakeholders in information system continuity. Power is measured as a function of the relevance and the importance of a stakeholder. Based on a survey of 40 respondents it ranks the stakeholders according to their power. It also explains the bases of these stakeholders’ power.
An information system’s continuity planner can use the knowledge of the power of stakeholders and the bases of their power in many ways. It can be used to determine expectations and to manage them. It can be used to set priorities and develop a coherent plan. Quantification and visual representation of the power of stakeholders is also an effective tool of communication and education.
Last but not the least, snapshots of stakeholder power can be used to compare and contrast the role of stakeholders in different industries. It can also be used to monitor changes induced by environmental changes such as technological developments, strategic alliances, and government regulations.
Arkalgud Ramaprasad, Paul Ambrose, and Mikhail Komarov are with the Pontikes Center for Management of Information, College of Business and Administration, at Southern Illinois University, Carbondale, IL.
1 French, J., and Raven, B.H. (1959). The Bases of Social Power. In D. Cartwright (ed.), Studies in Social Power (pp. 118-149). Ann Arbor, MI: Institute for Social Research.