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Formal power is a reflection of an individual's legitimate, reward, coercive, and information power.
Legitimate power confers on an individual the legitimate authority to control and use organizational resources to accomplish organizational goals. The legitimate power of a CEO, for example, is granted by an organization's board of directors, which, representing its owners' interests, gives the CEO authority over all organizational resources. Legitimate power is the ultimate source of an individual's power in an organization.
Reward power is the power to give pay raises, promotion, praise, interesting projects, and other rewards to subordinates. As long as subordinates value the rewards, a manager can use reward power to influence and control their behavior.
Coercive power is the power to give or withhold punishment. Punishments range from suspension to demotion, termination, unpleasant job assignments, or even the withholding of praise and goodwill.
Information power is power stemming from access to and control over information. The greater a manager's access to and control over information, the greater is his or her information power.
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