Definition: Executive power is an authority to administrate and manage an organization. The term is used in business environments to identify the power given to a person or group to command certain company.
What Does Executive Power Mean?
This expression is mainly used to differentiate a government’s executive branch from other branches such as the judiciary one. In business, this is the highest hierarchic positioning term of authority and power within an organization. The executive power might be concentrated in the top manager, which is commonly the Chief Executive Officer or the General Manager, or in a team of top executives.
Whoever holds the executive power is responsible for the organization’s performance. This responsibility embraces goal setting and performance evaluations as well as decision making in matters that affect the consecution of the company’s strategy. The executive power could be hold by the owner or by shareholders and also, in certain occasions, shareholders give executive power to an outsider because of his qualifications and willingness to do the job.
On the other hand, middle and low-level managers and supervisors also have certain executive power, on a lesser degree than top executives, but in a sense they could have enough authority to decide on small issues, which even though these will have a lesser impact they are either way executive capacities.
Example
Nolhan Industries is a firm that operates three manufacturing plants. Being 70 years old, the founder and owner has been working hard for several decades. He has been in charge of the entire operation but he now just want to work a few hours per week as the President. He decided to grant executive power to an Executive Committee formed by his top managers.
They will be in charge of running the company’s day-to-day operations, defining and monitoring strategies, coordinating and supervising middle managers and being accountable to the President about key results each month. This executive power includes authority to hire and fire employees, to manage financial resources, to decide about plans and projects, to introduce new product lines and to enter in new market niches.
