Contingency Approach to Management

The contingency approach to management is based on the idea that there is no single best way to manage. Contingency refers to the immediate contingent circumstances. Effective organizations must tailor their planning, organizing, leading, and controlling to their particular circumstances. In other words, managers should identify the conditions of a task, the requirements of the management job, and people involved as parts of a complete management situation. The leaders must then work to integrate all these facets into a solution that is most appropriate for a specific circumstance.

The contingency approach to management assumes that there is no universal answer to many questions because organizations, people, and situations vary and change over time. Often there is no one right answer when managers ask: “What is the right thing to do? Should we have a mechanistic or an organic structure? A functional or divisional structure? Wide or narrow spans of management? Tall or flat organizational structures? Simple or complex control and coordination mechanisms? Should we be centralized or decentralized? Should we use task or people oriented leadership styles? What motivational approaches and incentive programs should we use?” Thus, the answer depends on a complex variety of critical environmental and internal contingencies.

The contingency theory is similar to situation theory in that there is an assumption that no simple way is always right. Situation theory, however, focuses more on the behaviors that the leader should use. The contingency theory takes a broader view that includes contingent factors about leader capability and also includes other variables within the situation.

Factors that influence the contingency theory are numerous. These include the following:

• The size of the organization
• How the firm adapts itself to its environment
• Differences among resources and operations activities
• Assumption of managers about employees
• Strategies
• Technologies being used

HISTORICAL OVERVIEW

Classical management theorists such as Henri Fayol and Frederick Taylor identified and emphasized management principles that they believed would make companies more successful. However, the classicists came under fire in the 1950s and 1960s from management thinkers who believed that their approach was inflexible and did not consider environmental contingencies. Taylor, however, emphasized the importance of choosing the general type of management best suited to a particular case. Fayol also found that there is nothing rigid or absolute in management affairs. So while the criticisms were largely invalid, they created the contingency school of management.

It is relevant to note here that similar ideas were expressed three decades earlier. In the 1920s, Mary Parker Follett related individual experience to general principles. Her concept of the “law of the situation” referred to the necessity of acting in accordance with the specific requirements of a given situation. She noted that requirements were constantly changing and continuous efforts were needed to maintain effective working relationships.

Nonetheless, research in the 1960s and 1970s focused on situational factors that affected the appropriate structure of organizations and the appropriate leadership styles for different situations. Although the contingency

perspective purports to apply to all aspects of management, and not just organizing and leading, there has been little development of contingency approaches outside organization theory and leadership theory. The following sections provide brief overviews of the contingency perspective as relevant to organization theory and leadership.

CONTINGENCY PERSPECTIVE AND ORGANIZATION THEORY

Environmental change and uncertainty, work technology, and the size of a company are all identified as environmental factors impacting the effectiveness of different organizational forms. According to the contingency perspective, stable environments suggest mechanistic structures that emphasize centralization, formalization, standardization, and specialization to achieve efficiency and consistency. Certainty and predictability permit the use of policies, rules, and procedures to guide decision making for routine tasks and problems. On the other hand, unstable environments suggest organic structures that emphasize decentralization to achieve flexibility and adaptability. Uncertainty and unpredictability require general problem solving methods for nonroutine tasks and problems.

Paul Lawrence and Jay Lorsch suggest that organizations have developed separate departments to confront differing environmental segments. Organizational units operating in differing environments develop different internal unit characteristics. The researchers say that as internal difference become greater, additional coordination between units is needed.

Joan Woodward found that financially successful manufacturing organizations with different types of work technologies (such as unit or small batch; large-batch or mass-production; or continuous-process) differed in the number of management levels, span of management, and the degree of worker specialization. She linked differences in organization to firm performance and suggested that certain organizational forms were appropriate for certain types of work technologies.

For some time, there also existed a business myth that blue collar workers should be able to do their jobs without thinking, thus taking away the need for contingency management when dealing with assembly line employees. However, theorists quickly recognized that there are many very participative initiatives in manufacturing plants throughout the world. For example, in Japan, manufacturing companies have had great success engaging workers in shop-floor decision making, which has resulted in large positive productivity and quality results.

Organizational size is another contingency variable thought to impact the effectiveness of different organizational forms. Small organizations can behave informally while larger organizations tend to become more formalized. The owner of a small organization may directly control most things, but large organizations require more complex and indirect control mechanisms. Large organizations can have more specialized staff, units, and jobs. Hence, a divisional structure is not appropriate for a small organization but may be for a large organization.

In addition to the contingencies identified above, customer diversity and the globalization of business may require product or service diversity, employee diversity, and even the creation of special units or divisions. Organizations operating within the United States may have to adapt to variations in local, state, and federal laws and regulations. Organizations operating internationally may have to adapt their organizational structures, managerial practices, and products or services to differing cultural values, expectations, and preferences.

The availability of support institutions and the availability and cost of financial resources may influence an organization's decision to produce or purchase new products. Economic conditions can affect an organization's hiring and layoff practices as well as wage, salary, and incentive structures.

Technological change can significantly affect an organization. The use of robotics affects the level and types of skills needed in employees. Modern information technology both permits and requires changes in communication and interaction patterns within and between organizations. For example, advanced information and communication technologies have changed the way businesses operate and conduct commerce. The more secure Internet and new transmission standards make it easier and cheaper for businesses to conduct inter-organizational commerce. Managers have implemented new technologies such as Electronic Data Interchange (EDI) and Web-based e-commerce to enhance communication exchanges throughout the company.

CONTINGENCY PERSPECTIVE AND LEADERSHIP

Dissatisfaction with trait-based theories of leadership effectiveness led to the development of contingency leadership theories. Fred Fiedler, in the 1960s and 1970s, was an early pioneer in this area. Various aspects of the situation have been identified as impacting the effectiveness of different leadership styles. For example, Fiedler suggests that the degree to which subordinates like or trust the leader, the degree to which the task is structured, and the formal authority possessed by the leader are key determinants of the leadership situation. Task-oriented or relationship oriented leadership should each work if they fit the characteristics of the situation. Other

contingency leadership theories were developed as well. However, empirical research has been mixed as to the validity of these theories.

SEE ALSO Leadership Styles and Bases of Power; Management Styles; Organizational Structure

BIBLIOGRAPHY

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