contingency theory A strand of organization theory (sometimes also known as the ‘rational systems perspective’), the leading practitioners of which were Tom Burns, Joan Woodward, Paul Lawrence, and Jay Lorsch, an otherwise theoretically eclectic group who were nevertheless united in their belief that no single organizational structure was inherently more efficient than all others. Rather, since organizations differed in the tasks they performed and environments they faced, the appropriate organizational structure was in each case a function of such factors as technology, market, and the predictability of tasks.

In The Management of Innovation (1961), Burns and his co-author G. Stalker examined the impact of technical innovation on electronics companies, and attributed the differential adaptability of firms to the prevailing system of management. They devised an influential typology of ‘mechanical’ and ‘organic’ (or ‘organismic’) systems of management. In mechanical management systems, decision-making takes place within a tightly controlled and familiar normative framework, in which: individual employees are responsible for well-defined tasks; functions are precisely defined; control, authority, and communication are hierarchical; interaction between members is typically vertical (between subordinate and superior); there is an insistence on loyalty to and obedience of superiors; and a greater importance is attached to internal (local) than to general (cosmopolitan) experience and skills. Organic management systems display characteristics which are the obverse of these: continual adjustment and redefinition of tasks through interaction with others; network structures of control, authority, and communication; a lateral rather than vertical direction of communication through the organization, involving frequent communications between people of different rank, with communications taking the form of consultations rather than command; and so forth. Burns and Stalker argued that the former structure was only suited to ‘a concern for which technical and market conditions approximated very closely to stability’. Changing market and technological conditions, which create unforeseen problems and tasks which cannot therefore be described functionally or distributed automatically throughout a clearly demarcated structure, required an organic system of management.

Similarly, Lawrence and Lorsch (Organization and Environment, 1967) found, in a study of ten firms in three different industrial environments (plastics, food, containers) in the United States, that the degree of uncertainty in the three ‘task sub-environments’ of the firms (market, techno-economic, and scientific) was strongly related to their internal organizational arrangement. The greater the uncertainty, the greater the need to differentiate the sales, production, and research and development departments within the firm. However, the greater the degree of internal differentiation, the greater the need for appropriate mechanisms for integrating and resolving conflicts between the various segments.

Like Woodward and Burns, the premiss of Lawrence and Lorsch's work is that there is no ‘one best way’ to organize a given technical process, an explicit challenge to the assumption made by the scientific management approach that science can always identify the quickest and best way to perform work-tasks. This insight was a major advance on those organizational theories (such as the scientific management approach) which assumed that organizations operate unproblematically as more or less closed systems.