Situational theories and models provide important prescriptions on how the management of organizations can harness the dynamics that prevail in today's world. Of them, the contingency theory has the most practical approach in questioning the notion of the existence of the best strategy for organizational management.
Thus, the best strategy is dependent on a number of internal and external conditions prevailing in the environment. The blog aims to explain what contingency theory is and how it can be used in the current rather unpredictable world.
Contingency theory came into light in the mid 20th century as a reaction to the classical theories of management, which insisted on certain fundamentals of management. Fred Fiedler, Paul Lawrence, Jay Lorsch, and Joan Woodward claimed that the usefulness of those means depends on the environment in which the organization operates.
This was a complete shift from the earlier dogmatic and mechanistic philosophies of scientific management as well as administration theories to an open-minded attitude.
Contingency theory, on its part, has a number of core principles that, when adhered to, help organizations run efficiently. These entail:
In this view, the appropriate application of management practices and structures depends on the setting in which they are introduced. Various trends influence such practices, including the external environment, technology, the size of the organization, and its culture.
While it can be compared to classical theories, it differs in that contingency theory holds that there is no single set of best practices that can be applied in managing an organization. Not all change management initiatives suit all organizations, and this can hold especially true when some are in the same sector.
Managerial work and organizations cultivate a condition where strategies and their supporting structures are very dynamic and are in a perpetual state of change in response to the organization's environment. This calls for analysis of environmental and organizational factors in the management of the organization.
Organizational strategies are affected by many factors, hence the complexity of strategy formation. The decisions made by managers must take into consideration the various factors and their interrelationships.
Among all the publications in the area of contingency theory, Fiedler's contingency model of leadership is perhaps the most prominent. This model was pioneered by Fred Fiedler in the early 1960s and assumes that the productivity of a leader depends on the compatibility of the leader's style with the types of situations.
Fiedler identified two primary leadership styles: task-oriented and relationship-oriented. The first one is primarily known as transaction-oriented, and the second one is primarily called interaction-oriented. Task-centered people are those who are involved more in tasks and goals, and their emphasis is more on getting the jobs done.
On the other hand, people who are relationship-oriented are more engaged with people and are more concerned with the interpersonal relationships in their teams.
This work with Fiedler posits that task-oriented leaders are most appropriate in either highly favourable or highly unfavourable conditions. In contrast, relationship-oriented leaders are best provided in moderately favourable conditions. This re-emphasises the fact that leadership behaviour should correspond with situation requirements.
Contingency theory is generalizable and applicable to the different spheres of management. Here are some notable examples: Here are some notable examples:
From this perspective, companies can gain benefits when they apply contingency theory so as to identify the right organizational structure. For example, a mechanistic structure, which has many levels with strict subordination and detailed regulations, can fit into stable environments. In contrast, organic, which has decentralized decision-making and a great degree of flexibility, is appropriate for uncertain ones.
The strategic contingency model asserts that the choice of HR practices can be aligned based on contingency factors. For instance, in a fast-changing, technology-based production industry, the major HR strategies might be to encourage and support the flow of knowledge to employees and their continual professional development.
On the other hand, if the organization operates in the manufacturing industry, where activities are quite repetitive and may require little or no creativity, then the policies regarding HRM may focus more on aspects such as consistency with the processes to be followed.
Strategic management is a critical area influenced by contingency theory as it calls for the relation of strategies to environmental features. Companies functioning in an unpredictable environment may use the idea of a stylish strategy and implement fast, non-steady changes.
In contrast, those who occupy a steady environment may use the concept of efficient solutions and apply stable, gradual development.
Therefore, the contingency theory is possibly even more relevant to today's continuously evolving, fast-paced business world. Such is the case with the COVID-19 pandemic, which exposed the weakness of organizations that cannot be agile and adapt to change.
Another evident area was contingency-based thinking, namely, that companies capable of switching processes were in a better position, for instance, changing offices to working from home or altering manufacturing complete lines to producing gowns.
Furthermore, technological development and globalization have brought new factors that can influence organizations. Many factors force organizations to reconsider the applicability of the strategies used constantly; artificial intelligence, big data, and the gig economy are just a few examples.
Nevertheless, some critics can be leveled against contingency theory as follows: The main difficulty lies in the fact that its application entails a high level of model complexity and the subsequent identification and quantitative evaluation of all the contingency factors.
It is evident contingency theory is seen to provide a convenient guide to the management of organizations, especially due to the many variables involved in this field of study. It highlights contextuality, element dynamism, and dependency, thus offering a practical and application-friendly paradigm for decisions' making.
Given global society's continually changing environment, contingency theory will remain relevant in helping organizations manage their affairs.