By: Arjun Kafle MBA, 1st Semester FMS, BHU

This theory is developed by managers, Consultants, and researchers who tried to apply B-school thoughts in real life situation.

Recent addition to management thinking

Situational approach

Explains the phenomenon of organizationenvironmental exchange. Concerned with the relationship between relevant environmental variables and appropriate management techniques that lead to the effective goal attainment.

The contingency approach to management is based on the idea that there is no one best way to manage and that to be effective, planning, organizing, leading, and controlling must be tailored to the particular circumstances faced by an organization.

Managers have always asked questions such as "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?" The contingency approach to management (also called the situational approach) assumes that there is no universal answer to such questions because organizations, people, and situations vary and change over time. Thus, the right thing to do...

The classical, behavioural, and quantitative approaches are considered universal perspective because they tried to identify the one best way to manage organisations. In contrast, contingency theory suggests universal theories cannot be applied to organisations because each organisation is unique.

The contingency approach emphasis that what managers do depends on a given set of conditions. Emphasis on "if-then" relationships. For e.g.. "If" this situational variable exists, "then" this is the action manager probably would take.

Effective managerial behaviour in one situation cannot be generalized on other situations.

There is no any universal theory which is applicable in all the situation and action. So, we should try to choose a theory according to a situation.

The task of the managers is to identify which techniques will , in particular situation, under particular circumstances, and at a particular set of time , best contributed to the attainment of management goals.

One company which have successfully implemented the contingency approach are Taco bell, a division of PepsiCo. This firm never ignores the environment, and always seems on alert for new opportunities. Another company that has successfully implemented this concept is Continental airlines.

Current contingency approaches

Organizational Designs, Model of leadership,

Approaches to quantitative area, etc.

Organization Designs
Classicalists- beaucratic Neoclassical -decentralized Contingency-no one design is best for all conditions

Model of leadership
Contingency theory of leadership Felder model

Path goal theory

LPC theory

Approaches to quantitative area

Quantitative areas has also begun to use contingency approach The starting point in developing any OR model is to account for the situational variables

Job design
Job design satisfaction factors affects workers productivity and

Previously jobs were designed as prescribed by scientific management school People were thought as an extension of technology and less concern was give to their satisfaction and welfare

At present, job design should be appropriate for the situation if the firm want to have high productivity in terms of worker productivity, worker satisfaction, and organizational profits

Contingency approach & managerial process

Planning Decision making Motivation Leadership Communication controlling

Planning
The planning process requires contingency approach because of the multitude of factors, internal and external to the organization Plans should be designed to meet the situational requirements Strategic planning should be done to deal with future uncertainties

Decision making
Effective decision making is contingent upon three major considerations: -Committee size,

-Role of chairman, and

-Composition of membership

Contd

Size should be determined on the basis of task to be accomplished Chairman should be chosen on the basis of the role he is expected to play Members should be selected on the basis of need for cooperation versus competition and homogeneity versus heterogeneity

Motivation
How can I motivate my employees?

The answer begun to emerge: there is no single, simple motivational technique that will work for all persons
To motivate a people, there should always be task-organization-people fit If such a fit is achieved, both effective unit performance & a higher sense of competence motivation seem to result

Leadership
Participative vs. autocratic leadership styles

Contingency approach favors participative leadership based on flexibility as per situation needs
Effective leadership is contingent upon six major considerations:

-cultural factors,
-line versus staff positions, -external forces, -time availability, -Financial consideration, and -the problem .

Communication
Developed by Baveles and Barrett

Studied the characteristics of three organizational communication structure and identified the advantages and disadvantages based on the following five dimensions: -speed, -Accuracy, -organization, -Leader emergence, and -morale Contd..

Two solutions identified by research.

First, he can identify communication structure, predict the effects, and take preventive action to diminish its negative effects. Second, examine his objectives, and choose that communication structure that helps to accomplish them.

Empirical support
Woodward studies (organization-technology relationship) Burns and stalker studies(organizationenvironment relationship) Lorsch and lawrence empirical research studies(organization-environment relationship)

Organization-environment relationship
classicalists completely ignored the environment in which the business operates. Viewed environment to be relatively stable.

Considered organization.

environment

has

no

effect

on

But, contingency theorists considered environment as a major factor of organization structure, operations, and behavior of members.

Burns and stalker studies

Organization-environment relationship
Conducted in UK
Number of firms taken in study :25 Operating in both stable and dynamic environment If the rate of technological change is slow, it is considered as stable

If the rate of technological change is faster, considered as dynamic

it is

Findings of Burns and stalker studies Successful firms in stable environments were mechanistic in nature Successful firms in dynamic environment are organic and flexible in nature Mechanistic structure is highly centralized whereas organic structure is highly decentralized

Lawrence and lorsch studies

Organization-environment relationship
Number of firms taken: 10 (from three industries i.e. plastics, food, and containers) Basic question: what kinds of organization are more effective under different environmental conditions of certainty and uncertainty?
Contd..

Contd..

Internal environment is analyzed in terms of differentiation and integration Differentiation refers to the functional specialization with in the organization Integration refers to the degree of collaboration between various departments and sub-units of the organization

Findings of study
Organization should be relatively unstructured if the environment is uncertain and heterogeneous Rigid organization structure is the most appropriate if the environment is stable and homogenous

Woodward studies
Organization-technology relationship
Conducted in UK

Conducted by Joan Woodward and her colleagues

Classified the technology of the firms in three categories as less technological complexity, midrange technological complexity and most technologically complex system Found that there was a definite relationships between technology and structure of an organization

Evaluation of contingency approach

Contingency theory is very popular now days because of the following reasons: Conceptual framework

Linkage between theory and practice

A basis for introducing changes

Wide applicability

Conceptual framework
This theory provides a conceptual framework because earlier theories deal only with systems, subsystems or individual components. This theory can be labelled a comprehensive theory because it can be used for understanding the entire organization. Encourages managers to diagnose future problems and to be highly flexible regarding strategies.

Linkage between theory and practice

Contingency theory and analyzing the suggests one best theory offers host of solve a problem. is a practical way of studying organizations. Earlier theories way of doing things, but this alternatives that can be used to

A basis for introducing changes

This theory explains the dynamic process of organizational change. It provides information about the relevant changes that occur in the environment from time to time.

Wide applicability
Contingency theory has wide applicability. This model can be used in strategy formulation, organization design, and redesign, information decision systems, influence systems and leadership, and organizational improvement.

Implications of this theory

Management is entirely situational and there is no universal way of doing a particular thing.

This approach suggests suitable alternatives for those managerial actions which are contingent upon external and internal environment such as organisational design, strategy formulation, decision systems, influence systems, leadership, and organisational improvement.

Contingency approach suggests that since organisation interacts with its environment, neither the organisation nor any of its subsystems is free to take absolute action. Rather, it has to modify and adjust the actions subject to various forces like social, political, technical, and economic.

Limitations of Contingency Approach

Complex:

This approach suggests that managers should do according to the needs of the situation. However, when put into practice, this becomes complex. Determination of situation in which managerial action is to be taken involves analysis of a large number of variables with multi-dimensions.

Difficult empirical testing: It is very difficult to do empirical testing of empirical testing of contingency approach. Though methodologies are available for its empirical testing, due to a large number of factors, testing becomes difficult.

Reactive but not proactive:

Contingency approach is reactive in nature. It merely suggests what managers do in a given situation.