Organization Theory
The Contingency Approach to Organization Theory
The contingency approach believes that managerial actions can be adjusted to demands of specific situations or circumstances.
Organization design Opens in new window and managerial actions most appropriate to specific situations will have to be adopted to achieve the best possible result under the given situation.
There is no one best way to organize and manage. It is the basic function of managers to analyze and understand the environments in which they function before adopting their techniques, processes and practices.
The contingency approach guides the manager to be adaptive to environment.
The contingency approach states that neither the mechanistic forces nor the humanistic forces that provide solutions to the problems faced by organizations, but it is the synthesis of both that provide solution and act as a better guidance to managers.
The chief contributors to the contingency approach to organizational theory are:
- Herbert Simon who argued that the current organizational theory is mere oversimplication and superficial. Both the classical and human relations were merely proverbs and contradicted each other.
- Daniel Katz and Robert Kahn contributed the open-systems perspective to organization theory. They viewed organizations as an open adaptive system.
- Joan Woodward and Charles Perrow have stressed upon the importance of technology in determining the appropriate structure for organizations.
According to the contingency theory, an organization’s design should permit each function to develop a structure that suits its human and technical resources. In the design, structure is constructed in such a way that it allows the R&D, manufacturing, and sales functions to develop core competencies.
- R & D Organizations — The structure most conducive to the development of functional abilities in R&D is a flat, decentralized structure in which mutual adjustment among teams is the means of achieving coordination.
- Manufacturing Organizations — Manufacturing concerns should use tall hierarchy in which decision making is centralized and the speed of the production line controls the pace of work.
- Sales Organizations — A sales function should use a flat, decentralized structure to coordinate its activities because incentive pay systems, rather than direct supervision are the method used for achieving results.
An Appraisal of the Contingency School of Thought on Organization Theory
Contingency means that one thing depends upon other things, and for organizations to be effective there must be a “goodness of fit” between their structures and the conditions in their external environment. What works in one setting may not work in another setting. There is not one best way.
Contingency theory means “it depends”. Despite the changes in the environment, organizations are not all alike. A great many problems occur when all organizations are treated as similar, which was the case with the classical approach that tried to design all organizations alike.
In a certain situation, a mechanistic approach to management that uses bureaucratic control procedures, a functional structure, and formal communication would be appropriate. Likewise, organic, free-flowing management processes work best in an uncertain environment with a non-routine technology. The correct management approach is contingent upon the organization’s situation.