What is Contingency Approach to Management Theory?

The contingency approach, often called the Situational Approach, is based upon the premise that all management is essentially situational in nature. All decisions by managers will be affected (if not controlled) by the contingencies of a given situation. 

What are Contingencies? 

Contingencies are situational considerations arise from various environmental factors. 

How Does the Contingency Approach Affect Decision Making?

As such, managers must take into account these contingencies when making decisions that affect the organization. 

Contingency theory also proposes structural changes or designs, leadership styles, and control systems in an organization that allow it to react to environmental contingencies.

How is Contingency Theory Related to Systems Theory?

Contingency theory builds upon accepted elements of System Theory. It recognizes that an organization is an open system made up of interrelated sub-units. It adds, however, that the behavior of individual sub-units is contingent upon internal and external environmental contingencies. 

These might include the relationship between two other sub-units or external systems. This is particularly true when these internal or external units/systems have an effect on the desired outcome of a sub-unit. 

What are the primary characteristics of the Contingency Approach?

The primary characteristics of contingency theory include:

• Non-universality of management theory - There is no one best way of doing things.
• Contingency - Management decision making is contingent upon the situation.
• Environment - Managerial policies and practices to be effective, must adjust to changes in the environment.
• Diagnostics - Managers must possess and continue to improve diagnostic skills so as to anticipate and ready for environmental changes.
• Human Relations - Managers should have sufficient human relations skills to accommodate and stabilize change.
• Information and Communication - Managers must develop a communication system adequate to deal with environmental changes.

How do Contingencies Affecting Organizational Structure?

The contingency approach defines not only patterns of internal interaction but also suggests organization designs and management approaches most appropriate for specific situations.

The commonly-identified contingencies influencing organizational structure include:

• Organization Size
• Nature of Business and Technology (the need for customization)
• Environmental Uncertainty
• Individual Differences or Organizational Preferences

What are the Types of Organizational Structure?

Theorists Burns and Stalker, in their text "Management of innovation" (1968), identified two types of organizational structure (mechanistic) and (organic) and two categories of the environment (stable and dynamic). 

What is a Mechanistic Structure? 

Mechanistic structures are more common in stable environments. 

What is an Organic Structure?

Organic structures are more common and suitable in dynamic environments. 

Advantages and Disadvantages of Contingency Theory

The primary advantages of contingency theory include:

• It provides a realistic view of management and organization.
• It discards the universal validity of principles.
• Managers are situation-oriented and not stereotyped.
• Lends itself to an innovative and creative management style.

The negatives of contingency theory include:

• It does not have a theoretical base.
• Executive is expected to know all the alternative courses of action before taking action in a situation that is not always feasible.
• It does not prescribe a course of action.
• A situation can be influenced by many factors. It is difficult to analyze all these factors.

Who are the Primary Contributors to Contingency Theory?

Some of the primary contributors to contingency theory include:

• Burns and Stalker - In their work "Management of innovation" (1968), they identified two types of organizational structures (Mechanistic and Organic) and two categories of the environment (Stable and Dynamic).
• John Woodward - She analyzed the influence of technology on the organization structure and observed that the type of technology used for production, such as unit, small batches, large batches, mass production, and continuous process of production. She also examined how production shifts directly affected the span of control, use of committees, participative decision making, and other structural characteristics.
• J.W. Lorsch and P.R. Lawrence - In studies beginning in 1969, they proposed that organizations functioning in a complex environment adopted a much higher degree of differentiation and integration than those operating in a simple environment. They identified as key issues: environmental uncertainty and information flow. They advocated to Focus on exploring and improving the organization's relationship with the environment, which characterized by along a certainty-uncertainty continuum.