Explain Contingency Approach to management.

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 depends on a complex variety of critical environmental and internal contingencies.

Historical Overview:

Classical management theorists such as Henri Fayol  and Frederick Taylor identified and emphasized management principles that they believed would make companies more successful. However, the classicists came under fire in the 1950s and 1960s from management thinkers who believed that their approach was inflexible and did not consider environmental contingencies. Although the criticisms were largely invalid (both Fayol and Taylor, for example, recognized that situational factors were relevant), they spawned what has come to be called the contingency school of management. Research conducted in the 1960s and 1970s focused on situational factors that affected the appropriate structure of organizations and the appropriate leadership styles for different situations. Although the contingency perspective purports to apply to all aspects of management, and not just organizing and leading, there has been little development of contingency approaches outside organization theory  and leadership theory. The following sections provide brief overviews of the contingency perspective as relevant to organization theory and leadership.

Contingency Perspective and Organization Theory:

Environmental change and uncertainty, work technology, and the size of a company are all identified as environmental factors impacting the effectiveness of different organizational forms. According to the contingency perspective, stable environments suggest mechanistic structures that emphasize centralization, formalization, standardization, and specialization to achieve efficiency and consistency. Certainty and predictability permit the use of policies, rules, and procedures to guide decision making for routine tasks and problems. Unstable environments suggest organic structures  which emphasize decentralization  to achieve flexibility and adaptability. Uncertainty and unpredictability require general problem solving methods for non routine tasks and problems. Paul Lawrence and Jay Lorsch suggest that organizational units operating in differing environments develop different internal unit characteristics, and that the greater the internal differences, the greater the need for coordination between units.

Joan Woodward found that financially successful manufacturing organizations with different types of work technologies (such as unit or small batch; large-batch or mass-production; or continuous-process) differed in the number of management levels, span of management, and the degree of worker specialization. She linked differences in organization to firm performance and suggested that certain organizational forms were appropriate for certain types of work technologies.

Organizational size is another contingency variable thought to impact the effectiveness of different organizational forms. Small organizations can behave informally while larger organizations tend to become more formalized. The owner of a small organization may directly control most things, but large organizations require more complex and indirect control mechanisms. Large organizations can have more specialized staff, units, and jobs. Hence, a divisional structure is not appropriate for a small organization but may be for a large organization.

In addition to the contingencies identified above, customer diversity and the globalization of business may require product or service diversity, employee diversity, and even the creation of special units or divisions. Organizations operating within the United States may have to adapt to variations in local, state, and federal laws and regulations. Organizations operating internationally may have to adapt their organizational structures, managerial practices, and products or services to differing cultural values, expectations, and preferences. The availability of support institutions and the availability and cost of financial resources may influence an organization's decision to produce or purchase new products. Economic conditions can affect an organization's hiring and lay off practices as well as wage, salary, and incentive structures. Technological change can significantly affect an organization. The use of robotics  affects the level and types of skills needed in employees. Modern information technology both permits and requires changes in communication and interaction patterns within and between organizations.

Contingency Perspective and Leadership:

Dissatisfaction with trait-based theories of leadership effectiveness led to the development of contingency leadership theories. Fred Fiedler, in the 1960's  and 1970's, was an early pioneer in this area. Various aspects of the situation have been identified as impacting the effectiveness of different leadership styles. For example, Fiedler suggests that the degree to which subordinates  like or trust the leader, the degree to which the task is structured, and the formal authority possessed by the leader are key determinants of the leadership situation. Task-oriented or relationship oriented leadership should would each work if they fit the characteristics of the situation.

Other contingency leadership theories were developed as well. However, empirical research has been mixed as to the validity of these theories.