The contingency viewpoint is a more recent development of organizational theory that attempts to integrate a variety of management approaches by proposing that there is no one best way to organize a corporation or lead a company. Instead, the optimal course of action is contingent or dependent upon the specific internal and external situation management may find itself in.
Perspective on Previous Theories
The contingency approach claims that past theories, such as Max Weber's bureaucracy theory of management and Taylor's scientific management, are no longer practiced because they fail to recognize that management style and organizational structure are influenced by various aspects of the environment, known as contingency factors. Debating which one of the previous approaches to management is the "best" approach is irrelevant in contingency theory, since the heart of the contingency approach is that there is no "one best way" for managing and leading an organization.
An Outline of Contingency Theory
By its nature, contingency theory avoids static rules. There are, however, common contingencies that businesses must react to, including technology, competition, governments, unions, consumer interest groups, new markets and consumers, and economic factors. Fred Fiedler takes this a step further to identify three leadership styles and empirical situation measurements to assess the degree of favorability a given contingency offers:
- The leader-member relationship, which is the most important variable in determining the situation's favorableness.
- The degree of task structure, which is the second most important input into the favorableness of the situation.
- The leader's position power obtained through formal authority: this is the third most important dimension of the situation.
In other words, leadership needs to ensure that it is able to assess a situation, determine the task structure, and obtain a position of formal authority in order to be able to adequately manage a contingency situation.
An example of the contingency viewpoint in action is a manager facing a situation with an employee who regularly shows up late to work. A manager could have a written protocol for this situation in which there is only one option: give the employee notice. Under the contingency viewpoint, however, the manager may decide to better understand the situation by talking to the employee about why s/he is late to work and then deciding on the most effective and appropriate course of action. The value in this lies in the information the manager acquires about the employee: maybe there are extenuating circumstances that can be relatively easy to work around. In this case, the contingency approach allows the employee to keep her/his job and saves the manager from going through the time and trouble to dismiss one employee and hire another.
A leader's ability to manage under the contingency viewpoint depends largely on the nature of the environment and how the organization relates to the environment. Therefore, the organizational structure is a major component of the approach that management may take in resolving problems under contingency theory.