Contingency Theory

The optimal organization / leadership / decision-making style is dependent (contingent) upon various internal and external constraints (factors). Explanation of Contingency Theory.

Contingency Theory is a class of behavioral theory that claims that there is no best way to organize a corporation, to lead a company, or to make decisions. An organizational / leadership / decision making style that is effective in some situations, may be not successful in other situations. In other words: The optimal organization / leadership / decision-making style depends upon various internal and external constraints (factors).

Contingency Theory factors

Some examples of such constraints (factors) include:

The size of the organization.
How the firm adapts itself to its environment.
Differences among resources and operations activities.
Assumptions of managers about employees.
Strategies.
Technologies being used.
etc.

1. Contingency Theory on the organization

There is no universal way or one best way to manage an organization.
The design of an organization and its subsystems must 'fit' with the environment.
Effective organizations not only have a proper 'fit' with the environment, but also between its subsystems.
The needs of an organization are better satisfied when it is properly designed and the management style is appropriate both to the tasks undertaken and the nature of the work group.

2. Contingency Theory of leadership

In the Contingency Theory of leadership, the success of the leader is a function of various factors in the form of subordinate, task, and/or group variables. The effectiveness of a given pattern of leader behavior is contingent upon the demands imposed by the situation. These theories stress using different styles of leadership appropriate to the needs created by different organizational situations. Some of these theories are:

Contingency Theory (Fiedler): Fiedler's theory is the earliest and most extensively researched. Fiedler's approach departs from trait and behavioral models by asserting that group performance is contingent on the leader's psychological orientation and on three contextual variables: group atmosphere, task structure, and leader's power position. This theory explains that group performance is a result of interaction of two factors. These factors are known as leadership style and situational favorableness. In Fiedler's model, leadership effectiveness is the result of interaction between the style of the leader and the characteristics of the environment in which the leader works.
Situational Theory (Hersey & Blanchard). This theory is an extension of Blake and Mouton's Managerial Grid Model, and Reddin's 3-D management style theory. This model expanded the notion of relationship and task dimensions to leadership, and a readiness dimension was added.
Leadership Pipeline (Drotter)

3. Contingency Theory of decision-making

Vroom and Yetton's Decision Participation Contingency Theory or the Normative Decision Theory: According to this model, the effectiveness of a decision procedure depends upon a number of aspects of the situation:

The importance of the decision quality and acceptance.
The amount of relevant information possessed by the leader and subordinates.
The likelihood that subordinates will accept an autocratic decision, or the likelihood that subordinates will cooperate to make a good decision if they may participate.
The amount of disagreement among subordinates with respect to their alternatives.

Contingency Theory and Situational theory

Contingency Theory is similar to situational theory in that there is an assumption of no simple way that is always right. The main difference is that situational theory focuses more on the behaviors which the leader should use. Given situational factors (often about follower behavior). Whereas Contingency Theory takes a broader view, which includes contingent factors about leader capability, but also includes other variables within the situation.

Contingency Theory Forum (15)

How to Apply / Implement Contingency Theories in a Context
"I would like to know how can I apply contingency theory in an organisational context? And using this theories, how can I identify management and leadership requirement in a given situation?"

Contingency Theory versus Situational Theory
"I'm finding it really interesting how confusing and cross defined this subject is.
I think that situational and contingency could almost be band under the same group; to be honest they are very similar.
Dou you agree? If not, what difference you know of?"

Effects of Contigency Variables
"In what ways may the variables in the contingency approach affect management approaches in organisations?"

History of Contingency Theory
"I would like to know more about the origin and the development of contingency theory. Who can share an overview? Thanks."

Contingency Theory in 2 Countries
"I am writing on how contingency theory may be applied to leaders who share one culture, but reside in two different countires. Any thoughts?"

Contingency Theory Strengths
"What are the strengths of contingency theory when applied to a company's organization?"

Why Fiedler's Contingency Theory?
"Justify why you would recommend Fiedler's Contingency Theory to any organisation..."

Major Weeknesses of Contigency Leadership Approach
"What are the weaknesses of the Contigency Leadership Approach?"

Contingencies Affecting Management Development
"I would like to know the challenges of the environment that can affect management development. Are there any thought of schools on it."

Individual Unit of Analysis
"Hi, is there any conceptual framework of contingency theory for individual unit of analysis? Thank you."

Mission and Objectives > Leadership
"I would say the leadership styles / theories would be dependent on a company's level of understanding of its mission and objectives. A clear leadership theory/style would, I believe, be developed through a clear mission and objectives of the company."

Discuss Contingency Theory
"The contingency theory accepts that no one leadership style can be effective in all situations and thus the style used will be directed by a number of factors. Please discuss..."

Neocontingency Model
"In his 1995 book "American anti-management theories of organization: A critique of paradigm proliferation", L. Donaldson developed his "Neocontingency Model". Donaldson argues that when a fit exists between (internal or external) contingencies and organization structure, the performance of the organization will be high.
His dynamic model describes a self-correcting process through which organizations move from states of high performance to states of low performance and back again."

Right Way In Information Age
"It was easy to develop a theory in the last century and to ensure that it is valid in a particular environment. However, as information started flooding this world in the digital era, the validity of many theories lost its significance in the larger domain. Contingency theory, situational theory or any such theory can be viewed in the modern perspective as a 'part time theory'. However part time theory can still be used and found true in some situations in some of the time. In todays changing world, it remains a challenge and we must ensure that theory is valid and true for some longer time, in a longer perspective with changing time. Otherwise, instead of calling it theory, we must use these it as assumptions or hypthesis. The writings also need to be done accordingly."

The Cynefin Framework
"A recent application of contingency thinking on decision-making is the Cynefin framework described by David J. Snowden and Mary E. Boone in the HBR of Nov 2007. They distinguish between 5 decision-making contexts, each requiring its own decision-making style:
- Simple (Clear causes and effect): Ensure proper processes are in place, delegate.
- Complicated (Cause and effect relationships discoverable, but not apparent to everyone): Involve (teams of) experts, analyze.
- Complex (Emergence, Flux): Create experiments, wait for patterns to emerge.
- Chaotic (Turbulence, Crisis): Take immediate action, communicate clear and directly
- Disorder (None of the other 4 prevailing): Break down into the other 4 realms.
Adept decision-makers should learn how to:
1. Identify the context properly
2. Change their behavior and decisions to match that context
3. Prepare their organizations to understand and deal with the different contexts."

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