Essay: Contingency theory

Much of the management theory we come across relates to universally applicable ideas, often ones which suggest there is ‘one best way’ to organize. Contingency theory is different; it is a paradigm; it is a school of thought; it is a lens through which to view management. It is not so much a theory nor is it an approach, and it certainly should not be minimized to descriptions by superlatives like ‘best.’ Furthermore, to compare contingency theory to, for example, scientific management would be an exercise in futility. Scientific management has its place within contingency theory, as do many other ‘universal’ management theories. This, partly, is what makes contingency theory so attractive: it ties together the findings of some of the greatest management theorists in history, validating them while simultaneously disproving them. This possibility stems from contingency theory’s nature as a paradigm, and, perhaps more importantly, from its situational nature.
Contingency theories are, at their root, based on situational organization and management; they reject universality. There are a wide variety of contingency theorists with a wide variety of foci. For example, Fred Fiedler was a contingency theorist known for his extensive research related to leadership style. Frederickson focused on decision-making, and Delery and Doty were interested in human resources (Donaldson) Clearly, then, contingency theory has wide applicabilities and is thus not easily defined. Without going beyond the scope of the question, this essay will therefore focus on Lex Donaldson and structural contingency theory, which concerns itself mainly with the overall organizational and structural characteristics of an organization and their relationship with the three main contingencies, outlined by Donaldson as being size (defined by the number of employees), stability of the environment, and organizational strategy.
Each of the above mentioned contingencies works on a spectrum. For each contingency there is an ideal corresponding characteristic depending on where on said spectrum said contingency lies. Starting with size, a larger organization will benefit from a more bureaucratic and decentralized control structure, whereas a less bureaucratic, simpler, and centralized control structure will benefit smaller organizations, this because large operations tend to utilize repetitive tasks and so decision making can be rule-based, while smaller organizations can take advantage of more personal management. Regarding environmental stability, the more stable the more mechanistic (Tayloristic) the organization can be, whereas an unstable organization requires an organic style of management (like System 4) which encourages innovation and worker participation. Lastly, the strategy contingency impacts divisional structure, strategy referring to whether the organization is multi- or uni-purpose, or, in the case of corporations, whether they are diversified in their production of goods or services or not. A functional structure fits an undiversified strategy whereas a divisional structure fits a diversified strategy. Each of these three observations have a large deal of empirical evidence behind them and are central to structural contingency theory (Donaldson). Another central observation, it too backed by substantial empirical evidence, is that an organization would do better to change their characteristics than to change their contingencies, and so they adapt and evolve, in terms of their characteristics, to their contingencies (Donaldson).
As far as these observations run, contingency theory is certainly an interesting and compelling method of describing, explaining, and predicting organizational efficacy. Like with most phenomena in the human sciences, management is best explained by an understanding of the context and situational factors. It is difficult, always, to generalize in the human sciences, and contingency theory attempts to address that. Still, it is clear that contingency theory merely narrows down, organizes, and classifies generalizations. While it may be more comprehensive and take into account more variables than Taylorism, it is certainly true that it still has assumptions and generalizations which reduce accuracy. It is simply impossible to take into account enough factors and specify any model enough that all variables are accounted for, as it would then no longer be a model but merely a description, and so it would be useless.
Whether contingency theory is the ‘best’ theory is a rather incoherent question. Truthfully, contingency theory is not even as much of a theory as it is a lens. Most classical management theories are ‘one best way’ theories; theories that emphasize maximizing a particular variable in one of the three organizational types. Examples include Likert’s System 4 and McGregor’s Theory Y, both of which emphasized participation and an organic structure. Taylor’s Scientific Management also presents a clear example of a ‘one best way’ theory, preaching mechanistic organization and specialization. These theories are clear deviations from, and therefore alternatives to, contingency theory, and they are also clear to be largely inadequate. While scientific management is effective in stable environments requiring routine tasks, it does not, as Kanter argues, work to innovate or respond to a changing environment, as Donaldson & contingency theory would predict, these being characteristic of unstable environments. As for McGregor and Likert, McGregor himself acknowledged his ideas to not be universally functioning and evidence points against the total applicability of Likert’s System 4. About both, Fiedler says “empirical tests have generally not supported these theories,” as he goes on to dismiss universal management theories in general.
Nonetheless, contingency theory is clearly a more comprehensive explanation of management theory than any other. It explains why scientific management worked in Ford’s factories but not for the U.S. government. It also explains why McGregor found some successes in his trials of theory Y and unexplained failures in others. What management style is best and what structure to use simply depend on the situations facing the organization and the context of that situation. Scientific management was never so accommodating. It was one size fits all in a world of differences. Contingency theory, on the other hand, recognizes these differences and attempts to accommodate them.