Contingency theory
SoS Liu
Spring 2012
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The price – performance trade-off
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Competition is a race – for survival
Winning (survival) is assured through better fit with the environment
Trial and error is the field test of organizations
Ergo: it is crucial to understand the environment
(But if the environment changes so must the organization)
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Fit and adaptation – structure and process
“It is not the strongest of the species that survive, nor the most
intelligent, but the one that is most responsive to change”
Charles Darwin
Two qualities: Structural fit – ability to adapt
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Organizations are purposeful entities
Success is dependent upon
1. formulation of purpose (objective)
2. and delivery of the purpose (implementation)
But:
Strategies are contingent/ dependent upon their context
Contingent upon what?
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The search for ‘contingency factors’
W
h
aTask environment?
t1. Environmental uncertainty
d
Stable (little change) – unstable (dynamic, fast changing)
e
t
‘Turbulence levels’ (Ansoff 1967), Burns and Stalker (1961)
e
Moderately dynamic – highly dynamic (Eisenhart, 1995,
r
2000)
m2. Technology - Diversity of task environments
i
n
3. Size
e
s
s
t
r
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Environment
Strategy
Structure
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Environment
Stable
Dynamic
Technology
Process
Unit
Size
Large
Small
Mechanistic
!
?
Organic
?
!
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Mechanistic:
Organic:
Specialization of tasks
Job and task flexibility
Defined duties, responsibilities
Redefinition of tasks
Clear hierarchical structure
Network structure of control & authority
Top down instructions and info
Lateral info and advice
Obedience to org’n and rules
Committment to work group
Importance by position
Importance by individual’s contribution
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Efficiency is good
Slack is bad
Alignment!
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Fit, alignment, congruency, consistency
Infrastructure
HRM
Technology
Procurement
Inbound
logistics
Operations
Outbound
logistics
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Marketing and
sales
After sales
service
Contingency theory, summary
• Organizations are open systems
• Structure, and therefore performance, is dependent upon the particular
circumstances, situational factors, faced by each organization
• There is no best way for all organizations but there is a one best way for
each organization
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Efficiency and effectiveness
Effectiveness:
Strategies contain choice on goals and over-arching direction
Efficiency:
Management control systems integrates efforts towards a
common purpose/ goal
Management control systems are dependent upon the firm’s strategy
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The early strategy/ control paradigm
Environment – Strategy - Structure
Analysis – Formulation - Implementation
Contingency – congruency – consistency (external and internal fit)
Efficiency and effectiveness
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A reflection on the early theories/ propositions
A teleological perspective
A machine metaphor
A utilitarian perspective – Darwin/2
A structural perspective – Darwin/2
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