Contingency theory
There was this insight that organizations
might be dependent on their environment.
The best way to organize depends on the
nature of the environment to which the
organization must relate
The history of management thinking; a
diachronic perspective
• Pioneers
• The late 19th century… B&K suggest
”Industrial Betterment”
• Organization as a rational system –1930
• Organization as a natural system 1930 –1955
• Organization as an open system 1960 –1980
• Organization as a symbolic system 1980 – ?
A pendulum perspective
• The development of management thinking
might be described as a repeated swing
between organic and mechanic rhetoric
• Considering Kondratievs idea about long
waves in the economy Barley and Kunda
suggest that the mechanic rhetoric dominates
during periods of growth, and that the organic
rhetoric dominates during periods of
stagnation
Organization as an open system
• 1955/60 – 1980
• Organizations are not just closed boxes where
you might manipulate as you please. They are
open and dependent on their environment in
ways that put harsh restrictions on the
management.
Organizations as organisms
Organisms, like businesses, compete for survival
and evolve to gain an edge.
An organism is responsive to its environment, it
can learn and adapt.
Like organisms, businesses are born, grow and
die.
Organisms are more receptive to environmental
feedback than machines.
Businesses also operate within a delicate ecology
with a lot of interdependencies.
It's not as clear who's in charge of an organism as
it is with a ship, however.
Do businesses have no more control over their
fate than animals facing evolutionary pressure?
Living systems
environmental conditions
adaptation
life cycles
recycling
needs
homeostasis
evolution
survival of the fittest
health
illness
Joan
Woodward
Joan Woodward
• technologies directly determine differences in
such organizational attributes as span of
control, centralization of authority, and the
formalization of rules and procedures.
• There are three kinds of technology according
to JW
• Unit by unit
• Mass production
• Process industry
Robert Blauner
• ”Alienation and freedom” 1964
• Blauner claimed that alienation was closely
connected to the organizational logic of mass
production
• Craft, mass production and process
production related to alienation like an
inverted U
Henry Mintzberg
Burns and Stalker
• The Management of Innovation 1961
• Based on studies of the electronic industry I
Scotland
• The central theme of the book is the
relationship between an organization and its
environment - particularly technological and
market innovations.
• Internal structure must follow external
contingencies
Burns and Stalker
• In their book they try to synthesise
management thinking up to 1960
• SOP is ideal for repeated tasks, as in
bureaucracy, but extensive regulations bring
about narrow minded egoism
• A natural organization loosens up the
bureaucratic rigour and permits initiative and
innovation
• Change is the blind spot for bureaucratic
rationalism
Two kinds of management systems
• Mechanistic
– Functional
differentiation
– Hierarchy
– Vertical communication
– Instructions and
decisions
– Specified obligations and
responsibilities
• Organic
– Specialized knowledge
related to overall goals
– Network structure
– Lateral communication
– Information and advice
– Commitment
Burns and Stalker
• There are two kinds of environments
– Stable and changing
• And two kinds of internal organizational systems
– Mechanic and organic
• Firms working under stable conditions can be
expected to succeed if they have a mechanic system
• Firms working under changing conditions can be
expected to be successful if they have an organic
system
• Burns & Stalker seem to expect more change in the
future
Lawrence and Lorsch
• Differentiation and Integration, 1967
• Differentiation and integration is needed to
adapt to the requirements of the
environment.
• How can an organization achieve both when
they, in essence, are antagonistic
• More of both will be needed as the
environments will be both more
heterogeneous and more dynamic
Differentiation and integration
• Units that have similar orientations and tasks should be
grouped together. (They can reinforce each other's common
concern and the arrangement will simplify the coordinating
task of a common manager).
• Units required to integrate their activities closely should be
grouped together. (The common manager can coordinate
them through the formal hierarchy).
• Notice that when there is need for both more differentiation
and more integration organizational complexity will rise
Complex organization
• Complex environments necessitated complex
organizations
• Lawrence and Lorch’s line of thought made
matrix organization popular
• Charles Perrow (1972) was worried that those
big complex organizations that had emerged
during the 19-hundreds were impossible to
manage and threatened society.
James D. Thompson
I.
Where both preferences and cause/effect relations are clear, decision
making is "computational". These decisions are often short term and
information about the decision is fairly unambiguous.
II. Where outcome preferences are clear, but cause/effect relations are
uncertain, Thompson suggest that "judgment" takes over and you make
your best educated guess. These decisions are based on prior experience
and are often qualitative in nature.
III. When the situation is reversed, and preferences are uncertain, then you
rely on compromise between different groups. Political coalitions may be
built which rely on negotiating and bargaining.
IV. When neither preferences nor cause/effect relations are clear, then you
rely on "inspirational" leadership. This is where the charismatic leader
may step in and this type of decision often takes place in times of crisis.
James D. Thompson
• An organization is dependent on the well
functioning of its technological core
• Signals and demands (disturbances) from the
environment of the organization can put the
well function of the technological core at risk
• Rational organizations assign a variety of
administrative units to deal with and
neutralise the disturbances as a protective
buffer for the technological core
Hersey and Blanchard
The fate of Contingency Theory
• The empirical evidence of a correlation
between fit and success is inconclusive
• The idea of fit is somewhat circular
• The notion of environments as given facts was
questioned
• But still; contingency theory has great face
validity and is a dominating perspective in
much of the literature about corporate strategy