Meaning of Contingency Theory
Contingency theory refers to an organization theory that asserts that there is no single best way for making decisions, leading a company and organizing a corporation. The theory says that an effectiveness of management is contingent and is dependent upon internal and external environment. It is also termed as situational theory of management. Contingent leader chooses strategies in accordance with changing situations of organization for deriving optimum results. They believe that a single and rigid management style may not suitable and prove inefficient in long-term. Proper attention is paid both on contingent situations and their own management styles for ensuring that these two interact efficiently. Leaders should try to align all their planning, organizing and controlling in accordance with contingent circumstances like organization, people and situations that vary over a period of time.
Features of Contingent Theory
Various features of contingency theory are discussed in points given below:
- Management is situational in nature as per the contingency theory of management. Practices of management need to be adjusted in accordance with varying organizational situations.
- Principles of management are universal and there can’t be any single best style of managing organization. Managerial actions are dependent upon the environmental circumstances that keep on changing over a period of time.
- Contingency theory facilitates easy understanding of complex organization as it focuses on multivariate nature of organizations. Company implementing this approach of management are able to operate easily under distinct varying environmental conditions. Instead of having one and rigid solution for dealing with problems, such framework is provided where each of the solution is based on prevailing environmental conditions. Sometimes, same problem need to be deal in a different way at different point of time whereas sometime different problems can be handle in a same way at same time.
- Contingent theory is ‘If’ and ‘then’ approach to management. ‘If’ is independent variable whereas then refers to dependent variable of management.
- This theory provides insight into adaptability to both internal and external environment.
Evaluation of Contingent Theory
Contingent theory of management is proved useful on the basis of following: –
- Contingent theory is composed of distinct school thoughts: behavioural, classical and system approach. Principles of distinct school’s thoughts are integrated in it and applied in accordance with prevailing situations.
- This theory is adaptive in nature where structure is formed in such a way that enable organization in adapting to environment changes.
- Pragmatic in nature as situation is properly analyzed first before providing any solution.
- Multivariate analysis technique is followed which consider each of the relevant factors or variables for adopting the best one.
Limitation of Contingent Theory
- Concept of ‘universality of principles’ is not followed that is applicable to specific situations of management.
- Each of the factor relevant to situation of decision making can’t be determined. There are various constraints such as time, money and ability due to which managers cannot gathered complete information regarding environment.
- Contingency theory has added nothing new to management thoughts as Fayol’s theory also discussed about flexibility of management principles.
- No theoretical foundation that should form the basis of management principles is provided by contingency theory. Managers look for distinct alternatives in absence of definite problem which involves huge costs and time.