Year 1967

Crucial Message of Contingency theory

“There is no one best way to organize”

The idea that the organizational structures and control systems manager choose depend on—are contingent on—characteristics of the external environment in which the organization operates.

Assumes there is no one best way to manage.

The environment impacts the firm and managers must be flexible to react to environmental changes.In rapidly changing organizational environments, managers must find ways to coordinate different departments to respond quickly and effectively.

1. There is no universal or one best way to manage.

2. The design of an organization and its subsystems must ‘fit’ with the environment.

3. Effective organization not only have a proper ‘fit’ with the environment but also between its subsystems.

4. 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.

Organizational Subunits

EnvironmentOrganizational Performance

Organizational Subunits

A simplified model of contingency theory in organizational research

A simplified model of contingency theory in organizational research

Contingency Variables

MIS Variables

Organizational

Performance

MIS Performan

ce

StrategyStructure

SizeEnvironmen

t Technology

Task Individual

StrategyStructure

SizeEnvironmen

t Technology

Task Individual

ManagementImplication Structure

Development

ManagementImplication Structure

Development

Satisfaction Success

Effectiveness Innovativenes

s

Satisfaction Success

Effectiveness Innovativenes

s

Financial Volume

Financial Volume

Mechanistic StructureAuthority is centralized at the top. (Theory X)

Employees are closely monitored and managed.Can be very efficient in a stable environment.

Organic structureAuthority is decentralized throughout the

organization. (Theory Y)Tasks and roles are left ambiguous to encourage employees to react quickly to changing environment.

Two types of management thinkers- Universalists & Situationlist

Universalists- There is one best approach to management Situationalists- Advocate contingency theory

Contingency theory states- The manager must identify which technique will best contribute to the attainment of management goals, in a given situation

Contingency variables:a) Size of the firmb) Environmentc) Resourcesd) Technologye) Group dynamicsf) Individual differences

Born in1922

Fred Fiedler, in the 1960s and 1970s, was an early pioneer in this area. He identified that various aspects of the situation had an impact on the effectiveness of different leadership styles.

Fiedler’s approach departs from traits and behavioral models by asserting that group performance is contingent on the leader’s psychological orientation and on three contextual variables:

a) group atmosphere b) task structure c) leader’s power position.

What does his theory say’s…..?

This theory explain that group performance is a result of interaction of two factors.

• Leadership Style • 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.

Born in1939

This theory is an extension of Blake and Mouton’s managerial Grid modal and Reddin’s 3-D management style theory. With this model came the expansion of the notion of relationship and task dimensions to leaderships and adds a readiness dimension.

Born in 1932

According to this model, the effectiveness of a decision procedure depends upon a number of aspects of the situation :

a) the importance of the decision quality and acceptance

b) the amount of relevant information possessed by the leader’s & subordinates will accept an autocratic decision or cooperate in trying to make a good decision if allowed to participate

c) the amount of disagreement among subordinates with respect to their preferred alternatives.

• The more dynamic and diverse the environment, the higher the degree of both differentiation and integration required for successful organization.

• Less changeable environments require a lesser degree of differentiation but still require a high degree of integration.

• The more differentiated an organization, the more difficult it is to resolve conflict.

• Where the environment is uncertain, the integrating Functions tend to be carried out by middle and low-level managers where the environment is stable, integration tends to be achieved at the top end of the management hierarchy.

1967

System = A set of inter related components that

operate together

Components according to the approach:-a) Inputsb) Transformation Processc) Outputsd) Feedbacke) Environment

Key concepts in systems approach:-a) Open/closed systemb) Sub-systemsc) Synergy (Within the sub-systems)d) Feedback Mechanism

Transformation ProcessInputs Outputs

Feedback

Environment

Open SystemA system that takes resources for its

external environment and converts them into goods and services that are then sent back to that environment for purchase by customers.

Inputs: the acquisition of external resources.

Conversion: the processing of inputs into goods and services.Output: the release of finished goods into the environment.

Open systems refer to systems that interact with other systems or the outside environment.

For example, living organisms are considered open systems because they take in substances from their environment such as food and air and return other substances to their environment.

The three major characteristics of open systems are:a) They receive inputs or energy from their

environment.b) They convert these inputs into outputs.

c) They discharge their outputs into their environment.

Companies use inputs such as labors, funds, equipment, and materials to produce goods or to provide services and they design their subsystems to attain these goals.

Daniel Katz and Robert Kahn, began viewing organizations as open systems with specialized and interdependent subsystems and processes of communication, feedback, and management linking the subsystems. Katz and Kahn argued that the closed-system approach fails to take into account how organizations are reciprocally dependent on external environments. For example, environmental forces such as customers and competitors exert considerable influence on corporations, highlighting the essential relationship between an organization and its environment as well as the importance of maintaining external inputs to achieve a stable organization.

Closed systemClosed systemA system that is self-contained and thus A system that is self-contained and thus not affected by changes occurring in its not affected by changes occurring in its external environment. external environment. Often undergoes entropy and loses its Often undergoes entropy and loses its ability to control itself, and fails.ability to control itself, and fails.

SynergySynergyPerformance that results when Performance that results when individuals and departments coordinate individuals and departments coordinate their actions.their actions.

`Performance gains of the whole surpass the sum `Performance gains of the whole surpass the sum of the performance of the individual components.of the performance of the individual components.

1973

Management expert Professor Henry Mintzberg has argued that a manager’s work can be boiled down to ten common roles.

According to Mintzberg, these roles or expectations for a manager’s behavior fall into three categories:

Informational (managing by information) Interpersonal (managing through people) Decisional (managing through action)

Managers role assume to coordinate and interact with employees and provide direction to the organization.

Figurehead role: symbolizes the organization and what it is trying to achieve.

Leader role: train, counsel, mentor and encourage high employee performance.

Liaison role: link and coordinate people inside and outside the organization to help achieve goals.

Associated with the tasks needed to obtain and transmit information for management of the organization.

Monitor role: analyzes information from both the internal and external environment.Disseminator role: manager transmits information to influence attitudes and behavior of employees.Spokesperson role: use of information to positively influence the way people in and out of the organization respond to it.

Associated with the methods managers use to plan strategy and utilize resources to achieve goals.

Entrepreneur role: deciding upon new projects or programs to initiate and invest. Disturbance handler role: assume responsibility for handling an unexpected event or crisis.Resource allocator role: assign resources between functions and divisions, set budgets of lower managers.Negotiator role: seeks to negotiate solutions between other managers, unions, customers, or shareholders.

1974

Conceptual TechnicalHuman

TopManagers

MiddleManagers

LineManagers

Ability to use information to solve business problems, identification of opportunities for innovation, recognizing problem areas and implementing solutions, selecting critical information from masses of data, understanding the business uses of technology, understanding the organization's business model.

Human skills involve the ability to work well with other people both individually and in a group. Because managers deal directly with people, this is crucial! Managers with good human skills are able to get the best out of their people. They know how to communicate, motivate, lead, and inspire enthusiasm and trust. These are equally important at all levels of management.

Technical skills include knowledge of and proficiency in a certain specialized field, such as engineering, computers, financial and managerial accounting, or manufacturing. These are more important at lower levels of management since these managers are dealing directly with employees doing the organization's work.