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Contingency Theory – Introduction to Management (ITM)

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contingency theoryContengency Theory | Reference Note
Principles of Management (POM)
Third Semester | Second year
BSc.CSIT | Tribhuvan University (TU)

Contingency Theory
The situational characteristics are called contingencies. This contingency theory are also called situational theory regards the effectiveness of organizations as dependent or contingent on particular situations. This theory highlights the contextual perspective of management. The main message of contingency theory is that there is no best way to manage and lead the organization and that the desired outcome of the organization can be achieved in several ways. The organizational structures and the control system that managers choose are dependent on external environment in which organization operates. The characteristics of environment affect an organization’s ability to obtain resources. How managers design the organizational hierarchy, choose a control system, and lead and motivate their employees is contingent on the characteristics of the organizational environment.

Contingency variables are:

  • Size of an organization
  • Task technology
  • Environment uncertainty
  • Individual differences
  • The geographical spread of the organization
  • The type of work being done

Characteristics of the external environment determine the design of the organization’s structure and control systems in two ways as

  • Organizations in stable environments choose a mechanistic structure (centralized authority, vertical communication flows and control through strict rules and procedures
  • Organizations in changing environment choose a organic structure (decentralized authority, horizontal communication flows, cross department co-operation)
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