Interrelationship Between Management Functions

CONTINGENCY APPROACH

Contingency approach advocates that managerial actions and organizational design must be appropriate to the given situation and a particular action is valid only under certain condition. It advocates that the managers should develop situation sensitivity and practical selectivity. In fact, contingency approach has been termed as a common sense approach. Adoption of this approach can be useful in the formulation of strategies, design of effective organizations, planning information systems, establishing communication and control systems, shaping motivational and leadership approaches, resolving conflicts, managing change, etc.

Kast and Rosenzweig have described the contingency views of organization in the following words: “The contingency approach suggests that an organization is a system composed of subsystems and delineated by identifiable boundaries from its environmental subsystem. The contingency view seeks to understand the interrelationship within and among subsystems as well as between the organization and its environment and to define patterns of relationships or configurations of variable.” It emphasizes the multivariate nature of organizations and attempts to understand how organizations operate under varying conditions and in specific circumstances. Contingency views are ultimately directed toward suggesting organizational designs and managerial actions most appropriate for specific situations. 

Congruence between Organization and Environment

An underlying assumption of the contingency view is this there should be congruence between the organization and environment and among the various subsystems. The primary managerial role is to maximize this congruence. The appropriate fir between the organization and its environment and the appropriate internal organizational design will lead to greater effectiveness, efficiency, and participant satisfaction. Kast and Rosenzweig have analyzed the appropriateness of two kinds of structures under different circumstances. 

Firstly, the stable-mechanistic structure is more appropriate when the following conditions are fulfilled:

• The environment is relatively stable and certain.
• The goals of the organization are well defined and enduring.
• The technology is relatively uniform and stable.
• There are routine activities; and productivity is the major objective.
• Decision making is programmable and coordination and control processes tend to make a tightly structured, hierarchical system possible.

Secondly, the adaptive-structure is more appropriate when the following conditions are fulfilled:

• The environment is uncertain and turbulent.
• The goals are diverse and changing.
• The technology is complex and dynamic.
• There are many non-routine activities in which creativity and innovation are important.
• Heuristic decision-making processes are utilized and coordination and control occur through reciprocal adjustments. The system is less hierarchical and more flexible.

Contribution of Contingency Approach

Contingency approach is an extension of the systems approach. The basic theme of contingency approach is that organizations have to cope with different situations in different ways. There is no single best way of managing applicable to all situations. In order to be effective, the internal functioning of an organization must be consistent with the demands of the external environment. The managers must keep the functioning of an organization in harmony with the needs of its members and the external forces.

Contingency approach highlights the multivariate nature of organizations and explains how organizations operate under varying conditions. With its help, mangers can design structures which are highly appropriate to the respective situations. If an organization is operating in a stable environment, it can have a mechanistic structure characterized by high degree of differentiation, centralization of authority, rigid hierarchical relationship, rules and regulations, etc. But if the environment is dynamic, organic structure would be more appropriate. Organic structure is characterized by decentralized decision-making, collaborative relationships, open communication, scope for innovative decision-making etc.

Based on the above discussion, we can highlight the following contributions of contingency approach:

1. Contingency approach is action-oriented as it is directed towards the application of systems concepts and the knowledge gained from other approaches. The contingency approach builds upon this perspective by following in detail on the nature of relationships existing between these parts.
2. Contingency theory attempts to determine the predictable relationships between situations, actions and outcomes.
3. Management should match or ‘fit’ its approach to the requirements of the particular situation.
4. Contingency approach provides significant contribution in organizational design. It suggests that no organizational design may be suitable for all situations, rather, the suitable design is one determined, keeping in view the requirements of environment, technology, risk and people.