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Contingency Management Theory
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Contingency Theory
an organizational theory that claims that there is no best way to organize a corporation, to lead a company, or to make decisions. Instead, the optimal course of action is contingent (dependent) upon the internal and external situation.
"The best way to organize depends on the nature of the environment to which the organization must relate".
-William Richard Scott
Tenets
Environmental Factors
Who needs training?
Why was it founded?
- Leadership Style
- Region
- Available Markets
- Capital
- Human Capital
- Inputs/Outputs
1. Leader-member relationship – high if the leader is generally accepted and respected by followers
2. Degree of task structure – high if the task is very structured
3. Leader's position power – high if a great deal of authority and power are formally attributed to the leader's position
Situations are favorable to the leader if all three of these dimensions are high.
- Researches found problems with Taylorism
- Did not account for environmental factors
- Localized decisions
- Local Managers
- Local Employees
Summary
What is it?
Implementation
Reward Structure
- Localized Structure
- Autonomy
- Dependent on Degree of Contingency
Having a separate set of rules/ processes in different areas within the same company qualifies as part of the Contingency Theory. All that is required is the necessity for local change. (Failed Taylorism)
- Champions Autonomy
- Localized Decision-Making
- Caters to Different Environmental Factors
- Adapts to Changing Situations
- Founded by Fred Fiedler
- Decentralizes Scientific Management
- States that environment affects process
- No "Best" way to run a company