[Commerce Class Notes] on Modern Organizational Theories – Contingency Theory Pdf for Exam

Modern Approach To Management

Contingency Theory Of Management is a new approach to leadership, and the basic premise of this modern organisation theory is that there is no best way to lead an organisation. This theory gives a modern approach to management and enlists the various internal and external constraints that will alter as per the situation. In other words, the approach depends upon the situation at hand and the measures that will be the best course of action.

In the study of Modern Organisational Theory, we will discuss Simple Theory and Contingency Theory. This article on Modern Organization Theory Contingency Theory will help you comprehend all about Contingency Theory and how this approach differs from other organisational theories.

Contingency Theory of Management

The Contingency Theory of Management is an extension of the Systems Organisational Theory. According to the Contingency Theory, there is no specific Organisational design or executive action appropriate for all situations.

The organisational design and the managerial decision of the Contingency Theory depend on the situation, that is, whether it is contingent on the circumstances and the situation. Therefore, the Contingency Theory is commonly referred to as a Situational Theory.

Contingency Theory considers an organisation a system that comprises several subsystems, just as encompassed in the Systems Organisational Theory. Further, both theories emphasise the maintenance and adoption of the activities for the system’s survival and growth.

The two theories also deal with interdependence among the elements of the system and the patterns of relationships. However, there exist some key differences between the two theories.

Key Differences Between The Systems Organisational Theory and Contingency Organisational Theory

The key differences between the Modern Theory Of Organisation- The Contingency theory and the Systems Organisational theory are as follows:

• The Systems Theory mainly focuses on the internal dynamics that deals with an organisation’s behaviour and structure. Contrarily, the Contingency Organisational Theory focuses on the external determinants that deal with an organisation’s behaviour and structure. 

• The Systems Organisational Theory enlists and emphasises the universal principles for its application in all situations. While the Contingency Organisational Theory works on the prescription that ‘it all depends’, the Contingency Organisational Theory elucidates the relationship between an organisation and its external environment and endeavours to fill an analytic break of the Systems Theory.

• The Contingency Organisational Theory offers a more detailed comprehension of the connection between the environment’s multiple variables. It is also action-oriented and is directed towards the application of the System Theory’s concepts. Hence, The Contingency Theory offers practical and useful insights to managers or leaders during a turbulent working environment.

• The theory focuses its views towards the recommendation of the executive actions and organisational designs which are best suited for specific situations. The theory also proposes that apt organisational design is based on environmental variables such as people, size, technology, and more.

Fred Fiedler’s Modern Theory of Organisation- Contingency Theory

The Modern Organisation Theory – Contingency Theory of leadership, was proposed by the well-known Austrian psychologist Fred Edward Fiedler. The Contingency Theory focuses on the importance of the leader’s situation during the crisis and his/her personality. Fred Fiedler and his associates studied leaders’ behaviour in various contexts but mostly based on military context. Therefore, Fred Fiedler’s model is based on this section of the research findings.

Fred Fiedler and his associates enlisted the outline of two leadership styles- Task-motivated and Relationship-motivated. The task-motivated leadership refers to the task accomplishment, and relationship-motivated leadership refers to the interpersonal relationships.

However, central to the Contingency Organisational Theory is the concept of situation, which is characterised by three significant factors which determine the favorableness of various situations in organisations. They are-

Leader-member Relations

deals with the group’s general atmosphere and the various emotions associated with the group and leader, such as loyalty, trust, and confidence. 

Task Structure

deals with the means of task accomplishment and task clarity.

The Position Power

deals with reward-punishment authority the leader possesses over the group.