4.3
Contingency Theory Approach
contingency Theory
When you take a contingency approach, you don’t expect there to be one best way of doing something – you need to be flexible depending on the situation.
This approach sees organisations as adaptive systems adjusting to changing circumstances or ‘contingencies’.
Contingent Factors:
Environment
Size
Technology
upon which an organisation relies
within which the organisation operates
of the organisation.
Contingent Factors:
Technological contingencies
the core technology, or the primary production system of an organisation.
The technologies we are concerned with here are the things in an organisation that transform inputs into outputs – the information, equipment, techniques and processes
key research into the relationship between technology and organisational structure.
Woodward: types of production
Mass Production
Process Production
Unit Production
small batch production
Technically complex units and large equipment
Emphasize employees skills over machines,
Flat structure with narrow span of control
Focused on R&D as the most critical activity
Large volumes of identical products, using assembly lines and machines.
Tall bureaucratic structure
Production is the most critical activity
The most complex system of production
More layers of hierarchies
Wide span of control
Marketing is the most critical activity
Perrow: types of technologies
Focused on knowledge technology rather than production technology.
knowledge technology Typologies
Based on two criteria of Task Variety and Task Analyzability
Craft technology (low task variety, low task analysability)
Non-routine technology (high task variety, low task analysability)
Routine technology (low task variety, high task analysability)
Engineering technology (high task variety, high task analysability)
bureaucratic in nature, with a tall hierarchy, formal and standardised rules and procedures.
the hierarchy of an organisation would be flatter, with many horizontal linkages and integrating devices (cross-functional teams such as high-tech product designers and advertising agencies).
Perrow therefore argued that the ‘routineness’ of the knowledge technology is associated with formalisation and centralisation of the organisational structure.
Thompson: technological interdependence
refers to the extent to which tasks performed by one particular unit in an organisation will affect the tasks performed by other departments, teams or individuals.
types of technological interdependence
sequential interdependence
Reciprocal interdependence
Pooled task interdependence
Types of technology
Long-linked technologies
Intensive technologies
Mediating technologies
Thompson showed that the type of interdependence and the associated coordination required helps to determine what structure is suitable for the organisation
Pooled – low interdependence
co-ordination used: Categorisation; standardisation; rules and procedures
Cost of co-ordination: Low
Examples: Banks and branches; university departments; baseball teams
Form and degree of task interdependence: Sequential – medium interdependence
Main types of co-ordination used: Planning; scheduling meetings; committees
Cost of co-ordination: Medium
Examples: Assembly line; fast food restaurants; American football teams
Main types of co-ordination used: Mutual adjustment; unscheduled meetings; face-to-face discussions; physical proximity; interdepartmental teams
Cost of co-ordination: High
Form and degree of task interdependence: Reciprocal – high interdependence
Examples: Hospitals; airports; basketball teams
Environmental contingencies
The environment within which an organisation competes can also impact on its structure. This applies particularly to the unpredictability of the environment.
two key concepts associated with the environment:
the degree of environmental uncertainty
environmental complexity.
A mechanistic (bureaucratic) structure is generally encountered in stable and/or slowly evolving environments. However, an organic form is much more likely to enable firms to survive and prosper in fast-changing and/or more unpredictable environments.
Lawrence and Lorsch (1967) developed an open systems theory of how organisations and organisational sub-units adapt to best meet the demands of their immediate environment.
differentiation – the degree to which the tasks of individuals, groups and units are divided up
integration – the degree to which units in an organisation are linked together, and their respective degree of independence.
It is the level of environmental uncertainty that determines the most adequate organisation structure.
The size of an organisation
Researchers in the 1970s and 80s such as Peter Blau, the Aston group and John Child found that larger organisations have more rules, more layers of management and are also more decentralised.
Strengths and limitations of the structural contingency approach
there is no one best way of organising or managing, in other words, there is no one size fit all.
Organisations are open systems that react and adapt to environmental elements which can influence them in a number of ways.
This approach promotes the idea that by bringing the organisational design into alignment with internal and external contingencies, the organisation can respond to changing circumstances and adapt in a manner that ensures it survives and prospers.
Strategic choice approach
The biggest criticism of all remains the fact that it is deterministic in outlook, as is considered next.
This means that, in this approach, a set of internal and external conditions would entirely determine the form of an organisation, thereby eliminating the notion of choice
This approach was challenged by Child (1972, 1997), who disagreed that structures were solely determined by external and operational contingencies. For him, managers who control the organisation can and do make a choice about the way to structure it.
The balance between contingent elements and choice