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What Is Contingency Theory

Contingency theory claims that there is no single best way to organize a corporation and that the optimal structure depends on internal and external factors. It aims to design organizations that can effectively handle uncertainties by tailoring the structure based on environmental contingencies like technology, suppliers, customers, and regulations. Previous theories sometimes fail because they do not account for how management and structure are influenced by different contingency factors in each company's unique environment.

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305 views1 page

What Is Contingency Theory

Contingency theory claims that there is no single best way to organize a corporation and that the optimal structure depends on internal and external factors. It aims to design organizations that can effectively handle uncertainties by tailoring the structure based on environmental contingencies like technology, suppliers, customers, and regulations. Previous theories sometimes fail because they do not account for how management and structure are influenced by different contingency factors in each company's unique environment.

Uploaded by

Shibly
Copyright
© Attribution Non-Commercial (BY-NC)
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What is Contingency Theory?

Contingency theory is a behavioral theory that claims that there is no best way to organize a corporation and the organizational structure of the company. The best way of organizing the company, is, however, contingent upon the internal and external situation of the company.

The contingency approach to organizational design tailors the design of the company to the sources of environmental uncertainties faced by the organization. The point is to design an organizational structure that can handle uncertainties in the environment effectively and efficiently.

Therefore, previous theories such as Weber's bureaucracy and Taylor's scientific management sometimes fail because they neglect that management style and organizational structure are influenced by various aspects of the environment: the contingency factors. Therefore, there can not be ONE optimal organizational design for every company, because no companies are completely similar, and because every company faces its own set of unique environmental contingencies that result in different levels of environmental uncertainties.

Some important contingencies for companies are listed below: 1. Technology 2. Suppliers and distributors 3. Consumer interest groups 4. Customers and competitors 5. Government 6. Unions

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