An anaylsis of the Contingency theory

During 1950 and 1960, some small group decision making developed the idea of contingency theory. At the end of 1950s, academic schools began to utilize the contingency idea into organization theory(Donaldson 1996). The term “contingency theory was created, it challenged the traditional management notion: finding the one best way to organize(Hatch & Cunliffe 2006). Together with special and united notion of subsystems, the contingency theory drew theorists’ attention and obtain acceptance. Then more and more researchers took part in studying this effective problem solving approach.

This article will first elaborate some general idea of contingency theory’s theoretical propositions, the definition of contingency theory and the core theoretical idea . Secondly, Alfred Chandler, Miles and Snow’s researches on ‘strategy’, one of the main organizational contingencies, impacts organizational structure. Thirdly, another important variable, technology will be talked based on Woodward, Perrow, Thompson and Robbins four remarkable researchers’ work. Some kind of technology types will be illustrated with each study and then Robbins divided them into two categories. His conclusion of technology- structure on complexity, formalisation and centralisation will be discussed as well. At the last part, there is the evaluation of contingency theory when applying to organization analysis.

Organic form and environment are imperative factors supporting the organization evolves (Clegg & Hardy 1999). This is the root of contingency theory. Lots of problem emerged when scientist and researchers tried to design a universal form for managers to administrate the organization. Due to different internal condition and external environment, one approach is working upon one system does not mean it can have effect in another system(Daft 2001). Hence, contingency theory appears with the core idea “there is no one best way ” (Daft 2001: 218, Linstead, Fulop & Lilley 2009:24, Morgan 2006:422). Each organization constitutes the organizational designs based on its own environment. Efficiency can be achieved when an organization adapt well to the subsystems and environment. That is the more organization constructs structure appropriately and meet throughout demands, the more organization’s members feel satisfied. As concluded by Donaldson(1985) the most qualified and efficient means to frame and administrate an organization is in accordance with the organizational feature and out side circumstances. To apply contingency theory aims at distinguishing as many relative internal and external variables as possible (Linstead, Fulop & Lilley 2009). In 1967, Paul Lawrence and Jay Lorsch from Harvard University led a study and obtained two main perspectives: 1. Different sorts of organizations have to take order with diverse market condition and technological issue. 2. Precarious circumstance cause organizations carry on a higher extent of internal differentiation then those which are in the less complicate and more steady environment. The conclusion improved contingency approach that, organizational styles may alter among organizational subunits as a consequence of their subenvironment’s specific factors (Morgan 2006). Contingency theory focused on the nature of the mission, the structure of the system, the human factors and technology, it was argued that the structure of an organization would be swayed by certain variables (Linstead, Fulop & Lilley 2009). The factors that can lead organization achieve effective performance are called contingencies, contingencies conclude size, strategy, technology and environment, organizations are shape by these contingencies (Donaldson 2001).

In this article we just analysis two of them. Strategy and technology. One share the history when contingency theory was determined, another become one of the imperative variable with the development of technology.

Strategy

Strategy can be defined as the long term goods and missions of a company with a set of action applied to accomplish the goal and missions(Zwerman 1970). Strategy have two related levels: corporate level and business level. In corporate level, strategy try to arrange the roles for each part of business in organization. It expects to determine the nature of business for organizations. In business level, multi business organizations would run its own strategy, products or services for each business line. Strategy was thought to be the exclusive factor affects organizational structure 40 years ago. From then on, other factors’ effect in the organization were specified, but the substructural influences of strategy is still maintained.

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Since Afred Chandler, Raymond Miles and Charles Snow, Michael Portor and many other professors made a great contribution to strategy- structure relationship. Here we use Chandler, Miles and Snow’s research result to have a general concept about how strategy determine the organizational structure.

The initial most influential research was pursued bu alfred Chandler. From 1900 to1950, Chandler selected 100 American mass manufacture companies to do large quantity of case studies. From Chandler’s observation, at the beginning of operation, companies often have one single product, decisions are centralized in the senior manager, the structures are tend to be low complexity and formalization. When companies evolve to multiproduct, the structure is divisionalized. As they are looking for growth, the strategy will become ambitious and elaborate the complexity increased. The future stage is product diversification. In this stage, structure form enable the resources are allocated efficiently and support unit mutual cooperate performance. So Chandler argued that organizational strategy would be proposed before structure established and ir could lead the variation of the organization’s structure(Robbins & Barnwell 2006).

Raymond Miles and Charles Snow(1978) demonstrated four organizational strategic types according to the change rate of products and markets. They are named “defenders, prospectors, analysers and reactors”. Owning to the wild but specific concept of the types, we can distinguish all the organizations.

The first one is defenders, reading from the name we can get the information from this type is the organization is highly aggressive. Indeed, this kind of organizations keep themselves in stable environment by producing a small scale of products, thus they can only meet a limited extend of demand and market. They provide aggressive prices or high quality products to prevent competitors. Defenders may pay little attention to the external situation, such as interests inclination or new area opportunities. But they work on their own product development and optimum producing issues. This strategy cause organizational structure tend to be high extent of formalization and centralization, broad scale labour distribution, strick control to achieve efficiency.

The second type is prospectors. The key point of this strategy is innovation and attempt. It emphasizes on new opportunities. They would apply a large scale investigation, do throughout researches, get the superior product idea and produce the products. Prospectors are not afraid of uncertainty. They can meet the demands of progressing society and settle themselves in dynamic environment. In another words, prospectors will lose their advantages when tomorrow’s world is similar with today’s.

The third one is analysers. This strategic type can only appear after prospectors because they are copying the successful products from prospectors. They use their ideas, experience in order to eliminate risks and obtain profit maximization. Steady is waht they want, but they can also perform well in flexibility, for example, analysers can have high extent of standardisation and routinization in manufacturing and distribution department meanwhile they are always ready to develop new products line, so marketing and Research&Development department are response to support this flexibility. Hence the structure of this type is moderate centralisation.

The last one is reactors. This type describes the organizations fail to respond the market appropriately and perform very reluctant (Robbins & Barnwell 2006).

Technology

The term technology has a development history from mot important to be one of the organizational structure determinants. Fifty years ago in organizational theory, technology was used very carefully but now it becomes a common word to utilize. However, it is very difficult to define technology based on it influence to the organizational structure. Researchers can only get the general agreement on defining technology via performing a widely applicable approach to all organizations. Here, technology means the techniques facilities and information which organization applied to convert inputs into outputs. This definition consists of the mechanic producing part and personal information contribution to complete a task. Thus na matter what kind of organization it is, it will utilize technology in some extent to produce outputs.

Due to researchers can not develop an accurate, universal approach to measure technology, the next step how to estimate become another tough problem. Same as “strategy”, there are numerous researchers applied different means to compare. Here we can just analysis three of those significant researches.

Firstly, Joan Woodward’s research. She was the pioneer to look at organization structure in the technological way. It was in the middle 1960s, Woodward’s research objects were manufacturing factories. Hence her result can only analysis manufacturing industry. Her gaol was to find out the connection between organization structure to effectiveness. There were 100 producing companies taking place in, their number of employees are from less than 250 to extend 1000. According to the result, woodward divided the companies into three types: unit, mass and process production.

Unit production were low technology complexity, process production were high technology complexity. But technically, they both had low overall complexity, formalization and centralisation but high level of skilled employee’s proportion. On the contrary, mass production had the median technology complexity. It occupied high overall complexity, formalization and centralization but low proportion of trained employees. Woodward also illustrated other figures from the study, there will be too much to discuss. So the conclusion to the relationship between organization structure and effectiveness was : companies have the most congruent technology to the structure, they can acquire the most effectiveness.

The second one is Perrow’s study. Instead of Woodward doing lots of data analysis. Perrow put forward his predictions. Four types of technology were mentioned: routine, engineering, craft and non-routine. There were depending on Perrow’s two knowledge technology dimensions: task variability and problem analyzability. From Perrow’s view the degree of technical routine would impact the degree of organization structural intensive. That is, the higher degree of routine technology applied, the higher degree of organization structured, so flexibility structure would be performed in non-routine technologes. The content of specific prediction was: on routine technology high formalisation, centralisation and wide extend of control. On engineering the would be low formalisation, high centralisation and would be low formalisation high centralization and moderate control. For craft, moderate formalisation, low centralisation and moderate wide extend of control. For non-routine, low formalisation and centralization, moderate narrow control.

James Thompson’s work emphasized technology decided strategy.reference He believes that technology designs strategy which applies to decrease uncertainty. Three categories were proposed according to task differentiation: long- linked, mediating and intensive technology.

The feature of long-link technology is the consistant, .mutual interdependent tasks. They have moderate complexity and formalisation. Mediating technology’s trat is intermediately to connect different s=customers to meet each other’s need. Ti is pooled interdependence with low complexity and high formalisation. The third one, intensive technology deals with various kind of problems by utilizing wide scale customized responses, moreover it is reciprocal interdependence. As a consequence, intensive technology has high complexity and low formalization.

These three outstanding studies can not content all the technology- structure research. But they were from different aspects and selected by Robbins and Barnwell. Even though everyone of them had limitations, the criticism can not conceal the great contribution they made. So we just pay attention to how did those studies help us understanding the role of technology played in organization structure. As the conclusion Robbins and Barnwell demonstrated that the extent of routine lead differentiation of transforming inputs into outputs. They refined all the types into tow categories: routine and non-routine. Under routine there were Woodward’s mass and process, Perrow’s routine and engineering, Thompson’s long-linked and mediating technology. For non-routine, there were Woodward’s unit, Perrow’s craft and non-routine, Thompson’s intensive technology.

On the whole, the filiation of technology and complexity is that the degree of routine technology is inversely related to complexity. The more routine, the lower complexity, non-routine technology seems to bring high level complexity. The relation between routine technology and formalization is proportionate. Non-routine technology necessitate flexible and careful control system. Due to incompatible result, we can just indicate the technically rational argument of technology would have a centralized system, meanwhile non-routine are depending heavily on professional knowledge.

Let us use the former knowledge to analysis two examples, two restaurant. The first one is in our University of Leicester, named “Chi” on the first floor of Charles Willison Building. The second one is world wide famous “KFC”. Different strategy and technology could show the contingencies influence the organizational structure.

Firstly, we talk about strategy, if we apply Miles and Snow’s strategic type to analysis, Chi could be “defenders” and KFC could be “analysers”. Because the most customers of Chi are university students, teachers or some people incidentally stop by, the does not need to pay a lot of money on marketing because many of the customers are regular. The restaurant offers some regular meal everyday and also have alternative meal option which changed everyday. They may pay little attention to external situation, but work on the internal development. In each KFC restaurant the customers could be any age, any one from the world, the scale are much broader than Chi. KFC provide regular kinds of food, they have high extent of standardisation and routine meanwhile they always introduce new products by changing the taste of hamburger or fried chickens to attract new, old customers.

Secondly, we discuss the technology. Due to there are so many types of technology under the category of routine and non-routine, we just roughly distribute Chi and KFC of non-routine and routine.everyday KFC’s employees do mass of routine work, each of them response for their own process and the process could be very easy. The standardized equipment support employees to finish their routine job, cook time, temperature, tastes are regulated, so they are high formalization, centralization and low complexity. On the contrary, employees of Chi could deal with different meals, vegetables, they need coordinate the materials well, use their specialized knowledge to cook, temperature, time, tastes need to be done by personal experience. So that is low formalization, centralization and high complexity.

Evaluation

Traits

Contingency is one of the most useful theory for organizations to apply. It is a significant theoretical lens to observe an organization, the theory basis is upon substantial empirical support(Donaldson 2001). Contingency theory offers a consecutive paradigm to analysis the organizational structure. Furthermore, the paradigm has developed a set of framework that leads studies carry on within the scientific background knowledge (Donaldson 1996). Contingency theory can often solve extensive scale problems and difficulties because this ability, it can lead a simple decision rule evolve to gain a large scale sway in organization’s performance. This is a big advantage comparing with other theories. The filiation among subsystems are clear and may be much easier and simpler to comprehend than many other types thoery. So it is saying, contingency theory emerges to be a powerful means to develop organization’s performance(Betts 2003).

Deficiency

A common critique on contingency theory is that: this theory separates the throughout part of organization participating overall performance, it is independent organizing process. Because this approach encourages managers make the decision and design the structure according to different contingencies. Thus this approach neglects a fact that under manager’s political proposal the organizational structure could be changed or re-built even if those proposals are irrelevant to environmental turbulence or technology restriction(Silverman 1970, Clegg & Dunkerley 1980, Honour & Mainwong 1982, Mullins 1985, Dawson 1980). Even though contingency theory emphasize on organization’s choice, at the real time it barely offers alternative to change strategy or conditions during organization performing change process (Linstead, Fulop & Lilley 2009). Schoonhoven(1981) indicated a view that contingency theory could merely be an orientating strategy, with no substance, it can not account to be a theory. The opinion of best fitness is faint. The various contingencies may lead far more complex and make the analysis tougher. Take those various variable tinto account have its strengths, but ir may incapacitate managers to forecast what response lead to efficiency. Also it becomes hard to foresee the interaction among contingencies. At last well- structured organization’s running are supported by the corporation of organizational size, structure, strategy, environment and some other contingencies, however some decisions can not be put forward because some contingencies are very hard to change, like size, structure, especially environment.

Conclusion

Organizational design consists of many elements, size, strategy, technology, environment. At the contingency theory demonstrates, organization effectiveness can be achieved by the coherence of these variables.

As we talked about two contingencies in the article, strategy and technology, strategy is the one of the initial variables to be confirmed. Nevertheless, technology is confirmed along with the development of contemporary technology.

Contingency theory as an imperative approach for managers, leader to scan the organization has been widely used all around nations. With the deficiency maximize gaol and empirical foundation contingency theory plays a significant role in many organizations structure improvement.

Let’s end the article with Donaldson’s words: “misfit leads toward fit, but also fit leads toward misfit”