Contingency Theory in Organizational Structure - Essay Example

? Contingency theory in organizational structure Introduction Contingency theory is an approach in management that has been strictly criticized sincethe period of its introduction, in 60s. American and England were countries where a situational approach to management was developed. This approach was introduced in order to create a more flexible policy of organizations. Consumers’ demands were growing and there was a need for organizations to develop tangible organizational structures and policies. It was a new age for managers and consumers. It is relevant to consider development of contingency theory and its application to organizational structure in order organizations’ managers had an opportunity to develop flexible approaches to organizational structural development. Therefore, contingency theory is an alternative for organizations looking for solution of their current problems and tending to structural changes. A basic conceptual framework of contingency theory is a phrase “it depends” (Donaldson, 2001). Therefore, any managerial solution should be made with regard to the external factors of a certain situation in an organization. Moreover, a great role in establishing organizational structure plays nature of the environment of organization. In accordance with the contingency theory: “there is no one best way to organize; any way of organizing is not equally effective” (Galbraith, 1973). In case a perfect relation between nature of organization, external environment and organizational characteristics is established, an organization is on the right way to performance. Such kind of match is called a ‘contingency theory’ or ‘contingency perspective/view’ (Donaldson, 2001). Studies of organizational structures in relation to external conditions of organizations’ operation resulted in studies based on the contingency theory. Woodward (1965) discussed an interesting interrelation between operational complexities of manufacturing firms in England and claimed that organizational structure directly relates to the type of technological process used. In the study conducted by Lawrence and Lorsch (1969) organizations were studied and one ideal type of organization was defined. In case organization divisions operated in matching operating environment, they were successful. In the study made by Burns and Stalker (1961) mechanistic and organic principles of organizations were discussed. In organizations, where mechanistic principles prevailed, top managers developed a policy. Such kind of organizations was characterized by inflexible policies and rigid decision making. Luthans (1973) develops the idea of relation of contingency theory to management theory. Before theory developed by Luthans management theories were not related to each other. For example, process theory was based on planning, organizing, directing, and controlling (Donaldson, 1996). In order to find a perfect balance between management theories, contingency theory was a unifying approach defining interrelatedness and mutual dependence of all integrative parts of management theories. This approach was broadened and resulted in a “theoretical model of Structural Adaptation to Regain Fit (SARFIT)” (Donaldson, 1987, 2001). This model can be interpreted in the following manner: in case an organization finds a best relation between internal and external resources, it reaches high performance levels. It is a right way to reach size growth, introduce innovations and diversification (Hamilton and Shergill, 1992). Contingency variables may lead to organizational misfit to external factors. As a result, levels of performance are decreased and structural changes are introduced (Chandler, 1962). SARFIT theory implies consideration of structural contingency theory as relation between divisionalization changes and strategic changes. Bums and Stalker (1961) are focused on “discussion about changes in mechanistic and organic structures with regard to technological and market change in the external conditions” (Bums and Stalker, 1961). The ideas about changes and dynamics have always been deeply rooted in SARFIT theory. Currently, approaches to organizational structure and changes triggered by environment result in the configuration theory. This theory underlines a match between contingency and structural variables. This match is defined by certain developments of ‘gestalts’ or ‘fits’ (Miller, 1986). With this regard, “a universal theoretical concept is Cartesianism” (Donaldson, 2001). It is underlined in this framework that there are numerous fits. “A level of a contingency variable is matched by a level of the structural variable” (Donaldson, 2001). It can be interpreted in the following way: configurationalists claim that “there are few fits between size and formalization, such as simple structure and machine bureaucracy” (Miller, 1986), Cartesians underline that “there are many fits” (Chandler, 1962). Fits are distributed on a continuous line (Chandler, 1962), there are developed “stepping-stones for organizational growth” (Chandler 1962, p. 45). An organization’s progress should follow from one fit to another in order an organization could reach a high performance at each fit (stage). Extra resources required for contingency expansion are applied for every fit. Thus the idea of a continuous fit line is consistent with the SARFIT model, which provides a methodological theoretical basis for the discussion of “incremental changes in contingency and organizational structure” (Donaldson, 1996). This approach explains the way organizations experience frequent incremental changes. Moreover, Cartesianism may be considered an integral part of organizational change theory. Theoreticians of structural contingency theory claim that “it is not sensible for organizations to move into fit with their contingencies, because while the organization is changing its structure to fit the contingencies, the contingencies themselves change, so that the organizational structural change does not produce fit” (Donaldson 2001, p. 63). In case an organization moves towards the fit, it has a possibility to decrease misfit, and in such a way company’s performance is increased. Furthermore, “the organization may attain a partial fit or ‘quasi-fit’, or in other words a structure that fits the contingencies only partially” (Donaldson 2001, p. 72). It is possible on the one hand, that performance may lead to some contingencies’ expansion. For example, in case “an organization that is in misfit by being below the fit line can follow a growth path of increasing its organizational size and structure by moving into quasi-fit, rather than full fit” (Donaldson 2001, p. 74). In this case, structural changes in an organization may be essential. In order to fit onto a quasi-fit line, an organization meets essential structural changes. In such case, organization’s performance is increased. Still, quasi-fit leads to performance increase via implementation of surplus resources. This example of increment growth leads an organization “into a new state or misfit, a problem which can be resolved by an organization’s increase of structural level. Thus quasi-fit can be sufficient to initiate the cycle of incremental changes of SARFIT, which integrates into efficient organizational development and structural variables” (Donaldson, 2001). Opponents of structural contingency theory claim that administrators do not realize the role theory plays in organization’s structure and cannot fit this structure into fits of contingency theory. Nevertheless, quasi fit enables managers to move in the direction to fit and misfit is reduced and the SARFIT cycle is triggered (Donaldson, 2001). The next issue to be considered is organizational design helping to reach higher performance. With the help of contingency approach, managers can define misfits between organizational structures and contingencies. Supposedly, there are different issues of organizational structure and that “each may have more than one contingency that it fits or misfits, there are many possible misfits that can occur in an organization, each dragging down performance” (Donaldson 2001, p. 134). With regard to the fact that there are different misfits and each misfit can cause a modest negative impact on organizational performance, modern researchers and scientists do not think about modest negative effects properly. In case some misfits are corrected in an organizational structure, an organization would achieve a higher level of performance. Conclusion In this work we discussed the development of contingency theory and its application to organizational structure in order organizations’ managers had an opportunity to develop flexible approaches to organizational structural development. Organizational design problems prevent organizations from a high-level performance. The contingency theory is an approach that balances organization’s choices in order to match to environment. Starting from 60s, managers of organizations have to develop strategic and structural plans of organizations in order to meet demands of the customers. Moreover, competitiveness of the company, a high level of performance depends directly on organization’s ability to overcome misfits of an organization. It is also essential to note that application of the contingency theory to organizational structure enables organizations to fit to changes perfectly. Organization structure developed under the influence of changes in nature of an organization and influence of external conditions, leads to establishment of a more flexible organizational structure. Works cited 1. Bums, T., and Stalker, G. M., 1961. The Management of Innovation. Tavistock, London. 2. Chandler, A.D. Jr., 1962. Strategy and Structure: chapters in the history of the American industrial enterprise. M.I.T. Press, Cambridge. 3. Donaldson, L., 1996. For Positivist Organization Theory: Proving the Hard Core. Sage, London. 4. Donaldson, L., 2001. The Contingency Theory of Organizations. Sage, Thousand Oaks. 5. Galbraith, J., 1973. Designing Complex Organizations. Reading, MA: Addison-Wesley Publishing Co. 6. Lawrence, P. R. and Lorsch, J. W., 1967. Organization and Environment: Managing Differentiation and Integration. Boston, MA: Harvard Business School Press. 7. Miller, D., 1986. Configurations of strategy and structure: Towards a synthesis. Strategic Management Journal (7): 233-49. 8. Woodward, J., 1965. Industrial Organization: Theory and Practice. Oxford University Press, London. Read More