Structural Contingency, the Organisational Structure - Essay Example

? Structural Contingency Research Contents Contents 2 Introduction 3 Discussion 3 Conclusion 5 References 6 Introduction Contingency theory has proved to be an important paradigm in the study of organisational structure. It is a behavioural theory which states that there can be no single strategy or method to structure an organisation. It argues that individual firms adapt to their respective environments. The environments are considered to posses certain essential requirements for innovation, efficiency and sustainable growth (Zeithaml et al, 1988). In the present report, the theory is analysed in terms of its origin and validity in organisational structure. The report will discuss the theory in detail and how it affects the performance of an organisation. The report will also discuss the change on the organisation due to the various contingency variables. The contingency cycle, which changes an organisation from fit to misfit, and then again brings it back to fit though organisation structuring, is explained with examples. Discussion Till the late 1950s, school of classical management dominated the organisational structure. According to this school of thought, one single organisational strategy was effective for all kinds of organisational structure. It was categorised by high degree of planning and decision making. There was a strict hierarchy in this structure and the job responsibilities were well detailed to the lower level staff in advance, by the senior management. From 1930 onwards, this school of thought was challenged extensively by the new school of thought, known as school of human relations. According to this approach, individual employees possessed social and psychological needs. Bottom-up approach was followed here and the lower level departments were increasingly motivated to participate in the decision making processes of the organisation. Many researchers and theorists such as J. W. Lorsch and P.R. Lawrence, (1978) suggested that firms which operated in less stable environments were found to be operating more effectively. Less formalization of the organisation leads to more reliance on mutual agreement between the various departments of the organisation. On the other hand, in case of companies operating in a certain and more stable environment, effective functioning was recognised only when the firm was more formalized, decision making was centralised and there was less reliance on the mutual agreement between different departments. There are many theories of contingency approached. But the most accepted and popular ones are those which are related to leadership, management or organisational structure (Tuai, 2011). According to the overall approach of this, whatever happens in a firm depends upon particular circumstances or factors. In general, when whole or parts of an organisation fits together, they are referred to as organisational structure. More specifically, structures include factors such as complexity, formalization and centralisation (Martinez-Leon and Martinez-Garcia, 2011). The dimensions of complexity can be categorised as, spatial, vertical and horizontal. In case of formalisation, the options for individuals are little. There is a higher vertical differentiation where a manager’s work is defined by other senior manager and the senior manager’s work is defined by other managers. This results in division of labour and decrease in discretion. It is different than spatial differentiation because in spatial differentiation, there are organisation wide procedures that limit the discretion. Examples of higher formalisation are bank call centres, supermarkets. Examples for lower formalisation include lawyers, doctors, academics and that formalisation which are associated with skill. Centralisation refers to the extent of decision making, authority and power. Centralisation is inversely correlated with complexity because increase in complexity reduces the central power by distributing these powers through hierarchies and functions. Centralization is weakly correlated to formalisation. Since there is a lack of discretion among some employees, it implies that the work in centrally directed. There has been found some relationship between technology and structure (Schminke and McCardle, 2011). Technology can be the information, techniques and or equipments used and they need to be high-tech. Technology types can be considered in terms of their functioning. They can be categorised as mass functioning, unit functioning or process functions. The impact of information technology on organisation structure is not clearly understood, but it is profound and rapidly changing. One of the major impacts of information technology on organisational structure can be seen when high degrees of centralisation co exist with high degrees of complexity. For example, in case of supermarket chain, they can manage the marketing and inventories with the help in technology, even without the help of horizontal, vertical or spatial differentiation. The contingency theory of organisational structure has identified a set of contingency factors and at each level of these factor, organisational factor is determined. For example, to increase the contingency level of product diversification, the firm will require an increased level of decentralisation and step into a multidimensional organisational structure. This theory also states that by moving from the misfit, firms are able to adapt their structure, in order to restore their performance and effectiveness. Thus, most of the structural changes are seen as positive and productive for the organisation. According to the theory, the organisation moves from misfit to fit through structural changes, which in turn improves the performance and effectiveness. Any kind of change in the contingency variable moves the firm from fir to misfit. This leads the organisation into disequilibrium from equilibrium. With these structural changes, the organisation goes into a secondary adaptive mode to restore equilibrium and balance. Thus the organisation completes the cycle and the original balance is restored (Hines at al, 2004). Conclusion To study the organisational structure various theories have been established as well as studied. Contingency theory is one of the earliest theories used to study the structure and functioning of the organisation. Many organisations are still adapting this theory for the structuring and functioning of their organisation. From the above study, it is very clear that contingency theory is essentially an adaptive cycle, where the organisation is initially into fit, then structural changes occur due to changes in the contingency variable which brings misfit and reduced the firm’s performance Then the organisation adapts and brings out necessary structural changes to adapt to the new environment and balance is restored. References Hines, P., Holweg, M. and Rich, N., 2004. Learning to evolve: A review of contemporary lean thinking, Emerald 24. Lorsch, J. W. and Lawrence, P.R., 1978. Dimensions of Management System and Performance in Continuous-Process Organizations. Human Relations, 31 pp. 59-75. Martinez-Leon, I. M. and Martinez-Garcia, J A., 2011. The influence of organizational structure on organizational learning, Emerald 32. Schminke, M. and McCardle, J. G., 2011. Back to the future: A classical consideration of the impact of technology on human resource management, Advances in Human Performance and Cognitive Engineering Research, 3, pp.187-205. Tuai, C. K., 2011. A Structural Contingency Theory Model of Library and Technology Partnerships within an Academic Library Information Commons. Advances in Library Administration and Organization, 31 pp.1-87 Zeithaml, V. A., Varadarajan, P.A., Zeithaml, C.P., 1988. The Contingency Approach: Its Foundations and Relevance to Theory Building and Research in Marketing. European Journal of Marketing, 22(7), pp.37 - 64 Read More