Contingency theory

							     Contingency theory

  There was this insight that organization
might be dependent on their environment.
 The best way to organize depends on the
  nature of the environment to which the
         organization must relate
  Organization as an open system
• 1955 – 1980
• Organizations are not just closed boxes where
  you might manipulate as you please. They are
  open and dependent on their environment in
  ways that put harsh restrictions on the
  management.
Organizations as organisms
Organisms, like businesses, compete for survival
and evolve to gain an edge.
An organism is responsive to its environment, it
can learn and adapt.
Like organisms, businesses are born, grow and
die.
Organisms are more receptive to environmental
feedback than machines.
Businesses also operate within a delicate ecology
with a lot of interdependencies.
It's not as clear who's in charge of an organism as
it is with a ship, however.
Do businesses have no more control over their
fate than animals facing evolutionary pressure?
Living systems
environmental conditions
adaptation
life cycles
recycling
needs
homeostasis
evolution
survival of the fittest
health
illness
  Joan
Woodward
              Joan Woodward
• technologies directly determine differences in
  such organizational attributes as span of
  control, centralization of authority, and the
  formalization of rules and procedures.
• There are three kinds of technology according
  to JW
     • Unit by unit
     • Mass production
     • Process industry
             Robert Blauner
• ”Alienation and freedom” 1964
• Blauner claimed that alienation was closely
  connected to the organizational logic of mass
  production
• Craft, mass production and process
  production related to alienation like an
  inverted U
Henry Mintzberg
            Burns and Stalker
• The Management of Innovation 1961
• Based on studies of the electronic industry I
  Scotland
• The central theme of the book is the
  relationship between an organization and its
  environment - particularly technological and
  market innovations.
• Internal structure must follow external
  contingencies
             Burns and Stalker
• There are two kinds of environments
   – Stable and changing/dynamic
• And two kinds of internal organizational systems
   – Mechanic and organic
• Firms working under stable conditions can be
  expected to succeed if they have a mechanic system
• Firms working under changing conditions can be
  expected to be successful if they have an organic
  system
         Lawrence and Lorsch
• Differentiation and Integration, 1967
• Differentiation and integration is needed to
  adapt to the requirements of the
  environment.
• How can an organization achieve both when
  they, in essence, are antagonistic
• More of both will be needed as the
  environments will be both more
  heterogeneous and more dynamic
    Differentiation and integration
• Units that have similar orientations and tasks should be
  grouped together. (They can reinforce each other's common
  concern and the arrangement will simplify the coordinating
  task of a common manager).
• Units required to integrate their activities closely should be
  grouped together. (The common manager can coordinate
  them through the formal hierarchy).
• Notice that when there is need for both more differentiation
  and more integration organizational complexity will rise
         Complex organization
• Complex environments necessitated complex
  organizations
• Lawrence and Lorch’s line of thought made
  matrix organization popular
• Charles Perrow (1972) was worried that those
  big complex organizations that had emerged
  during the 19-hundreds were impossible to
  manage and threatened society.
                 James D. Thompson
I.   Where both preferences and cause/effect relations are clear, decision
     making is "computational". These decisions are often short term and
     information about the decision is fairly unambiguous.
II. Where outcome preferences are clear, but cause/effect relations are
     uncertain, Thompson suggest that "judgment" takes over and you make
     your best educated guess. These decisions are based on prior experience
     and are often qualitative in nature.
III. When the situation is reversed, and preferences are uncertain, then you
     rely on compromise between different groups. Political coalitions may be
     built which rely on negotiating and bargaining.
IV. When neither preferences nor cause/effect relations are clear, then you
     rely on "inspirational" leadership. This is where the charismatic leader
     may step in and this type of decision often takes place in times of crisis.
          James D. Thompson
• An organization is dependent on the well
  functioning of its technological core
• Signals and demands (disturbances) from the
  environment of the organization can put the
  well function of the technological core at risk
• Rational organizations assign a variety of
  administrative units to deal with and
  neutralise the disturbances as a protective
  buffer for the technological core
Hersey and Blanchard
  The fate of Contingency Theory
• The empirical evidence of a correlation
  between fit and success is inconclusive
• The idea of fit is somewhat circular
• The notion of environments as given facts has
  been questioned
• But still; contingency theory has great face
  validity and is a dominating perspective in
  much of the literature about corporate strategy