organizational theory concerning companies
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Contingency theory is a type of organizational theory, that claims that there is no best way to organize a corporation, to lead a company, or to make decisions. Instead, the optimal course of action is contingent (dependent) upon the internal and external situation.
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- Organizational forms — specific configurations of goals, boundaries, and activities — are the elements selected by environmental criteria, and change may occur either through new forms eliminating old ones or through the modification of existing forms. Environmental niches are distinct in combination of resources and other constraints that are sufficient to support organizational form. Organizational forms, then, are organized activity systems oriented toward exploiting the resources within a niche.
Selection pressures may favour or eliminate entire groups of organizations, such as industries, and the changing population distribution of organizations in a society reflects the operation of such selection pressures.
- Howard Aldrich (2008). Organizations and Environments, 1979, 2010. p. 28
- Until the mid-1970s, the prominent approach in organization and management theory emphasized adaptive change in organizations. In this view, as environments change, leaders or dominant coalitions in organizations alter appropriate organizational features to realign their fit to environmental demands (e.g. Lawrence and Lorsch 1967; Thompson 1967; Child 1972; Chandler 1977; Pfeffer and Salancik 1978; Porter 1980; Rumelt 1986). Since then, an approach to studying organizational change that places more emphasis on environmental selection processes, introduced at about that time (Aldrich and Pfeffer 1976; Hannan and Freeman 1977; Aldrich 1979; McKelvey 1982), has become increasingly influential. The stream of research on ecological perspectives of organizational change has generated tremendous excitement, controversy and debate in the community of organization and management theory scholars. Inspired by the question, Why are there so many kinds of organizations?
- Joel A. C. Baum, "Organizational ecology." in: Stewart Clegg ed. Studying Organization: Theory and Method (1999): 71-108. p. 71; lead paragraph
- Within organization studies, contingency theory has provided a coherent paradigm for the analysis of the structure of organizations. The paradigm has constituted a framework in which research progressed leading to the construction of a scientific body of knowledge... Contingency theory states that there is no single organizational structure that is highly effective for all organizations. It sees the structure that is optimal as varying according to certain factors such as organizational strategy or size. Thus the optimal structure is contingent upon these factors which are termed the contingency factors. For example, a small-sized organization, one that has few employees, is optimally structured by a centralized structure in which decision-making authority is concentrated at the top of the hierarchy, whereas a large organization, one that has many employees, is optimally structured by a decentralized structure in which decision-making authority is dispersed down to lower levels of the hierarchy.
- Lex Donaldson, "The normal science of structural contingency theory." Studying Organizations: Theory and Method. Thousand Oaks, Calif: Sage (1999): 51-70.
G - LEdit
- There is no one best way to organize... Any way of organizing is not equally effective.
- Jay R. Galbraith, Designing complex organizations, 1973. p. 2: The two underlying assumptions of contingency theory.
- Contingency theory is an outgrowth of systems theory. This approach essentially argues that the decision-making style should be suitable for the situation in which the organization finds itself.
- Martin J. Gannon. Organizational behavior: a managerial and organizational perspective. Little, Brown, 1979. p . 63
- March and Simon's work reflects a key concern with the issue of inducing contributions from organizational members and emphasizes rationality in organizations. The writing of Likert and McGregor reflects a central interest in organizational arrangements for releasing the underutilized energy of individual members. Argyris' work emphasizes the impact of the organization on individual development. All of these writers tend to start with the individual as the basic unit of analysis and build toward the large organization, while we are proposing to start with larger, sociological entities- the entire organization and its larger subsystems.
- Paul R. Lawrence and Jay W. Lorsch. "Differentiation and integration in complex organizations." Administrative science quarterly (1967): 1-47.; Republished in: Lex Donaldson (ed.). Contingency theory, 1995.
M - REdit
- Contingency theorists suggest that we can best proceed by appointing 'the right people' to the job we have in mind, and by creating flexible authority, communications, and reward structures that will motivate them to satisfy their own needs through the achievement of organizational goals.
- Gareth Morgan. 1986 Images of Organization p. 78; as cited in: Steffen Blaschke (2008). Structures and Dynamics of Autopoietic Organizations. p. 42
- This article [entitled A framework for the comparative analysis of organizations (1967)], was one of three independent statements in 1967 of what came to be called "contingency theory." It held that the structure of an organization depends upon (is ‘contingent’ upon) the kind of task performed, rather than upon some universal principles that apply to all organizations. The notion was in the wind at the time.
- I think we were all convinced we had a breakthrough, and in some respects we did — there was no one best way of organizing; bureaucracy was efficient for some tasks and inefficient for others; top managers tried to organize departments (research, production) in the same way when they should have different structures; organizational comparisons of goals, output, morale, growth, etc., should control for types of technologies; and so on. While my formulation grew out of fieldwork, my subsequent research offered only modest support for it. I learned that managers had other ends to maximize than efficient production and they sometimes sacrificed efficiency for political and personal ends.
- Charles Perrow, in "This Week’s Citation Classic." in: CC, Nr. 14. April 6, 1981 (online at garfield.library.upenn.edu)
The other two 1967 publications were Paul R. Lawrence & Jay W. Lorsch. Organization and environment. Cambridge, MA: Harvard University Press, 1967, and James D. Thompson. Organizations in action. New York: McGraw-Hill, 1967.
- Organizational theorists, at least since the pioneering work of Burns and Stalker, 1961 and Joan Woodward, 1965 and others in what came to be called the contingency school, have recognized that centralization is appropriate for organizations with routine tasks, and decentralization for those with nonroutine tasks. For an early statement see Perrow 1967, and Lawrence and Lorch, 1967.
- Charles Perrow (1984), Normal Accidents: Living with High-Risk Technologies. p. 334
S - ZEdit
- Contingency Theory is not a theory at all, in the conventional sense of theory as a well-developed set of interrelated propositions. It is more an orienting strategy or metatheory, suggesting ways in which a phenomenon ought to be conceptualized or as approach to the phenomenon ought to be explained. Drawn primarily from large-scale empirical studies, contingency theory relies on a few assumptions that have been explicitly stated, and these guide contingency research.
- Claudia Bird Schoonhoven. 1981. "Problems with contingency theory: Testing assumptions hidden within the language of contingency "theory". Administrative Science Quarterly, 26: p. 350
- Contingency theory is guided by the general orienting hypothesis that organizations whose internal features best match the demands of their environments will achieve the best adaptation.
- W. Richard Scott (1992). Organizations: rational, natural, and open systems. p. 89
- Contingency theories dominate scholarly studies of organization behavior, design, performance, planning and management strategy. While they vary widely in subject matter, they have the common proposition that an organizational outcome is the consequency of a "fit" or match between two or more factors. "Fit" is the key concept in this proposition, and the core problem common to contingency theories is not defining this term clearly. This paper examines three ways to define and test this concept of fit: Selection, Interaction, and Systems approaches. A critical discussion of these three approaches will clarify much of the current confusion in the literature on contingency theories, and suggest ways that future theorizing and research can become more systematic and constructive.
- Andrew H. Van de Ven and Robert Drazin. The Concept of Fit in Contingency Theory. No. SMRC-DP-19). Minneapolis: Minnesota University Minneapolis Strategic Management Research Center.