The contributors of contingency theory are; John Woodward, Paul Lawrence, Fred Fiedler, James D. Thompson, Jay Lorsch, etc. This theory evolved during the 1970s. The theory is built on the major assumptions of systems theory lie; the organization is an open system and subsystems of it are interdependent and interactive with one another. It is simply an assumption that ng single theory or model of business management can apply to all business circumstances. The contingency theory suggests that a wide range of external and internal factors must be considered and the focus should be on the action that best fits the given situation. The theorists of this theory have identified the following contingency variables which affect a manager’s decision:
- Size of the firm:
- Group Dynamics
- Subordinates’ task
- Individual Differences
On the basis of the above-mentioned contingency variables, managers need to evaluate them according to the situations prevailing in the organization and determine the best way to manage them. This is called contingency management theory.
Features of Contingency Management
1. Management action is contingent on certain actions outside the system or subsystem.
2. Organizational action should be based on the behavior of action outside the system so that organization should be integrated with the environment.
3. Because of the specific organization environment relationship, no action can be universal.
4. It varies from situation to situation.
Contributions of Contingent Management
l. Employee development and training is enhanced.
2. Decision of decentralization fosters the participation of employees.
3. The contingent theory helps to establish communication and control systems.
4. Under the framework of contingent management planning is formulated based on decision systems.
Limitations of Contingent Management
1. The theory lacks adequate literature on tools and techniques.
2. The theory is complex, to use and understand.
3. Due to difficult empirical testing the managers are reluctant to apply the theory.
4. The theory is highly reactive rather than proactive.