Contingency theory or approach can also be termed as situational approach. This theory is of the view that there cannot one specific action or response for different situations faced by the organization. The best action for every situation is the one that meets the requirements of internal and external environment. The developers of contingency approach are of the view that systems approach is not effective in describing the relationship shared between the organization and its external environment. Contingency theorists have attempted to meet this limitation of the systems approach by proposing an appropriate action that should be taken in response of an event occurring in the environment.
The contingency approach was invented by the people from different walks of life like managers, researchers, consultants, etc., after their attempts of applying other management theories were unsuccessful. They discovered that the real life situations and the concepts developed by major schools of management are not compatible with each other. This lack of applicability of management theories led to the development of contingency approach.
Contingency approach is a situation based approach which compels the managers to examine, analyse and identify the situation. It encourages the managers to prepare inventories of management theory, principles, techniques and concepts in the light of the analysed situation. Different situations demand different responses from the management. It is necessary to check legitimacy and applicability of management tools in terms of a given situation. Thus, this approach suggests that the management tools should be tailored and customized according to the situation.
Implications of Contingency Approach
The contingency approach holds a significant place in the modern theory of management. It is a refined approach that helps n understanding and in minimizing the organizational complexities. It stresses on the dynamic nature of organizations and tries to understand and analyse the ways in which the organisation conducts its operations in the ever changing business environment. Contingency approach proposes organisational plants and the suitable managerial actions for specific situations.
The major viewpoints of contingency approach are as follows:
- Management is broadly based on current situations and the concept of universal principles of management is not applicable in the ever changing scenario. There is no specific methods that is best for carrying-out a particular activity.
- This approach proposes appropriate options for those managerial actions that are affected by the internal and external factors of the business environment.
- The organization has to continuously interact and communicate with its environment. This interaction restricts the organization and its departments from taking independent and absolute actions.
Merits of Contingency Theory
- Contingency approach has proved its importance time and again, as a logically sound approach. Due to its practical applicability, it has helped the managers in becoming effective leaders. Apart from Fielder, many researches have certified the legitimacy of the contingency management approach.
- This approach has increased the scope of leadership theories. It has encouraged the managers to apply different theories and styles in different situations.
- This approach has the ability to predict and identify which leadership style will be more effective at which particular situation.
- Leaders cannot be effective at any and all given situations and therefore the approach proposes that the organisations should evaluate the performance of the leader in optimal situations and on the bases of their leadership style.
- The theory provides the necessary information regarding leadership styles, which can be helpful for the organisation in developing leadership profiles.
Demerits of Contingency Approach
- It does not have a theoretical base.
- Because of lack of underlined principles, the manager working according to the contingency approach has to consider all the possible options or solutions.
- It is not pro-active and only recommends the alternatives to be undertaken in a given situation.
- This theory sounds to be simple but converting it into a partial approach is a difficult task due to the present of several contingent factors.