3. Contingency Theory
The contingency theory is an extension of the open system. It has an adaptable approach which is applicable to all situations. Organizing a business based on changing situations and the environment has its own quality and advantages. It is ready to cope with the increasing needs of the company and society. The contingency theory is a situational theory which changes its approach according to the requirements of the situation. It is away from the angle of different theories of management, although it cannot claim that the valuable theories of management are not applied for solving the problem. It is an attempt to provide something more contributory for the help of practicing managers. The basic tenets of the theory are the relationships between various organizational subsystems. Supra-systems are established after focusing on the external and internal factors of environment. There is no prescribed managerial action or organizational design for management action. The best organization to be followed depends on the situation. It deals with a variety of organizational and environmental variables with empirical support.
Organization environment relationship – The environment plays a significant role in the management decision. It decides the interrelationship within and among subsystems and supra-systems. Since the external environment is a major variable influencing management decisions, the organization structure, operation and behavior is molded according to that. It is essential to study empirically the impact of environmental factors on human behavior and institutional activities to develop an appropriate casual relationship between the organization and environment variables. Man and environment are closely related. Man is a part of the subsystem in a system of organization. He may influence the system and environment, which may also have a direct impact on the behavior of human beings. Man is a social being. He is influenced by the social set up which is visible in employee dissatisfaction and consumer disappointment. Social costs are not included in the balance sheet and profit and loss account, although they influence business activities significantly. Social accounting and social auditing are developed depending on the impact of the social system on the organization. The contingency approach considers the management activities to be flexible and adaptable to meet situational requirements. It integrates the diverse specialists and management experts for management functions. Innovation and creativity are recognized for management development. Management was considered to be the universal and everlasting truth but it is now recognized that management is not to be rigid. It has to be changed as per the requirements of the situation. All managerial actions depend upon the prevailing circumstances and situational factors. Management has to be adapted to meet changing conditions. The functions of planning, organizing, directing and controlling are molded to meet changing requirements.
Organization technology relationship – Technological development has a wide influence on organization. Many authors have empirically tested the organization-technology relationship. Burns and Stalker have pointed out that a slow rate of technological changes is used for adaptable policies and procedures. Dynamic and flexible organizations are sensitive to technology. They immediately accept the technology for the improvement of management activities. The mechanic structure is routing and highly centralized. It lays emphasis on formal authority and communication. The organic structure believes in decentralization with flexibility for innovation and technological development. Woodwand has pointed out technological complexities with controllable and predictable processes. He has established the relationship between technology and structure as well as structure and the success or organization. The contingency theory is developed in the current unpredictable and uncertain environment. Each and every business or industrial unit is a victim of circumstances and risk. No business can develop unless the management knows how to manage the units within uncertainties. It has become certain that organizations have to fact complexities and risk. The contingency theory comes to their rescue. It is a comprehensive theory because it can be used for understanding the entire organization. Management is a situational analysis and decision-making process. It is useful because problem solving puzzles are a unique transactional management process. However, it requires expert and experienced managers to handle the situation with the contingency theory. A competent manage can guide and direct employees effectively and efficiently.