Contingency theory SoS Liu Spring 2013 Per Åman

The price – performance trade-off Per Åman

Competition is a race – for survival Winning (survival) is assured through better fit with the environment Trial and error is the field test of organizations Ergo: it is crucial to understand the environment (But if the environment changes so must the organization) Per Åman

Fit and adaptation – structure and process “It is not the strongest of the species that survive, nor the most intelligent, but the one that is most responsive to change” Charles Darwin Two qualities: Structural fit – ability to adapt Per Åman

Organizations are purposeful entities Success is dependent upon 1. formulation of purpose (objective) 2. and delivery of the purpose (implementation) But: Strategies are contingent/ dependent upon their context Contingent upon what? Per Åman

The search for ‘contingency factors’ What determines strategy and structure? Task environment? Environmental uncertainty Stable (little change) – unstable (dynamic, fast changing) ‘Turbulence levels’ (Ansoff 1967), Burns and Stalker (1961) Moderately dynamic – highly dynamic (Eisenhart, 1995, 2000) 2. Technology - Diversity of task environments 3. Size Per Åman

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Environment Strategy Structure Per Åman

Environment Stable Dynamic Technology Process Unit Size Large Small Mechanistic ! ? Organic Per Åman

Specialization of tasks Job and task flexibility Mechanistic: Organic: Specialization of tasks Job and task flexibility Defined duties, responsibilities Redefinition of tasks Clear hierarchical structure Network structure of control & authority Top down instructions and info Lateral info and advice Obedience to org’n and rules Committment to work group Importance by position Importance by individual’s contribution Per Åman

Efficiency is good Slack is bad Alignment! Per Åman

Fit, alignment, congruency, consistency Inbound logistics Operations Outbound Marketing and sales After sales service Infrastructure Procurement Technology HRM Per Åman

Contingency theory, summary Organizations are open systems Structure, and therefore performance, is dependent upon the particular circumstances, situational factors, faced by each organization There is no best way for all organizations but there is a one best way for each organization Per Åman

Efficiency and effectiveness Strategies contain choice on goals and over-arching direction Efficiency: Management control systems integrates efforts towards a common purpose/ goal Management control systems are dependent upon the firm’s strategy Per Åman

The early strategy/ control paradigm Environment – Strategy - Structure Analysis – Formulation - Implementation Contingency – congruency – consistency (external and internal fit) Efficiency and effectiveness Per Åman

A reflection on the early theories/ propositions A teleological perspective A machine metaphor A utilitarian perspective – Darwin/2 A structural perspective – Darwin/2 Per Åman