1. Contingency theory SoS Liu Spring 2012 Per Åman 2

2. The price – performance trade-off Per Åman3

3. Competition is a race – for survival Winning (survival) is assured through better fit with the environment (But if the environment changes so must the organization) Ergo: it is crucial to understand the environment Trial and error is the field test of organizations Per Åman4

4. 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 Åman5

5. Contingent upon what? But: Strategies are contingent/ dependent upon their context Organizations are purposeful entities Success is dependent upon 1. formulation of purpose (objective) 2. and delivery of the purpose (implementation) Per Åman6

6. The search for ‘contingency factors’ Task environment? 1.Environmental uncertainty Stable (little change) – unstable (dynamic, fast changing) ‘Turbulence levels’ (Ansoff 1967), Burns and Stalker (1961) Moderately dynamic – highly dynamic (Eisenhart, 1995, 2000) Per Åman7 What determines strategy and structure?What determines strategy and structure? 2. Technology - Diversity of task environments 3. Size

7. Per Åman8

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9. 10 Environment Strategy Structure

10. Per Åman11

11. Per Åman12

12. Efficiency is good Slack is bad Alignment! Per Åman13

13. Per Åman Fit, alignment, congruency, consistency Inbound logistics OperationsOutbound logistics Marketing and sales After sales service Infrastructure Procurement Technology HRM

14. 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 Åman15

15. Efficiency and effectiveness Effectiveness: Strategies contain choice on goals and over-arching direction Efficiency: Management control systems integrates efforts towards a common purpose/ goal Per Åman16 Management control systems are dependent upon the firm’s strategy

16. The early strategy/ control paradigm Environment – Strategy - Structure Analysis – Formulation - Implementation Contingency – congruency – consistency (external and internal fit) Efficiency and effectiveness Per Åman17

17. A reflection on the early theories/ propositions A teleological perspective A machine metaphor A utilitarian perspective – Darwin/2 A structural perspective – Darwin/2 Per Åman18