Contingecy approach to management

AN OVERVIEW ABOUT CONTINGENCY APPROACH OF MANAGEMENT-(ONE OF THE MODERN THEORIES OF MANAGEMENT)

1. CONTINGENCY APPRAOACH OF MANAGEMENT G.KRISHNA VAMSY

2. Contingency approach states that there is “ no one best way ” to manage an organisation. It is also known as situational approach.

3. In 1970s , it is recognized as a key to effective management. CONTRIBUTORS: L.W. Lorsch Joan Woodward Burns George Stalker Paul R.Lawrence

4. Joan Woodward ( 1916-1971) – “Management and Technology”, 1958, ”Industrial Organization”, 1965 – Studied a large number of firms (100) in the South Essex area of England in the 1950s – Found that organizational form varied, and correlated with production technology – Concluded that there was not ”one best way” to organize – the nature of the production process would determine which form that would be most suitable.

5. Tom Burns (1913-2001) and G. M. Stalker – “The Management of Innovation” (1961) – Studied the introduction of electronics in Scottish industry – Described two ideal types of organization on each side of a continuum – the mechanistic and the organismic (organic) organization – The organization as a result of the simultaneous working of (at least) three different social systems: • Formal authority: aims, technology, relations with the environment • Cooperative systems of people with different aspirations • The political system – the competition and cooperation for power

6. Paul R. Lawrence (1922-2011) and Jay W. Lorsch ( 1932 ) – “Organization and Environment: Managing Differentiation and Integration” (1967) – Question: Why do people seek to build organizations? Answer : In order to find better solutions to the environmental problems faced by them . – Therefore: • It is people who have purposes, not organizations • People come together to coordinate their different activities into an organization structure • The organization’s effectiveness is judged from the extent to which the members’ needs are satisfied through the planned transactions with the environment – In order to cope with the environment, organizations develop units and formal structures suited to the particular environment(s) they operate in.

7. What you do “depends” on the “situation”. -internal contingency factors -external contingency factors

8. Internal Contingency Factors Purpose Tasks People Technology Structure

9. External Contingency Factors Socio-cultural Factors Legal /Political Factors Economic Factors Technological Factors

10. General Environment of Coca Cola Sociocultural Concerns about health Easier access to refrigeration Baby boomers drinking less Immigrants drink less Concerns about recycling Increased acceptance in China and India Government Increased health standards for bottling Stricter liability legislation Economic Slow economic growth Prospect of economic recovery Technological New recycle friendly canning tech. New promotional opportunities via the internet Threat of substitute drinks Coca Cola

11. Instead of propagating universally applicable organisation-management principles, this theory tries to demonstrate that different circumstances require different organisational structures What works for one organisation may not work for the other. Managers need to understand the key contingencies that effect the management practice for a given situation.

12. EXAMPLE OF A SHOE MANUFACTURING COMPANY : A shoe manufacturing company is faced with the problem of decreasing profits; Solution can be: May establish a committee of sales and production personnel to coordinate the production and distribution of goods under the assumption that large inventories are responsible for the decline in profits - (Systems theory ) By application of a contingency perspective: Would enable to examine the situation and to determine the cause of decreased profits before a new procedure or program is implemented.

13. Example of a super market manager: Problem: Customers Are complaining that queing lines and time for billing are high. Solution: Manager identifies that, 1)The waiting times and queue lengths are always changing. 2)So a flexible approach is required. Then he observes the customers and assings duty to the workers according to the changing situation.

14. Studies show that companies that operate in less structured environments are more successful with a flexible approach to management, while companies in a more stable environment do better with a more rigid and structured management style of operations . When the uncertainity of environment is high, an organic structure(more flexible one) is suitable and when uncertainity is low a mechanistic structure is suited.

15. Contingency theory is designed to provide the manager with the capabilities to examine numerous possible solutions to a problem. Adapting to changing circumstances- No two situations are absolutely identical, therefore each situation requires its own unique solution. To adopt this approach managers must sample all the past and present ideas, some refer this to the ‘smorgasbord approach’.

16. The way you manage should change depending on the circumstances. Sometimes a bureaucratic organization is most effective, sometimes a more loosely structured one; sometimes a more classical approach is best, sometimes a more modern one. The most effective management style will vary depending on the type of organization, its size, its environment, and the particular situation/problem it faces at the time.

17. Limitations of Contingency Approach: Difficulty in determining all relevant contingency factors and showing relationship between them may be complex. It is totally practical approach without support of theoretical and conceptual frame work. Sometimes manager finds difficulties in analyzing the situation and discovering appropriate management technique in absence of proper research and lack of proper understanding of the situation.

18. THANK YOU