Contingency Approach: Development of Systems View of Organizations

1. CONTINGENCY APPROACH, a development of the Systems view of organisations Falkné dr. Bánó Klára BGF Külkereskedelmi Főiskolai Kar Falkne.dr.BanoKlara@kkfk.bgf.hu falk.cs@t-online.hu

2. Summary of Management theories

3. The Systems View of Organisations

4. The Contingency Approach is an extension, or operationalisation of the systems approach • IT RELATES THE ENVIRONMENT TO SPECIFIC STRUCTURES OF ORGANISATIONS. • IT STATES THAT THERE IS NO ONE BEST UNIVERSAL STRUCTURE, BUT THERE ARE A NUMBER OF VARIABLES, OR ’SITUATIONAL FACTORS’ WHICH INFLUENCE ORGANISATIONAL DESIGN AND PERFORMANCE. • THE CONTINGENCY APPROACH IS DIAGNOSTIC RATHER THAN PRESCRIPTIVE. • CONTINGENCY THEORISTS REFLECTED THE FINDINGS OF EMPIRICAL RESEARCHES. • THEY FOUND THAT THE MOST APPROPRIATE STRUCTURE IS DEPENDENT UPON THE CONTINGENCIES OF THE SITUATION FOR EACH ORGANISATION.

5. Contingency approach can be seen as an IF – THEN Matrix Relationship Situational factors, e.g. size; technology; environment

6. The Best-known Contingency Models

7. Size and economic performance The larger the company, the greater the association between more bureaucracy and better performance. (2,000 employees and above) Among small firms (100 or so employees) the better performers manage with very little formal organisation. (Child, J.)

8. Summary of levels of management and span of control in different production systems (Woodward, J.)

9. Characteristics of production systems (Woodward, J.)

10. The main conclusion drawn from Woodward’s study Industrial organisations which design their organisational structures to fit the type of production technology, are likely to be commercially successful.

11. Two major dimensions of Technology: Variability and Analysis of technology (Perrow, C.)

12. Characteristics of mechanistic and organic organisations (Burns and Stalker)

13. Hybrid organisations Many organisations are hybrid,i.e. they represent a mix of mechanistic and organic structures. This may lead to tension and conflict. - Need for a senior member of staff who has the respect of both groups to act in a bridging role. E.g. a university or a college: academic staff – non-teaching staff; typical between ‘production’ and ‘service’ functions of an organisation. E.g. hotel – kitchen (production,mechanistic) and front reception office (more organic structure)

14. Lawrence and Lorsch: differentiation and integration • Differentiation - describes the difference among managers in different functional departments with respect to: goal orientation, time orientation, different aspects of the environment, interpersonal relations, formality of structure • Integration – describesthe degree of coordination and cooperation between different departments with interdependent tasks. Different demands of the environment - individual departments may develop different structures. (E.g. research, production and sales)

15. Lawrence and Lorsch study: Conclusions • The extent of differentiation and integration in effective organisations vary according to the demands of the environment. The more diverse and dynamic the environment, the more the effective organisation will be differentiated and highly integrated. • In more stable environments less differentiation is required but a high degree of integration is still required. • Differences in the environment require different methods, integrating mechanisms. In mechanistic structures: rules, procedures; In organic structures: teamwork and mutual cooperation.

16. Contingency approach-main influences on organisation and management

17. Parkinson’s Law the Rising Pyramid, ‘Work expands so as to fill the time available for its completion.’ • An official wants to multiply subordinates, not rivals. • Officials make work for each other.

18. Other features of organisational practice Parkinsondiscusses include The Law of Triviality In a committee the time spent on any agenda item will be in inverse proportion to the sum involved.

19. The Peter Principle is concerned with the study of occupational incompetence and the study of hierarchies. ‘In a hierarchy every employee tends to rise to his level of incompetence.’ Two main means by which one can affect promotion rate: 1. ‘Pull’ – an employee’s relationship with a person above him in the hierarchy (by blood, marriage or acquaintance) 2. ‘Push’ – manifested by an abnormal interest in study, vocational training and self-improvement

20. The Peter Principle cont. ‘Pull’ is likely to be more effective than ‘Push’. ‘Never stand when you can sit; never walk when you can ride; never Push when you can Pull.’ (Peter and Hull)