Environmental change and uncertainty, work technology, and the size of a company are all identified as environmental factors impacting the effectiveness of different organizational forms. According to the contingency perspective, stable environments suggest mechanistic structures that emphasize centralization, formalization, standardization, and specialization to achieve efficiency and consistency. Certainty and predictability permit the use of policies, rules, and procedures to guide decision making for routine tasks and problems.
Unstable environments suggest organic structures which emphasize decentralization to achieve flexibility and adaptability. Uncertainty and unpredictability require general problem solving methods for nonroutine tasks and problems. Paul Lawrence and Jay Lorsch suggest that organizational units operating in differing environments develop different internal unit characteristics, and that the greater the internal differences, the greater the need for coordination between units. Joan Woodward found that financially successful manufacturing organizations with different types of work technologies (such as unit or small batch; large-batch or mass-production; or continuous-process) differed in the number of management levels, span of management, and the degree of worker specialization.
She linked differences in organization to firm performance and suggested that certain organizational forms were appropriate for certain types of work technologies. Organizational size is another contingency variable thought to impact the effectiveness of different organizational forms. Small organizations can behave informally while larger organizations tend to become more formalized. The owner of a small organization may directly control most things, but large organizations require more complex and indirect control mechanisms. Large organizations can have more specialized staff, units, and jobs. Hence, a divisional structure is not appropriate for a small organization but may be for a large organization.
In addition to the contingencies identified above, customer diversity and the globalization of business may require product or service diversity, employee diversity, and even the creation of special units or divisions. Organizations operating within the United States may have to adapt to variations in local, state, and federal laws and regulations. Organizations operating internationally may have to adapt their organizational structures, managerial practices, and products or services to differing cultural values, expectations, and preferences.
The availability of support institutions and the availability and cost of financial resources may influence an organization’s decision to produce or purchase new products. Economic conditions can affect an organization’s hiring and layoff practices as well as wage, salary, and incentive structures. Technological change can significantly affect an organization. The use of robotics affects the level and types of skills needed in employees. Modern information technology both permits and requires changes in communication and interaction patterns within and between organizations.
We now have many better ways of thinking about strategic management in the round. I believe that it is dangerous to believe all the hype that comes out with each successive theory, that it is the only valid path to salvation. In fact it is only when we get to the contingency theories that authors of the new approaches appear to be willing to acknowledge that many different approaches and ways of thinking have value, but that this value is not the same in every situation. I am with Coyne and Subramaniam in their statement ‘Consequently, strategists should be familiar with all of these concepts, but not biased toward any of them. They should narrow their focus to a specific sub model only after they have determined which one is most appropriate to their situation to.
There are five areas of critical importance in successful strategic management, none of which should be neglected. In the centre, and affecting each of the other factors, are the capabilities of the business leaders. It is possible to hit on a good strategy without any analysis, but there are dangers in the approach which could be avoided. However, analysis rarely produces a sound strategy. Creativity and vision is required, and then analysis is needed again to examine the likely outcome of the strategy. The way in which strategic decisions are taken and the process the organisation uses to arrive at strategies
will also affect the success of those strategies. Finally, the best strategy in the world will be useless if it is not implemented.
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