Contingency Management Theory Basics

Business.com / Managing / Last Modified: February 22, 2017

Contingency theory was developed by a number of key contributors to management thinking, including Fred Fiedler, Victor Vroom and ...

Contingency theory was developed by a number of key contributors to management thinking, including Fred Fiedler, Victor Vroom and Johannes Pennings, many of whom are still developing their theories today. Fiedler's contingency theory is a model that focuses on individual leadership behaviors and decision-making practices within an organization, while Vroom's models address leadership style. Pennings has developed a theory of interaction between external uncertainty, organizational structure and performance.

Contingency management theory asserts that there is no one best way to manage an organization because external factors, known as contingencies, are always influencing the activities and outcomes. The structural contingency theories that emerged in the 1970s have had a major impact on many other contemporary management theories.

Get to know the contingency management theory basics by investigating the following:

  1. Learn how contingency theory fits into other management theories currently in use;
  2. Use contingency management theory to evaluate and understand decision-making;
  3. Discover how contingency theory is used to understand individual leadership.

Get to know the factors for contingency management theory basics

Several main factors of organizations inform contingency management theory and should be considered when using a contingency model. The size of the organization, differences in resource allocation, how the firm adapts itself to the environment, managers' assumptions about their employees and corporate strategies and technologies are all contingencies that affect the activities of a given organization.

Understand how decision-making is viewed in contingency theory

Contingency theory has specific ways of addressing the decision-making process at all levels of a business or organization. The contingency decision making process targets the creation of a consensus about goals and the use of technical knowledge to inform goal-setting. Contingency decision-making is usually evaluated using a grid of goal consensus and technical knowledge.

Use contingency theory to understand individual leadership models

Fiedler's contingency theory of leadership is also a main component of broader contingency theory of management, and suggests that there is no best way for leaders to work in an organization with contingencies, that successful organizations and leaders should fit the environment and that management styles should be appropriate to the tasks and nature of the group. Fiedler also asserts that leadership combines with the contingencies of group atmosphere, task structure and a leader's power position to shape group performance.
University of Wisconsin Eau Claire website. You can also learn how situational theories of leadership relate to other leadership theories, such as trait and behavioral theories that place more importance on individual characteristics and actions, at Infed.
  • If you are concerned with having a company that is able to meet changing demands and work dynamically in the global economy, consider adopting some level of contingency management theory in your management style. Contingencies of all types are becoming increasingly important for organizations to take into account as they are asked to constantly adapt their goals and activities to meet diverse demands.

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