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Updated Nov 01, 2023

Contingency Management Theory Explained

Contingency Theory is a unique approach to leadership.

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Chad Brooks, Managing Editor & Expert on Business Ownership
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Leadership plays a crucial role in attracting new employees and team productivity. Various theories of leadership propose different styles for how to guide your team to success. However, 55 percent of CEOs said developing the next generation of leaders is their top challenge, reported DDI’s Global Leadership Forecast. Fred Fiedler’s contingency theory emphasizes the impact of situations on a leader’s effectiveness and highlights adaptability as a key trait. 

Read on to learn about Fiedler’s theory and how you can apply it to become a better leader.

Contingency management theory explained

Contingency theory, which also goes by Fiedler’s contingency model and Fiedler’s theory of leadership, proposes no single correct or right way to lead a business due to the various internal and external factors that influence leadership’s effectiveness. Fiedler’s contingency trait theory and contingency management theory emphasize the correlation between a leader’s traits and their effectiveness to suggest that leadership styles should adapt to different situations. The theory highlights the importance of self-awareness, objectivity and adaptability in determining the most effective leadership approach for a given situation. The theory suggests that two factors rely on a successful leader: natural leadership style and situational favorableness. 

TipBottom line
To be a good leader for your business, be assertive and emotionally intelligent, delegate tasks and cultivate your creativity. [Read related: What You Can Learn From Fictional Businesses]

Fiedler’s contingency model proposes a simple concept — comparing your leadership style to the demands of a particular situation. Here is how Fiedler’s model breaks down into these three concepts. 

Leadership style

Fiedler created the least-preferred co-worker (LPC) scale to help identify leadership styles, which measure whether managers have a task-oriented or relationship-oriented approach. A positive rating on the scale indicates a relationship-oriented leader who is skilled in building connections and managing interpersonal dynamics. Conversely, a less favorable rating suggests a task-oriented leader who is focused on efficiency and effectiveness.

Situational favorableness 

The next step in the model is to assess the situation using situational contingency theory. The favorability of a situation depends on leader-member relations, task structure and position power. Strong trust between the leader and team members, clear task requirements and high position power contribute to a more favorable situation for effective leadership.

Applying the model

The model suggests different leadership styles thrive in specific situations. Task-oriented leaders are successful in highly favorable or unfavorable situations, while relationship-oriented leaders succeed in moderately favorable situations. [Read more about Human Relations Management Theory Basics.] 

Did You Know?Did you know
Only 12 percent of employees believe their leaders have the right mindsets to lead them forward, according to the Future of Leadership Global Executive Study and Research Report.

Tips for implementing contingency management theory

While every business owner has their own way of leading their company, the contingency approach focuses on the issue at hand and the ways owners may need to adjust their leadership style depending on the pressing concern. Here are a few ways you can implement the contingency model into your company.

Classify your organization with these three variables in Fiedler’s contingency theory.

You can classify your business using these three variables: 

  • The degree to which your employees accept you as their leader
  • The level of detail used to describe the employee’s jobs
  • The level of authority you possess in your position at the company

Leaders are able to use contingency theory to exert a better influence on employees if they can build strong relationships with them. Contingency theory management allows leaders to have more influence over employees who detail the tasks, as opposed to leaders who don’t structure tasks. [Read more about Classical and Scientific Management Theory.] 

Understand how internal and external factors affect your business.

Fiedler’s contingency theory says there are various internal and external factors that can influence the optimum organizational structure. Internal factors include the business’s size, the technology used, leadership style and how the business adapts to strategic changes.

Most of the time, business owners can’t control outside factors — such as the marketplace and customer orientation — which means they should address these issues differently than the way they would with internal factors. 

It’s also crucial for leaders to consider the different external and internal factors before they determine their leadership style. The most effective approach is to modify the leadership style to the situation or vice versa. [Read more about The Management Theory of Frank and Lillian Gilbreth.]

FYIDid you know
A high LPC score equates to a relationship-oriented leader who is good at building relationships and managing conflicts to get things accomplished. A low LPC score means you are a task-oriented leader who is good at organizing teams and projects and getting things done.

Evaluate your leaders using Fiedler’s LPC scale.

Request that your managers rate one co-worker they least enjoy working with using the LPC scale. The scale uses between 18 and 25 adjectives, such as pleasant and unpleasant, interesting and boring, or supportive and hostile, on an eight-point scale. A score above 73 means you hold the characteristics of a relationship-oriented leader. Anything below 54 means you are a task-oriented leader. Those who fall between 55 and 72 are considered both relationship-oriented and task-oriented leaders, which means you might need to delve further into other leadership theories to determine your preferred style.

Investing time each day in getting to know your subordinates reinforces your position in a contingency theory of leadership model, which allows you to apply more influence on employees.

Chad Brooks contributed to the writing and research in this article.

author image
Chad Brooks, Managing Editor & Expert on Business Ownership
Chad Brooks is the author of "How to Start a Home-Based App Development Business," drawing from over a decade of experience to mentor aspiring entrepreneurs in launching, scaling, and sustaining profitable ventures. With a focused dedication to entrepreneurship, he shares his passion for equipping small business owners with effective communication tools, such as unified communications systems, video conferencing solutions and conference call services. A graduate of Indiana University with a degree in journalism, Brooks has become a respected figure in the business landscape. His insightful contributions have been featured in publications like Huffington Post, CNBC, Fox Business, and Laptop Mag. Continuously staying abreast of evolving trends, Brooks collaborates closely with B2B firms, offering strategic counsel to navigate the dynamic terrain of modern business technology in an increasingly digital era.
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