Contingency Management Theory Explained

What is Fiedler’s contingency management theory?

Contingency theory, also known as Fiedler’s theory of leadership, emphasizes that there is no single best approach to management; instead, effective leadership is contingent on internal and external factors.

“Performance depends on how well what you are doing is a ‘fit’ with the environment,” said Rita McGrath, a strategy professor at Columbia Business School. “For a small business owner, the ability to understand what constraints and opportunities exist in the environment should inform what choices they make about things like organizational design.”

The theory highlights the importance of self-awareness, objectivity and adaptability in determining the most effective leadership approach for a given situation. This adaptability is especially important given the diversity of the modern workplace, said Shwetank Dixit, founder of Voohy.com, a platform for leadership and career skills training.

“The workplace has changed and become more diverse today,” Dixit said. “Many companies have realized that managers cannot rely on just one way of managing and leading — and instead might need to adjust their leadership style based on the situation and people involved.”

Fiedler’s contingency model proposes a simple concept: comparing your leadership style to the demands of a particular situation. 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.

Here’s how Fiedler’s model breaks down into the two key concepts of leadership style and situational favorability. 

Leadership style

To identify leadership styles, Fiedler created the least-preferred co-worker (LPC) scale, which measures 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 favorability 

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.

Pros and cons of contingency management theory

By focusing on the interaction between a leader’s behavior and situational factors, this model draws attention to the importance of adaptability in achieving high performance. Like any theory, Fiedler’s model has strengths and weaknesses. 

Pros

• Situational awareness: Unlike other popular models from Fiedler’s time, contingency management theory considers the situation at hand, providing a more flexible approach to leadership.
• Clarity and practicality: The model is easy to understand and provides clear guidance, thus helping leaders assess and respond effectively to different situations.

Cons

• Limited internal flexibility and growth: The assumption that a leader’s behavior is static can prevent leaders from adapting or developing new approaches, which could limit their outcomes in diverse situations.
• Oversimplification: Categorizing leaders into only two types — task-oriented or relationship-oriented — may not fully capture the complexity of the situation or individual

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 at 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 employees’ jobs
• The level of authority you possess in your position at the company

Understand how internal and external factors affect your business.

Fiedler’s contingency theory says there are various internal and external factors that can influence an organization’s optimal structure. Internal factors include the business’s size, the technology used, the 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 they would internal factors. 

It’s also crucial for leaders to consider these external and internal factors before they determine their leadership style. The most effective approach is to adapt their leadership style to the situation.

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 they are a relationship-oriented leader, and anything below 54 means they are a task-oriented leader. Those who fall between 55 and 72 are considered both relationship-oriented and task-oriented leaders, which means they might need to delve further into other leadership theories to determine their preferred style.

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

Alternatives to Fiedler’s contingency management theory

There are multiple types of management and leadership theories, each of which uses various elements to highlight the path to effective leadership. 

“What I appreciate most about leadership theory is that, for the most part, there is no right or wrong or one size fits all,” said Laurie Cure, an executive coach, HR expert and CEO of Innovative Connections. “Every organization or business and every leader really needs to assess what approach is best for them — and often, it is situational.”

While contingency theory allows for great flexibility within the workplace, combining it with insights from other popular theories can elevate your management effectiveness even further. “What I find is that leaders and companies rarely fall solely into one category,” Cure said. 

Here are some alternative management theories to consider. 

Covey management theory

Covey management theory, outlined in the book “The 7 Habits of Highly Effective People” (Simon and Schuster, 1989), emphasizes personal and organizational growth through seven key habits: being proactive, setting clear goals, prioritizing tasks, fostering collaboration, listening and understanding, cooperating, and allowing for self-care. Stephen Covey’s approach encourages leaders to create a positive, communicative and effective work environment.

Drucker management theory 

Drucker management theory highlights results-oriented leadership, decentralization and continuous learning. The theories of Peter Drucker advocate for setting clear goals, empowering employees and fostering innovation through decentralized decision-making. Drucker, known as the “father of modern management,” also highlighted the importance of organizational culture and corporate social responsibility in driving long-term success.

Follett management theory

Follett management theory emphasizes collaboration and employee engagement. Mary Parker Follet advocated for “power with” rather than “power over” to create reciprocal relationships between leaders and workers. Follett’s principles of integration, conflict resolution and shared group power encourage teamwork, open communication and mutual respect, thereby boosting morale and productivity.

Fayol management theory

Fayol management theory outlines five core functions: planning, organizing, commanding, coordinating and controlling. The theory’s creator, Henri Fayol, also introduced 14 principles — such as division of work, authority and unity of command — to enhance organizational effectiveness. Although this model is rooted in industrial practices, his ideas still provide valuable guidance for modern small businesses that are seeking efficient leadership and teamwork.

Juran management theory 

Juran management theory focuses on three key principles: quality planning, quality control and quality improvement. His approach stresses continuous quality enhancement by understanding customer needs and engaging all levels of the organization. Joseph Juran’s commitment to quality management has influenced modern practices, including Six Sigma and lean manufacturing.

Kanter management theory

Kanter management theory centers on fostering positive change through six principles: showing up, speaking up, looking up, teaming up, never giving up and lifting others up. Rosabeth Moss Kanter’s approach promotes employee empowerment, collaboration and resilience. The theory encourages managers to create a supportive environment that boosts morale, productivity and openness to change.

Mayo management theory 

Mayo management theory, based on his well-known Hawthorne experiments, asserts that employees are motivated more by social and relational factors than by monetary rewards. Elton Mayo’s approach emphasizes the importance of group cohesion, communication and positive interpersonal relationships to improve workplace productivity and morale.