Contingency analysis emphasizes the factors that influence the evolution of structure: these are contingency factors. By contingency, we mean something that can change and is fortuitous.
Contingency factors, by their nature, are beyond the manager’s control. It follows that their fundamental choices of a structure will be conditioned by a set of contingency factors, distinguished by MINTZBERG, such as age and size, technical system, environment, and power.
Table de matières
Contingency factors of the company
Age and size
The older an organization is, the more formalized it becomes, the more it resorts to procedures, and the more bureaucratic it becomes. Moreover, the larger an organization is, the more elaborate its structure: tasks are more specialized, units are more differentiated, and the administrative component is more developed.
Therefore, any old and large organization becomes formalized. Standardization is then a good means of coordination, thus developing bureaucratization.
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The technical system
Depending on whether the technical system induces mass production (assembly line), prototype production (projects), or continuous production (automated process as in a refinery), and whether it involves simple or sophisticated technology, the organization is more or less bureaucratic, centralized, overloaded with technical expertise or functional support staff (Thus, the more complex a technology is, the more it is necessary to surround oneself with functional specialists who must be given a certain autonomy to adjust mutually).
The lesson we can draw from this factor is given by WOODWARD’s study: there is a specific type of organization for each category of technical system.
The environment
The first authors to have analyzed the influence of the environment are T. BURNS and C.M. STALKER. They identified two types of structures, each evolving in a privileged environment:
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- the mechanical (bureaucratic) structure evolves in a stable environment where tasks are specialized, work is carried out according to strict and formal procedures, power is centralized, hierarchy is highly developed and clearly affirmed (stability – predictable – standardization);
- the organic structure evolves in an unstable environment where task definition is vague, information exchanges are frequent, hierarchy is flat and flexible while power is decentralized.
The most important work was then conducted by P.R. LAWRENCE and J.W. LORSCH, whose conclusions MINTZBERG takes up. MINTZBERG states five relationships between structure and environment:
- the more dynamic the environment, the more organic the structure;
- the more complex the environment, the more decentralized the structure;
- the more diversified the organization’s markets, the more it tends to differentiate its structure based on its markets (subject to the search for economies of scale not being a brake on this tendency);
- extreme hostility in the environment leads the organization to centralize its structure (at least temporarily).
The two most relevant variables, complexity and stability (in addition to market diversity and hostility), allow us to define four basic organizational environments.
Organization structure and environmental characteristics:
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| Degree of environmental complexity | Stable | Dynamic and Unstable |
| Complex | Decentralization of decisions Professional bureaucracy (standardization of qualifications) | Decentralization of decisions Organic structure (→ adhocracy) (mutual adjustment) |
| Simple |
|
|
Power
The stronger the external control exercised over the organization, the more it will tend to centralize and formalize the structure. The outside controls the organization by holding the highest decision-maker responsible for what happens in the organization and/or by imposing standards on the organization.
The existence of external control (even if not formalized, such as public opinion pressure) leads the organization to be very conservative and formalistic in order to justify its actions vis-à-vis the outside.
This is a factor of bureaucratization beyond what the mere rationalization of work would require.
The need for power of the organization’s members leads it to centralize structures to avoid giving too much leeway to individuals.
Strategy
The strategy adopted by a company to achieve its objectives plays a major role in its success. Whether aiming for cost leadership, differentiation, or focus on a specific market, the chosen strategy influences the organizational structure, necessary resources, and operational choices.
Organizational Culture
Corporate culture, composed of shared values, norms, and beliefs, can also be a contingency factor. A strong culture can influence how employees interact, make decisions, and work together to achieve the company’s objectives.
The Interconnection of Factors
It is important to note that these contingency factors do not operate in isolation. They are interconnected and can reinforce each other. For example, a technology-based business strategy may require a specific organizational structure to implement that strategy.
Impact on Decision Making
Contingency factors directly influence how decisions are made within a company. A clear understanding of these factors allows leaders to make more informed decisions adapted to the changing environment.
The Evolution of Contingency Factors
Contingency factors do not remain static. They evolve with changes in the economic, social, and technological environment. Companies must remain vigilant and ready to adapt to remain competitive.
Frequently Asked Questions
Why are contingency factors important for businesses?
Contingency factors influence how businesses operate, organize themselves, and make decisions, which can have a direct impact on their success.
How can company size influence its structure?
Company size can determine the complexity of its organizational structure and its ability to make decisions quickly.
How does technology affect businesses?
Technology influences how businesses produce, communicate, and remain competitive in the market.
How can organizational culture influence a company?
Corporate culture influences how employees interact, work together, and make decisions.
Why should companies monitor the evolution of contingency factors?
Contingency factors evolve over time, and companies must adapt to remain aligned with their constantly changing environment.
Conclusion
These contingency factors listed here in isolation are not totally independent. They influence each other mutually.
Sources:
T. Burns and C.M. Stalker, “The Management of Innovation”, London, Tavistock Institute, 1966.
P.R. Lawrence and J.W. Lorsch, “Organization and Environment: Managing Differentiation and Integration”, Boston, Harvard Business School Press, 1967.
