BUSINESS CONTINGENCY THEORY: PRINCIPLES, AUTHORS - DUDAS - 2025

The theory of business contingency indicates that there is no more correct generic way of managing an organization, but that it will depend on the external and internal factors of the environment where it develops; Success depends on how the leader manages the company according to the “contingent” variables in which his organization operates.

This theory emerged in the early 1960s as a result of investigations that sought to find out which structure model was the best. In isolation, the authors investigated whether the most efficient companies were managed based on the classical theory: division of labor, hierarchy, unity of command or equity with all employees, among others.

The results of the study confirmed something that turned the way of understanding organizational administration up to that point: there is no more correct way to administer the company, but rather it depends directly on the conditions of the environment in which it develops. organization.

Beginning

- The nature of external factors matters and affects the decisions of the company. Therefore, the type of administration depends on the complexity of the situation.

- It is about the “if…, then…” approach. The "if" represents the independent factor and the "then" the dependent variable of the administration, or the technique to be adopted in that situation. For example: "if" workers have great physiological needs, "then" financial motivations must be adopted.

- The principles of administration are not universal in nature, but situational. They have to be decided based on the circumstances of the environment in which the organization operates.

- Helps to better understand more complex organizations and focuses on the multivariate nature of companies. Instead of having a concrete solution to problems, it provides a framework where each solution depends on the environment.

- Gives a vision for the adaptability of the company to the different external and internal factors. The goal is to integrate the internal environment into the external environment in the best possible way.

Authors

The most representative author of this theory was the Austrian Fred Fiedler, who created the most common contingency theory.

In addition to Fiedler, there were other authors who developed other theories from this, such as Hersey and Blanchard, Vroom and Yetton, and Tannenbaum and Schmidt.

We will focus on the two most recognized: Fiedler himself, creator of Fiedler's contingency theory; and Hersey and Blanchard, creators of situational theory.

Fred Fiedler (1922 - 2017)

Fred Edward Fiedler was an Austrian psychologist who focused on improving the psychology of organizations. In 1964 he developed what is known as Fiedler's contingency theory; in this he affirmed that the conditions of a leader were given by the experiences he had had throughout his life, so they were difficult to change.

Therefore, he proposed that rather than trying to teach a particular type of leadership to people, it was better to make people understand your type of leadership and try to apply it to different situations.

The CMP test

To find out what kind of leader each employee is, Fiedler developed the Least Preferred Co-Worker (CMP) test.

In this, the workers were given some guidelines to score what for them was the worst person they had ever worked with, with a series of adjectives to score from 1 to 8 (not friendly-friendly, non-cooperative-cooperative, etc..).

In this way, and depending on how people described their “less preferred colleagues”, it was possible to determine whether a leader was more people- or task-oriented.

According to Fiedler, people more focused on relationships scored more positively for their worst peers than those more focused on tasks.

The higher CMP they had, their efforts were aimed at improving relationships with the people on the team; the less CMP, the more focused they were towards accomplishing their tasks within the organization.

Situational control

A second concept in Fiedler's theory is the leader's ability to control the group's situation.

Only leaders with good control will be able to give orders and know that the subordinate group will carry them out correctly. To determine this ability, Fiedler focuses on three points:

The quality of member-leader relationships

It refers to the degree of mutual trust, loyalty and respect between the leader and his subordinates.

The structure of the tasks

It refers to how clear and structured the tasks of a group are. When they are unstructured and clear, the tasks are ambiguous, without a concrete solution or adequate approach to achieve the objective.

On the other hand, if they are well structured the objective is clear and the members know what to do to achieve that goal.

The power of the leader's position

It refers to the power of the leader based on his position in the hierarchy.

If the quality of relationships between members and the leader are good, the tasks are clear and structured, and the power of the leader's position is high, we are in a favorable situation.

Fiedler found that leaders with low CPM (task-oriented ones) are more effective in extreme favorable or unfavorable situations. In contrast, high CPMs (relationship oriented) behave more effectively in intermediate situations.

Paul Hersey (1931-2012) and Ken Blanchard (1939)

Hersey and Blanchard developed the so-called situational theory, one of the basic approaches to contingency theory. This focuses on the particularities of subordinates, who are the people who then determine how the leader behaves.

In other words, people need different types of leadership depending on the characteristics they possess. Therefore, there are different types of leadership:

Executive

High disposition for tasks, little for relationships between people.

Persuasive

It is reflected in both a high disposition for people and for tasks.

Participatory

High interest in people, combined with low interest in tasks.

Delegator

Has a low interest in both people and tasks.

References

1. Fiedler, FE (1967) A Theory of Leadership Effectiveness, New York: McGraw-Hill.
2. Stoner, James (1998). Administration (sixth edition). Mexico: Hispanic-American Prentice hall.
3. Forsyth, DR (2006). Leadership. In Forsyth, DR, Group Dynamics (5th Ed.)
4. Tannenbaum, Robert & Schmidt, Warren H. (1957). "How to Choose a Leadership Pattern," "Harvard Business Review"
5. Hersey, Paul and Blanchard, Ken (1964). '' Management of Organizational Behavior: Utilizing Human Resources '', p. 84, Prentice-Hall, Englewood Cliffs, NJ
6. Tanuja, A. (nd). Business Management Ideas. Retrieved from businessmanagementideas.com