The Normal Science of Structural Contingency Theory Introduction
- The recurrent set of relationships between organizational members can be considered to be the structure of the organization. This includes the authority relationships, the reporting relationships as signified in the organization chart, the behaviors required by organizational rules, the patterns in decision making such as decentralization, patterns of communication and other behavior patterns.
- Contingency theory states that there is no single organizational structure that is highly effective for all organizations. It sees the structure that is optimal as varying according to certain factors (contingency factors) such as organizational strategy, size, task uncertainty and technology.
- Organizational characteristics in turn reflect the influence of the environment in which the organization is located. Thus, in order to be effective, the organization needs to fit its structure to the contingency factors of the organization and thus to the environment.
- The task of contingency research is to identify the particular contingency factor or factors to which each particular aspect of organizational structure needs to fit. This involves the construction of theoretical models of fits between contingency and structural factors and their testing against empirical data.
Origins of Structural Contingency Theory
- Up until about the late 1950s academic writing about organizational structure was dominated by the classical management school. This held that there was a single organizational structure that was highly effective in organizations of all kinds. This structure was distinguished by a high degree of decision-making and planning at the top of the hierarchy.
- From the 1930s onwards the human relations school focused on the individual employee as possessing psychological and social needs. The focus here was on the bottom-up processes of organizing and the benefits of participation in decision-making by employees from lower levels of the hierarchy.
- There were attempts to bring together these two antithetical approaches of classical management and human relations by arguing that each approach had its place. Thus Contingency theories developed in the 1950s and 1960s on topics such as small-group decision making and leadership.
- The core assumption of structural contingency theory is that low uncertainty tasks are most effectively performed by centralized hierarchy since this is simple, quick and allows close coordination cheaply.
- As task uncertainty increases, through innovation or the like, then the hierarchy needs to loosen control somewhat and be overlain by participatory, communicative structures.
- As size increases the compact, simple centralized structure is replaced by a bureaucracy featuring a tall hierarchy and extensive specialization.
- Burns and Stalker pioneered the contingency approach to organizational structure. They distinguished between the mechanistic structure in which organizational roles were tightly defined by superiors who had the monopoly of organizational knowledge, and the organic structure in which organizational roles were loosely defined and arrived at by mutual discussion between employees, with knowledge being dispersed among the employees who possessed varieties of expertise germane to the organizational mission.
- Burns and Stalker argued that where an organization faces a stable environment then the mechanistic structure is effective, but where the organization faces a high level of technological and market change then the organic structure is required.
- Woodward conducted a comparative survey study of one hundred manufacturing organizations. She examined their organizational structures and found them to be unrelated to the size of their organizations. Operations technology emerged as the key correlate of organizational structure.
- Woodward used quantitative measures of organizational structure, such as the span of control of the first line supervisor, the number of levels of management in the hierarchy and the ratio of direct to indirect labor. She gives many quantitative results showing associations between operations technology and various aspects of organizational structure.
- Lawrence and Lorsch have been credited with initiating the term “contingency theory”. They theorized that the rate of environmental change affected the differentiation and integration of the organization.
- Lawrence and Lorsch advanced their theory in a comparative study of different organizations in three industries: containers, processed foods and plastics. They demonstrated their environments had higher performance.
- Hage similar to Burns and Stalker showed that centralized, formalized organizations produced high efficiency but low innovation rates while decentralized, less formalized organizations produced low efficiency but high innovation rates.
- Perrow argued that knowledge technology was a contingency of organizational structure. The more codified the knowledge used in the organization and the fewer the exceptions encountered in operations, the more the organization could be centralized in decision making.
- Thompson distinguished closed system organizations versus organizations which are open systems transacting with their environments. He argued that organizations attempt to insulate their core production technologies into a closed system to render them efficient through buffering the core from the environment.
- Thompson argued that the environment directly shaped the organizational structure, with different parts of the organizational structure being specialized to conform to the requirements of different parts of the environment.
- Blau advanced a theory of structural differentiation. This asserted that as an organization grows in size (employees) so it structures itself more elaborately into increasingly numerous sub-units, such as more divisions, more sections per division, more levels in the hierarchy. He also argued that organizational growth leads to greater economies of scale with the proportion of employees who are managers or support staff declining.
- Weber argued that organizations were becoming increasingly bureaucratic structures, characterized by impersonal administration, fostered in part by their increasing size.
- Chandler showed historically that strategy leads to structure. Corporations need to maintain a fit between their strategy and their structure otherwise they suffer lower performance.
- Egelhoff in particular, advances a formal contingency theory based on the underlying information processing requirements.
Structural Contingency (Theory Model)
- The contingency theory model of the way organizational structure changes as the contingencies change through growth.
- Both the internal and the environmental factors are referred to as contingencies, many contingency factors of structure such as organizational size or technology are internal to the organization.
- A small organization, one with few employees, is organized effectively in a simple structure in which there are few levels in the hierarchy. Decision making authority is concentrated in the top manager who exercises power directly over the lower-level employees.
- As the organization grows in size, especially in the number of employees, the structure becomes more differentiated. Many more levels are added in the hierarchy, Some of the decision making authority of the top managers is delegated down to them, commensurate with their greater knowledge of local, operational matters. Throughout the organization there is a greater division of labor as operations are broken down into their components and allocated to specific departments and work groups.
- As organizations seek to innovate, in products or services or production processes, so this entails more uncertain tasks. These tasks cannot be formalized by the bureaucracy, and the tasks cannot be pre specific in advance in a rule or procedure because this would require knowledge that the bureaucrats do not possess. So the organization has to allow employees discretion and encourage them to use their initiative, with the actual division of labor involving team elements and emerging through discussion between employees rather than being imposed by hierarchical superiors.
The Structural Contingency (Research Paradigm)
- The theory is sociological functionalism, sociological functionalism explains social structures by their functions, that is their contributions to the well-being of society. The organizational sociological branch of functionalism posits that organizational structures are shaped so as to provide for effective functioning by the organization.
- The adaptation by the organization to its environment makes structural contingency theory part of adaptive functionalism.
- The functionalist theoretical base has meant that the contingency paradigm can be pursued both by sociologists interested only in the explanation of organizational structure, for whom the functionality of a structure is purely a cause, and management theorists for whom the effectiveness outcomes of structures inform their prescriptive advice to managers.
- The adaptive functionalism, contingency-fit model and comparative method constitute the core of the paradigm of structural contingency theory. They provide a framework in which subsequent researchers work.
The Normal Science Phase: Replication and Generalizations
- The studies of replication and generalization constitute much of the normal science research in the structural contingency literature.
- During the 1970s there arose an interest in whether different national cultures require different forms of organizational structure that render the general structural contingency theories false.
- The initial orientation of most researchers is that they expect that they may find the contingency-structure relations of the pioneering studies but that such general assertions are to be treated cautiously until verified empirically in each particular, new setting.
- The Aston Group gave emphasis to replication. The multiple dimensions of organizational structure found in the pioneering study were not found in some replication studies, some of which found a single main dimension.
- The main contingency-structure findings of the original study have been supported: size is the major contingency of the bureaucratic structuring of the activities aspect of organizational structure. Replication studies bear this out. Further studies show that this finding generalizes across organizations of many types and nations in diverse locations.
- The size-functional specialization relationships generalizes globally.
- SARFIT theory mentioned that there is fit between each contingency and one (or more) aspect of organizational structure such that fit positively affects performance and misfit negatively affects performance. This causes adoption of a new structure so that fit is regained and performance restored. Hence the cycle of adaptation is: fit, contingency change, misfit, structural adaptation, new fit.
- Commentators have argued against the SARFIT. The call is made by commentators for structural contingency theory studies to move beyond cross-sectional or synchronic research designs into those that study organizational change through time, that is longitudinal or diachronic studies. Thus part of normal science has been the move to make studies through time in order to reveal the actual causal paths.
Dynamics of Strategy and Structure
- The fit of strategy and structure is positively related to performance. Thus the proposition that the fit between strategy and structure affects performance receives support.
- When organizational change is examined by a model that more accurately captures the full processes involved in structural adaptation then structural contingency theory is confirmed. Where the simplistic model that contingency change leads to structural change is used to analyze data it leads to the erroneous conclusion that structural contingency theory is not supported. This is normal science at work: resolving findings contrary to theory by showing that the empirical testing procedure was erroneous.
- The correlation between strategy and structure does not arise through structure causing strategy. This adds confidence that the causal dynamics are those identified in the SARFIT model.
- The determinism of Structural contingency theory is has been much criticized, critics argue, more moderately, that the contingencies have some influence but that there is a substantial degree of choice (strategic choice).
- The choice for managers and other organizational controllers arises from several sources. He points out the decision making process that intervenes between contingency and structure. Managers (and other organizational controllers) vary in their response to the contingency according to their perceptions, their implicit theories, preferences, values, interests and power.
- A corporation in a dominant market position, such as monopoly or oligopoly, or a corporation in a protected industry, has sufficient excess profit, or organizational slack, that it can absorb a decrement in performance, due to structural misfit, without the profit level becoming unsatisfactory. Thus managers of such organizations may retain a misfitting structure that they prefer for a long time.
- Child argues that when a misfit is no longer tolerable and fit must be restored this can be done by retaining the structure and altering the contingency to fit the structure. Thus there is no imperative to adapt structure to contingency for there is an alternative route to regain fit.
- Research into strategy and structure shows that organizations in misfit may delay adoption of a new, fitting structure for lengthy periods, up to decades. Structural adaptation empirically tends to occur when the organization in misfit has low performance. This is consistent with the strategic choice argument.
- For most firms, the degree of organizational slack enjoyed through market domination would be almost exhausted by structural misfit so that performance would decline below the satisfying level, leading to structural adaptation.
- Strategic choice theory argues that an organization in misfit can regain fit by altering its contingency to fit its structure, thereby avoiding the necessity of changing a structure that the managers prefer.
- Strategic choice theory often has a negative aspect in that it seeks to assert a role of managerial choice by showing that managers select structures that are less than optimal for the situation, Thus choice is manifested by selecting a structure different from that which the contingencies determine to be most effective.
- However, more positive, sense of choice is that managers select the structure which moves the organization into fit with the contingencies thereby increasing organizational effectiveness through bowing to the system imperatives. Thus they exercise choice and are the human actors making the system respond but the outcome is beneficial for the organization and in conformity with contingency theory.
Fit and Performance Multidimensional model of fit would more richly capture the idea of fit. It would be more complex, as each structural variable has in practice only a limited number of contingencies. Many structural variables have as their contingencies only a limited set of contingency variables, mostly restricted to one or a few out of the variables of size, strategy, task uncertainty and public accountability. The Challenge of Other Paradigms As part of the growing pluralism in the study of organizations, since about the mid 1970s new paradigms have arisen in sociology and economics which offer explanations of organizational structure additional to those available in structural contingency theory. Reflections on The Structural Contingency Theory Paradigm
- The normal science of structural contingency theory has been pursued by a number of scholars. However, it is has declined in popularity since 1970. There have arisen many new and different approaches, for example, institutional theory in the US and action theory in the UK.
- The normal science of structural contingency theory has been pursued only by some students of organization. Nevertheless their results have indicated that considerable progress has now been made in solving puzzles and advancing a strengthened structural contingency theory.
- Many contemporary empirical researchers take the contingency-structure relationship as basic and then add on variables and interpretations from the newer structural paradigms.
- Structural contingency theory began as a synthesis between the opposed ideas of the classical management and human relations schools, it is not inappropriate that it in turn should become synthesized with other organization theories in a wider model.
- Proponents of structural contingency theory will see it as providing the major component of the new synthesis.
- Proponents of the other organization theories will see structural contingency theory as providing only a minor part and their own preferred theory as providing the major component of the new synthesis.
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