From this comparison we have seen that it is possible to understand the differences in the internal states and processes of these three effective organizations on the basis of the dif-ferences in their external environments. This, along with the comparison between the high performers and the other organizations in each environment, has provided us with some important leads as to what characteristics organizations must have in order to cope effectively with different environmental demands. These findings suggest a contingency theory of organization which recognizes their systemic nature. The basic assumption underlying such a theory, which the findings of this study strongly support, is that organizational variables are in a complex interrelationship with one another and with conditions in the environment.
In this study we have found an important relationship among external variables (the certainty and diversity of the environment, and the strategic environmental issue), internal states of differentiation and integration, and the process of conflict resolution. If an organization’s internal states and processes are consistent with external demands, the findings of this study suggest that it will be effective in dealing with its environment.
More specifically, we have found that the state of differen- tiation in the effective organization was consistent with the diversity of the parts of the environment, while the state of integration achieved was consistent with the environmental demand for interdependence. But our findings have also indicated that the states of differentiation and integration are inversely related. The more differentiated an organization, the more difficult it is to achieve integration. To overcome this problem, the effective organization has integrating devices consistent with the diversity of the environment. The more diverse the environment, and the more differentiated the organization, the more elaborate the integrating devices.
The process of conflict resolution in the effective organization is also related to these organizational and environmental variables. The locus of influence to resolve conflict is at a level where the required knowledge about the environment is available. The more unpredictable and uncertain the parts of the environment, the lower in the organizational hierarchy this tends to be. Similarly, the relative influence of the various functional departments varies, depending on which of them is vitally involved in the dominant issues posed by the environment. These are the ways in which the determinants of effective conflict resolution are contingent on variations in the environment. Four other determinants, however, seem to be interrelated only with other organizational variables and are present in effective organizations in all environments. Two of these are the confrontation of conflict and influence based on competence and expertise. The other two factors are only present in those effective organizations that have established special integrating roles outside the managerial hierarchy—a balanced orientation for the integrators and a feeling on their part that they are rewarded for achieving an effectively unified effort. Our findings indicate that when an organization meets most of these determinants of effective conflict resolution, both the general ones and those specific to its environment, it will be able to maintain the required states of differentiation and integration.
This contingency theory of organizations suggests the major relationships that managers should think about as they design and plan organizations to deal with specific environmental conditions. It clearly indicates that managers can no longer be concerned about the one best way to organize. Rather, as we shall see, this contingency theory, as supported and supplemented by the findings of other recent research studies, provides at least the beginning of a conceptual framework with which to design organizations according to the tasks they are trying to perform. We shall now examine in more detail the implications of these findings, not only for the design and planning of organizations, but also for gaining a clearer perspective on current organizational theory.
Source: Lawrence Paul R., Lorsch Jay W. (1967), Organization and Environment: Managing Differentiation and Integration, Harvard Business School.