A contingency theory is a theory of the firm that claims that there is no best way to organize a corporation, to lead a company, or to make decisions. Instead, the optimal course of action is contingent (dependent) upon the internal and external situation. Contingent leaders are flexible in choosing and adapting to succinct strategies to suit change in situation at a particular period in time in the running of the organization.
In Fiedler’s piece from 1993, he describes how two main factors contribute to effective or successful leadership and points them out as “the personality of the leader and the degree to which the situation gives the leader power, control and influence over the situation” (p. 333-334). Leadership personality can be broken up into two main motivation schools of thought for leaders. Leaders can be task motivated or relationship motivated. The way that Fiedler suggests individuals determine their motivation preference is through the Least Preferred Co-Worker Score or LPC. The second aspect that Fielder says determines success is the specific situation and the degree to which the leader feels in control of the outcome of their actions.
Gareth Morgan in his book Images of Organization summarized the main ideas underlying contingency:
- Organizations are open systems that need careful management to satisfy and balance internal needs and to adapt to environmental circumstances
- There is not one best way of organizing. The appropriate form depends on the kind of task or environment one is dealing with.
- Management must be concerned, above all else, with achieving alignments and good fits
- Different types or species of organizations are needed in different types of environments
Fred Fiedler’s contingency model focused on a contingency theory of leadership in organizations. This model contains the relationship between leadership style and the favorable-ness of the situation. Fielder developed a metric to measure a leader’s style called the Least Preferred Co-worker. The test consists of 16-22 items they are to rate on a scale of one to eight as they think of a co-worker they had the most difficulty working with. A high score indicates the test taker is relational in style and a low score indicates the test taker is more task orientated in style. Situational favorable-ness was described by Fiedler in terms of three empirically derived dimensions:
- Leader-member relationship – high if the leader is generally accepted and respected by followers
- Degree of task structure – high if the task is very structured
- Leader’s position power – high if a great deal of authority and power are formally attributed to the leader’s position
Situations are favorable to the leader if all three of these dimensions are high.