Contingency Management Theory

Contingency theory of leadership emphasizes that effectiveness of leadership is dependent on matching a leader’s style to the right situation.

Also, the contingency management theory states that leaders will be able to exert more influence if they are able to have good relationships with employees.

Fiedler’s contingency theory was originally developed by Fred Fiedler after studying various leaders in different contexts, but predominantly those in the military. Fiedler’s theory proposes that a leader’s effectiveness hinges on how well his or her leadership style matches the current context and task. Thus, contingent leaders effectively apply their own style of leadership to the right situation.

Effective leaders know that just because one approach to an individual or an issue worked well in the past, it does not mean that it will work again when the individual, situation, or task is not the same.

Fiedler’s pioneering theory suggests that leaders fall into one of two different leadership styles:

1. Task-oriented, or
2. People-oriented

The effectiveness of a person’s style in a particular situation depends on how well-defined the job is, how much authority the leader has, and the relationship between the followers and the leader (see Figure X-1; Fiedler 1976).

Figure X-1: A Model of Fiedler’s Contingency Theory | Credit: Lumen LearningOpens in new window

Contingencies are the core concepts underlying the contingency theory. It proposes there are many external and internal constraints that alter what is the best way to manage organizations in a given situation. In other words, it all depends upon the situation at hand as to what will be the best course of action for organizations.

The contingency management theory is a major theoretical lens used to view organizations. It yields many insights and has substantial empirical support since its emergence in the 1970s through Fred Fiedler.

The main ideas underlying contingency theory include:

1. Organizations are open systems that need careful management to satisfy and balance internal needs and to adapt to environmental circumstances.
2. There is no one best way or organizing. The appropriate form depends on the kind of task or environment within which the organization is operating.
3. Management must be concerned, above all else, with achieving alignment and good fit, that is, fit between the organization and its environment.
4. Different types of organizations are needed in different types of environment.

The theory also proposes that managers change and redesign their organizations primarily to adapt to changes in the internal and external environment. Therefore, organizational environments and processes are often sources of change.