University of Nebraska - Lincoln
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A General Contingency eory of Management
Fred Luthans
University of Nebraska - Lincoln710&+/1+)#"1
Todd I. Stewart
United States Air Force
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A General Contingency
Theory of Management
FRED LUTHANS
University of Nebraska
TODD I. STEWART
United States Air Force
Recent formal recognition of situational influences on the manage-
ment of complex organizations has led to an increasing number of
contingency models, but a comprehensive and integrative theoretical
framework for contingency management has been lacking. A General
Contingency Theory (GCT) of Management is introduced as an overall
framework that integrates the diverse process, quantitative and behav-
ioral approaches to management; incorporates the environment; and
begins to bridge the gap between management theory and practice.
A major goal of any academic pursuit is the
development of an overall theory which can
serve as a conceptual framework for understand-
ing, research, and application (8). The search for
such a theory in management has resulted in a
Fred Luthans (Ph.D. - University of Iowa) is Professor of
Management at the University of Nebraska, Lincoln.
Todd 1. Stewart (M.S. - Southern Methodist University) is an
officer in the United States Air Force and a doctoral candidate
at the University of Nebraska, Lincoln.
Received 7/26/76; Accepted 9/7/76; Revised 10/15/76.
myriad of complementary, but more often con-
flicting assumptions and constructs. About 15
years ago Koontz (22) identified six major theo-
retical approaches to management: process, de-
cision theory, empirical, human behavior, social
system and mathematical. He appropriately la-
belled the existing situation as the "management
theory jungle". Today there are at least four
widely recognized theoretical approaches to
management: process, quantitative, behavioral
and systems.
There has been a proselytic tendency on the
part of theorists identified with the various ap-
181
The Academy of Management Review, Vol. 2, No. 2 (Apr., 1977), pp. 181-195. Used by permission.
A General Contingency Theory of Management
proaches. Prominent theorists promote their
ascribed frameworks as conceptually valid and
pragmatically applicable to all organizations in
all situations, criticizing alternative approaches as
conceptually weak, myopic in perspective and
inapplicable to practice.
During the formative years of the theoretical
development of management, the process ap-
proach dominated (11, 31, 41). But with the ac-
celerating theoretical development, research
and application of the behavioral and quantita-
tive approaches, the process approach proved to
be an inadequate theoretical framework.
In recent years, the systems approach has
emerged as an important conceptual framework
which attempts to integrate and redirect some
divergent theoretical management constructs.
Systems concepts such as the environmental su-
prasystem, the interrelated nature of constituent
organizational subsystems, and system boundary
permeability which lead to the concepts of
"closed" and "open" systems have been particu-
larly useful in integrating process, quantitative
and behavioral constructs (21, 40).
The systems approach will undoubtedly con-
tinue to have a significant integrating effect, but
it is not pragmatic enough to serve as a theoreti-
cal framework for the understanding, research,
and practice of management (20). At the same
time there is a growing awareness that the proc-
ess, quantitative and behavioral advocates have
been unable to substantiate their respective
claims for universality. Although each construct
from the various approaches to management has
been effective in particular situations (12, 24, 36,
38), quantitative advocates have had consider-
able difficulty accommodating behavioral factors,
and behavioral theorists have been only mar-
ginally successful in solving management prob-
lems more adaptable to quantitative approaches.
There is need for a new theoretical frame-
work for management - not just another ap-
proach but one that can achieve the following
goals:
1. Integrate and synthesize diverse process,
quantitative and behavioral concepts in-
to an interrelated theoretical system
(26).
2. Functionally incorporate the systems
perspective to organization and man-
agement, particularly in developing and
defining specific functional relationships
between situational factors, manage-
ment concepts and applications, and or-
ganizational performance.
3. Provide a pragmatic basis for analyzing
and interpreting the existing body of
management knowledge and empirical
research, thereby facilitating under-
standing, prediction and control (8).
4. Provide a framework for systematic and
coordinated direction of new research
on the complex functional relationships
between management and situational
variables.
5. Establish a mechanism for effectively
translating theoretical constructs and the
results of empirical research into man-
agement information and application
techniques that are relevant and useful
to the practitioner.
This article proposes that a General Contingency
Theory (GCT) can best meet these important
goals for the field of management.
Toward a General Contingency Theory
The Situational Approach
A situational perspective has been receiving
increased attention. Partly the result of open sys-
tems thinking and probably more a direct result
of the growing skepticism surrounding the uni-
versality assumption of other management ap-
proaches, the situational approach argues that
the most effective management concept or tech-
nique depends on the set of circumstances at a
particular point in time (3, 7, 26, 30).
Child (5) relates the situational approach to
open systems thinking and the universalist ap-
182
Academy of Management Review - April 1977
proach to closed system thinking. There is a con-
ceptual dichotomy between situational and uni-
versalist approaches. Although the universalist/
closed-system constructs ignore potentially sig-
nificant, but complicating, situational variables,
they are easier to apply in practice. The situation-
al approach takes a more conceptually realistic,
but complex, open systems perspective, making
practical application much more difficult. In
other words, the situational approach achieves
greater conceptual validity at the expense of
practical applicability.
One way of resolving the dichotomy sug-
gested by Child is to propose a synthesis of the
two extremes. The goal would be to modify the
situational approach in such a way as to maintain
theoretical (open systems) validity, but, at the
same time, improve its potential as a framework
for practical application. A contingency ap-
proach seems best able to accomplish this goal.
The Contingency Approach
The contingency approach is generically sit-
uational in orientation, but much more exacting
and rigorous. As used in this discussion, the con-
tingency approach is defined as identifying and
developing functional relationships between en-
vironmental, management and performance var-
iables. There have been diverse contingency ap-
plications. Some of the more widely recognized
include the following:
1. Organization Design. Woodward's (42)
classic study of British companies dem-
onstrated contingent relationships be-
tween environmental variables (technol-
ogy), management variables (organiza-
tion structure), and performance. Prob-
ably the most widely recognized work
has come from Lawrence and Lorsch (24).
Chandler (4) found a contingent rela-
tionship between environment, struc-
ture/strategy, and performance. There is
also more recent work on contingency
approaches to organization design (17,
38, 40).
2. Leadership and Behavioral Applications.
Fiedler's (12) model demonstrated a con-
tingent relationship between environ-
mental variables, leadership style, and
effectiveness. Other recent behaviorally
oriented applications include models of
job design (15) and behavioral change
(27).
3. Quantitative Applications. Although
specific applications are not yet devel-
oped, increasing attention is given to sit-
uational considerations. Groff and Muth
note that:
the capabilities developed within the
operations area should match the re-
quirements of the firm. These require-
ments are determined primarily by the
characteristics of the environment in
which the firm operates (13, p. 4).
Miller and Starr (29) developed specific
contingency relationships between var-
ious situations and quantitative deci-
sion-making techniques that lead to ef-
fective performance.
The contingency approach has also played
an important part in classification taxonomies
for organizational systems. With the recent em-
phasis on open-systems models, many of these
classification frameworks are based directly or
indirectly on the nature of the organization's en-
vironmental suprasystem. Particular attention is
devoted to the manner in which the organiza-
tion interacts with its environment. Katz and
Kahn (21), Burns and Stalker (2), Thompson (40),
Terryberry (39), Perrow (34) and Etzioni (10) of-
fer organizational typologies that are environ-
mentally based. In general, these taxonomies
were developed through a deductive method-
ology. In contrast, Haas, et al. (14), Pugh, et al.
(35), McKelvey (28) and others have taken an
inductive approach. They propose taxonomies
developed empirically through multivariate
analysis. McKelvey concludes:
The recent flourishing of contingency ap-
proaches ... is in fact a grassroots response to
183
A General Contingency Theory of Management
the absence of useful classifications . . . Or-
ganization and management researchers need
contingency theories because there is no tax-
onomy to make it clear that one does not, for
example, and only for example, apply findings
from small British candy manufacturers to
large French universities (28, p. 523).
A Contingency Model
of the Organization
The formulation of a General Contingency
Theory of Management must start with a sound
construct of the organization system. Drawing
on the work of Katz and Kahn (21), Thompson
(40), Churchman (6), Shetty and Carlisle (38),
Lorsch and Morse (25), and Kast and Rosen-
zweig (20), an organization can be defined as a
social system consisting of subsystems of re-
source variables interrelated by various manage-
ment policies, practices and techniques which
interact with variables in the environmental su-
prasystem to achieve a set of goals or objectives.
The goals and objectives are defined by constit-
uents of the social system in terms of relevant
environmental and resource constraints. This
definition emphasizes several important con-
structs relevant to development of a comprehen-
sive contingency theory of management.
First, the systems paradigm is viewed as con-
ceptually viable. A systems perspective is needed
to emphasize the organization's inherent inter-
action with its external environment and, in-
ternally, the organization is comprised of inter-
related subsystems. Second is identification of
relevant system variables, which can be placed
into a taxonomical hierarchy of primary, second-
ary and tertiary levels.
The Primary System Variables
The primary variables are the elemental
"building blocks" of the organization. Specifi-
cally, the primary system includes environmen-
tal, resource and management variables.
Environmental Variables - These factors af-
fect the organization, but are beyond the direct
or positive control of the organization's resource
managers (6). Thompson (40) and others have
emphasized that an organization can affect the
environment in which it operates. In the context
of this discussion, such influences are indirect
results of the manager operating more directly
on organizational resources to produce some
desired change in the system. As the organiza-
tion and its management gain more direct con-
trol over a segment of its environment, this seg-
ment is effectively annexed into the organiza-
tional system as its boundaries are expanded. As
environmental variables are not subject to the
direct control of management, they must be
considered as "givens" or independent varia-
bles in the contingency framework.
A distinction is made between external and
internal environmental factors. External envi-
ronmental variables, such as federal legislation,
are considered to be outside the organizational
system. Internal environmental variables are also
beyond the direct control of the manager in
question, but are within the control of the for-
mal organizational system. For example, the en-
vironment for a middle manager is not only af-
fected by those factors external to the organiza-
tion but, probably more important, by the in-
ternal environment (e.g., top management pol-
icy) over which he or she has no control.
Another important refinement is to distin-
guish between specific and general variables.
Specific environmental variables affect the or-
ganization directly and significantly, while gen-
eral environmental variables have only an indi-
rect influence on the organization and provide a
context for the more directly relevant specific
factors. A synthesis of the classification schemes
offered by Duncan (9), Hall (16), Kast and Ro-
senzweig (20) and Negandhi (32) suggests the
following representative general environmental
variables: cultural, social, technological, educa-
tional, legal, political, economic, ecological and
demographic. Representative specific environ-
mental variables would include customers/cli-
ents, suppliers (including labor), competitors,
technology and socio-political factors.
184
Academy of Management Review - April 1977
Resource Variables - These are tangible
and intangible factors over which management
has more direct control and on which it operates
to produce desired changes in the organiza-
tional system or its environmental suprasystem
(6). Clearly particular variables may transfer be-
tween environmental and resource states (with
reference to a specific manager or group of man-
agers), as management gains or loses direct con-
trol over such factors. For example, if an organ-
ization depends on the independent commercial
trucking industry for delivery of supplies and
distribution of products, its means of transpor-
tation is effectively an environmental variable.
Should this same organization acquire its own
trucks and drivers to gain control of this trans-
portation variable (i.e. expansion of the organi-
zation's system boundaries), the transportation
factor is now a resource variable.
Many system variables simultaneously ex-
hibit both environmental and resource charac-
teristics. Extending the transportation example,
even though an organization may own its own
trucks and employ its own drivers, these drivers,
while employees of the organization (and there-
fore resource variables), are also likely to be
members of the Teamsters Union and not sub-
ject to the total control of management. The ex-
tent to which management's influence over
these operators is limited is a measure of the en-
vironmental quality of this system variable. A
particular system variable can be a resource var-
iable to one manager and an environmental var-
iable to another manager in the same organiza-
tion. In the final analysis, the manager is also (at
least partially) a resource to superiors and a criti-
cal factor in the environment of subordinates.
Resource variables can be classified as hu-
man and non-human. Human resource variables
include both demographic characteristics such
as number, skills, knowledge, size, race and age,
and behavioral characteristics including individ-
ual and social behavior and such attendent con-
cepts as needs, attitudes, values, perceptions,
expectations, goals, group dynamics and conflict.
Non-human resource variables include such ele-
ments as raw materials, plant, equipment, capital
and product or service. Since the set of resource
variables on which the manager operates is a
"given" at any particular point in time, they too,
like environmental variables, are treated as inde-
pendent variables in the contingency function.
Management Variables - A manager is de-
fined as any individual within the organization
system having formal authority to make decisions
affecting the allocation or utilization of available
resources. Management variables are those con-
cepts and techniques expressed in policies, prac-
tices and procedures used by the manager to
operate on available resource variables in de-
fining and accomplishing system objectives.
Recognizing the eclectic nature of the contin-
gency construct, process, quantitative and be-
havioral concepts are all represented as man-
agement variables. On a more micro perspective,
process variables include planning/goal-setting,
organizing, communicating and controlling. Be-
havioral variables can be further classified into
individual (motivational techniques, reward sys-
tems, etc.) and group/inter-group (organization
development techniques, leadership styles, etc.).
Quantitative variables can be classified into
areas such as decision-making models and infor-
mation/data management.
Relationship Between the Primary Variables
- Relationships between the primary system
variables are illustrated in the Venn diagram of
Figure 1. This figure illustrates the role that man-
agement plays in coordinating interaction of the
resource subsystem and environmental supra-
system. Specifically, it illustrates the concept
proposed by Thompson (40) in which the man-
agement subsystem serves as a "buffer" between
the uncertain environment (i.e., the set of sto-
chastic environmental variables) and what he
called the organization's "core technology".
The Secondary System Variables
Figure 1 also illustrates the secondary sys-
tem variables, which result from interaction of
subsets of the primary variables. As shown, there
185
A General Contingency Theory of Management
ENVIRONMENTAL SUPRASYSTEM (E)
RESOURCE SUBSYSTEM (R)
MANAGEMENT SUBSYSTEM (M
SITUATION
ORGANIZATION
PERFORMANCE CRITERIA
SYSTEM PERFORMANCE
(E x R)
(M x R)
(M x E)
(M x R x E)
FIGURE 1. A Contingency Model of the Organization System.
are three important secondary system variables:
situation, organization and performance criteria.
Situation Variables - The set of variables
defined by the interaction of environmental (E)
and resource (R) variables are called situational
variables in the secondary subsystem. This set
describes the given state of the organization sys-
tem with which the manager must interact and
operate.
Organizational Variables - The intersection
of managerial (M) and resource (R) variable sets
results in a secondary subsystem variable set de-
fined as operational organizational variables.
This set presents a relatively closed-system de-
PRIMARY
EmI
Ema
Em~z
SECONDARY
TERTIARY
\Nlk **a
186
)
Academy of Management Review - April 1977
scription of a particular state of "the organiza-
tion" at a given point in time, without reference
to the environmental suprasystem in which the
organization operates.
An example of the organizational variable
set is the familiar construct of organizational
structure. Structure is, in and of itself, a theoret-
ical concept commonly used to describe the set
of formalized or sanctioned social relationships
existing between members (primary/resource
variables) of the organization system. With re-
gard to the formal organization, these social re-
lationships have been developed by manage-
ment to facilitate the accomplishment of organ-
ization goals. This characterization should not
imply that structure, as an organizational vari-
able, is completely independent of environmen-
tal variables. The research of Lawrence and
Lorsch (24), Woodward (42) and others has
clearly demonstrated the correlation between
structure and environment. However, the con-
cept of closed-system organizational variables
emphasizes that the structure is not determined
directly or caused by the environment. Manage-
ment develops structure in consideration of
(among other factors) environmental variables.
The degree to which management is successful
in developing a structure compatible with its
perception of the environmental suprasystem is
reflected in organizational performance.
Performance Criteria Variables - The third
set of secondary subsystem variables is deter-
mined by the intersection of the environmental
(E) and management (M) variable sets. The criti-
cal product of this intersection is a set of per-
formance criteria variables relevant to a particu-
lar organizational system. Of direct significance
to the manager are organizational goals which
are conceived to be desired or acceptable levels
of performance. These levels are measured by
the respective performance criteria variables. A
major goal for the manager, particularly the top
level manager with strategic decision making
concerns, is to effectively analyze the relevant
set of environmental variables to determine the
continuing viability of the organization's per-
SITUATIONAL
SYSTEM
PERFORMANCE
PERFORMANCE
\ CRITERIA
Resource
ORGANIZATIONAL
FIGURE 2. A Summary of the Variables and
Relationships in a Contingency Model
of the Organization.
formance criteria and associated goals. The ob-
ject of this analysis is to determine what changes
must be made in the allocation of available re-
sources to achieve and/or sustain acceptable
performance as measured against specific per-
formance criteria.
The Tertiary System Variables
The third level of hierarchical system vari-
ables is generated by the interaction of second-
ary system variables (and, therefore, constituent
primary system variables). The product of this
interaction is defined as the set of system per-
formance variables, which represent the actual
performance output of the organization as meas-
ured by relevant performance criteria variables.
As previously suggested, goals or objectives are
defined as a specific subset of these organiza-
tional performance variables. This set of per-
formance variables is perhaps the single most
distinctive feature of the contingency model,
setting this model apart from theoretical con-
structs that do not emphasize this important link
between theory and practice (e.g., 2, 20, 32, 36).
Figure 2 illustrates the relationships between
primary, secondary and tertiary variables. It is an
illustrative compendium of the conceptual con-
tingency model as a theoretical foundation for
developing a GCT framework for management.
187
A General Contingency Theory of Management
General Contingency Theory
As Dubin (8) notes in his thorough discus-
sion of theory construction, a theory must in-
clude both conceptual units (variables) and law-
ful relationships between these variables. The
contingency model illustrated in Figures 1 and 2
depicts relevant constituent variables and sug-
gests the general form of the functional relation-
ships between these variables. To facilitate dis-
cussion of these GCT functions, the following
notation is introduced:
E = the primary set of environmental vari-
bles
R = the primary set of resource variables
M = the primary set of management varia-
bles
S = the secondary set of situational varia-
bles (E x R)
= the secondary set of organizational
variables (M x R)
PC= the secondary set of performance cri-
teria variables (M x E)
P = the tertiary set of performance varia-
bles as measured against PC
P* = the subset of Pwhich meets or exceeds
desired or objective levels of per-
formance
f = function of
X = the interaction/intersection of
s.t.= subject to/such that
.GE. = greater than or equal to
From the contingency model of the organi-
zation, it is apparent that system performance is
a function of the interaction of subsystem vari-
able sets. This suggests that a GCT function will
be of the following general form:
1. P=f(ExRxM)
Here, system performance (P) is cast as the de-
pendent variable, while environment, resource
and management variable sets are independent.
Further, the situational variable set can be ex-
pressed as:
2. S = f(E x R)
Consequently, substitution of expression 2. into
expression 1. yields:
3. P= f(S x M)
Expression 3. is particularly revealing as it em-
phasizes the inherent situational nature of the
contingency approach (i.e. system performance
is a function of the interaction of situational and
management variable sets). From a more prag-
matic perspective, the practicing manager is pri-
marily interested in that subset of functions in
which performance exceeds the desired mini-
mums.
4. P= f(SxM) s.t.P .GE. P*
Theoretically, it can be argued that in any
organizational system, all primary, secondary and
tertiary variables are continuous in nature, i.e.,
there exists an infinite number of variable states
(8). But from a more realistic perspective, these
system variables can be reasonably approxi-
mated by a finite number of discrete and inde-
pendent variable states. Under this assumption,
each of the constituent variable sets can be in-
dexed to represent these discrete states. For ex-
ample:
5. Si i= 1,2,.... I
6. Mj j= 1,2...,m
Using this indexed notation, expression 6. can be
written as:
7. P ij= f(S i x Mj) s.t. P ij .GE. P* ij
Further, by similarly indexing specific perform-
ance criteria as:
8. PCk k= 1,2,...,n
Expression 7. can be extended and refined as:
9. P ijk = f(S i x M j x PC k)s.t. P ijk .GE. P* ijk
The general functional relationship of expres-
sion 9. indicates that a particular level or state of
system performance (Pijk) is a dependent varia-
ble which is functionally determined by the in-
188
Academy of Management Review - April 1977
PERFORMANCE CRITERIA VARIABLES
PCk
.0 0 ,Mj
MANAGEMENT VARIABLES
i SITUATIONAL VARIABLES
FIGURE 3. A General Contingency Matrix for Management.
teraction of independent situational, manage-
ment and performance criteria variables in states
S i, Mj and PC k.
The GCT Matrix
The general form of the contingency func-
tion of expression 9. suggests the possibility of
organizing these system variables and relation-
ships as a three dimensional conceptual matrix
(see Figure 3). The respective axes represent
nominal scales along which are aligned the vari-
ous independent and discrete states of S i, Mj
and PC k. The matrix cell (i, j, k,) determined by
the intersection of these variable states holds
the associated dependent value of system per-
formance (Pijk). This conceptual contingency
matrix provides the integrating framework nec-
essary for the development of a GCT of Manage-
ment. As Dubin (8) observes, a simple collection
of propositions or, in this case, contingency func-
tions, does not constitute a theory. A theory de-
pends on a lawful relationship between these
functions. The GCT matrix provides the theoret-
ical framework necessary to organize and relate
these contingency functions and to facilitate the
continuing development of a true general theory
of management.
The effectiveness of the matrix as a frame-
work for a GCT of management is postulated
from comparison of its characteristics with those
definitive objectives required for such a general
189
A General Contingency Theory of Management
theoretical approach to management. First, the
Mj axis includes management concepts and ap-
plication techniques from the process,quantita-
tive and behavioral schools. These concepts are
systematically integrated by their functional in-
teraction with specific situational and perform-
ance criteria variables, as well as to the resultant
level of system performance or output. Secondly,
the GCT matrix, derived directly from a systems-
based model of the organization, incorporates
both environmental and resource factors as con-
stituent elements of these situational variables.
The matrix framework functionally relates these
independent situational variables to manage-
ment concepts, performance criteria and system
performance. Thus the matrix also satisfies the
third definitive objective, providing a pragmatic
basis for organizing, analyzing and interpreting
the existing body of management knowledge.
Implications for Research - The GCT matrix
can also provide an integrating framework for
existing research findings and serve as a guide
for future research. Churchman notes that:
... so much social research is conducted in a
fragmented way in which enormous amounts
of data are collected, correlated and filed
away in reports that at best have a mild inter-
est to the reader, and at worst are totally ir-
relevant for decision-making purposes (6, p.
102).
The empty cells of the matrix indicate specif-
ic combinations of situational, management and
performance criteria variables for which a func-
tional relationship to system performance has
yet to be defined. The framework can also be
used to identify contingency functions that re-
quire validation by rigorous, empirically-based
research methodologies. For example, functions
that have been derived deductively from case
studies are candidates for validation through
replication in controlled laboratory or field ex-
periments.
Finally, the framework can serve as an im-
portant vehicle for inductively or deductively
generating hypotheses for testing and validation.
The framework itself provides a data base upon
which secondary or indirect research can be
conducted. For example, by holding Mj and
PCk variables constant and varying Si, func-
tional relationships could be developed relating
a given management concept or technique at a
given performance level across a range of situa-
tions. Only after a particular management vari-
able M has been systematically and empirically
validated across a wide range of situations Si
could a practical claim for universality be justi-
fied. In this way, research progress could be
made in an orderly, systematic manner, thereby
building an integrated, valid general theory of
management.
Implications for Management Practice -
Perhaps the acid test of the GCT matrix is its po-
tential for translating theoretical constructs and
associated empirical research data into manage-
ment information and application techniques
that are relevant to the practitioner. The key to
facilitating this application is development of an
operational matrix, i.e. a data base of contingen-
cy functions organized in the format of the GCT
matrix framework. Development of an opera-
tional GCT data base in turn depends on availa-
bility of the data reduction instruments neces-
sary to translate the existing body of manage-
ment research into functional contingency rela-
tionships. To be of value to the practitioner,
these data reduction instruments, or a comple-
mentary set of diagnostic instruments, must also
be effective in analyzing, measuring and defin-
ing the current state of system variables in opera-
tional organizations. In addition, storing and
manipulating the vast amount and wide variety
of data implied in an operational GCT data base
matrix requires efficient and effective auto-
mated data processing hardware and software.
For example, a GCT matrix dimensioned at only
100 discrete states on each axis generates an ar-
ray of one million cells or system state combina-
tions. Consequently, the development of a real-
istic GCT data base depends in part on availa-
bility of adequate computer support.
These problems represent formidable bar-
riers to application of the GCT approach to man-
190
Academy of Management Review - April 1977
agement. Their resolution would provide the
manager with a powerful tool for diagnosis of
organizational systems and implementation of
planned change designed to improve perform-
ance.
With such an automated GCT data base ma-
trix and the associated diagnostic instruments,
a manager could periodically conduct a "con-
tingency audit" to identify and measure the cur-
rent states of relevant system variables and high-
light specific performance criteria for which sys-
tem performance is less than the corresponding
objective value. By programmatically comparing
results of the contingency audit with the GCT
data base, the information system could provide
the manager with alternate management applica-
tions that have resulted (or are likely to result) in
an acceptable level of system performance in a
similar situation.
With development of an automated GCT
data base, selection of the intervention strategy
can be made more effectively. Using simulation
and sensitivity analysis techniques, potential in-
tervention strategies can be tested and evaluated
without incurring the associated investment and
opportunity costs. This process for applying the
GCT approach to management practice is sum-
marized more formally in the following algo-
rithm:
Step 1: The Contingency Audit
a. Identify through diagnostic techniques
the current state of system variables:
1. The situation (Si), as defined by the
interaction of environmental and re-
source variables.
2. The existing set of management var-
iables (M j).
3. Relevant performance criteria (PC k)
and associated goals (P* ijk or, if con-
stant over S i x Mi, P* k).
4. System performance states (P ijk).
b. Identify those system performance cri-
teria (PCk) for which P ijk is less than
P* ijk
Contingency Audit 4
1
Evaluate Results
and
Update the GCT
Data Base
Develop the
Intervention Strategy
2
Implement the
Change Strategy
3
4
!
FIGURE 4. A Contingency Approach to Managing
Planned Change.
Step 2: Develop the Strategy for Planned
Change
a. For those criteria (PC k) for which P ijk is
currently less than P*ijk, identify those
states in the conceptual matrix (the ex-
isting data base) for which Pijk .GE.
P* ijk for all values of k.
b. Using a specific criterion (e.g., perform-
ance/cost ratio), determine from accept-
able alternates the most effective change
strategy, considering changes in man-
agement and resource variables, there-
by changing the situational state.
Step 3: Implement the Change Strategy
Step 4: Evaluate the Results of the Change
Intervention
a. Determine if management and/or situa-
tional variables have been changed to
the target state as intended.
b. Determine if P ijk, GE. P* ijk for all values
of k.
c. Determine if the results of the interven-
tion are consistent with the results pre-
dicted by the data base.
191
A General Contingency Theory of Management
d. Update the data base to reflect the re-
sults of the intervention (to insure the
continuing accuracy and validity of the
data base).
The steps of this algorithm are illustrated in the
schematic of Figure 4.
A specific example is described in the finite
conceptual matrix of Figure 5. Assume that the
Step 1 diagnosis reveals that the organization is
currently in the state represented by (S 4 x M 1).
Step 1 would also identify unsatisfactory per-
formance against, for example, criteria C3 (i.e.
P4, 1, 3 is less than P* 4, 1, 3). In a systematic
search of the matrix, (S 4 x M 2) and (at least) (S 2
x M 4) result in performance levels that exceed
the associated P* ijk. However, adopting a change
strategy that results in system state (S 4 x M2)
suggests that performance will become unsatis-
factory as measured against criteria PC1 and
PC4. In contrast, system states (S4 x M3) and
(S2 x M4) both satisfy all performance objec-
tives. Based on this determination, the system
manager selects the most potentially effective
intervention strategy, i.e., to change the manage-
ment variable from M 1 to M 3 in situation state
S4, or to change both management and situa-
tional (resource) variables from (S4 x M ) to
(S2 x M 4). The actual choice of intervention
would depend on the decision criteria employed
by the manager.
Operationalizing the GCT Framework
A number of complex developmental prob-
lems must be resolved if the GCT matrix con-
struct is to be effectively operationalized and
extended beyond the state of intellectual exer-
cise. First, an operational taxonomy must be de-
veloped that effectively defines and measures
the state of each primary and secondary system
variable. Such a taxonomy must be comprehen-
sive enough to handle the highest order of op-
erational measures (nominal, ordinal, interval
and ratio scales) that can be validly applied to a
particular system variable state. Ideally, these
variable taxonomies must describe both a system
variable value in its steady-state mode, and also
such critical parameters as state stability/state dy-
namics and the relative deterministic/stochastic
nature of the variable state value.
Instruments and techniques must be devel-
oped to apply these system variable state taxon-
omies to source data. Essentially, this problem
breaks down into two specific applications. First,
data reduction instruments must be devised to
translate the research data currently reported in
the management literature into appropriate tax-
onomical dimensions included in the GCT ma-
trix data base. Secondly, a similar set of instru-
ments and techniques is required to support the
contingency audit of an operational organiza-
tion. Such diagnostic tools provide the neces-
sary operational link between the data base of
empirically-expressed management contingency
functions and the complex problematic realities
confronting the practicing manager.
A second fundamental problem attendant
to development of an operational GCT matrix is
expression of the contingency functions them-
selves, i.e. the lawful relationships between the
various system variable state values. Like the state
variables which constitute the other necessary
component element of a true theory, these re-
lationships must be operationally defined. Any
scheme for expressing these functions must ef-
fectively accommodate the range in types of in-
teractions reported in the management research
literature.
Dubin (8) recognizes a relative hierarchy of
three general forms of interaction expressions.
Categoric laws of interaction indicate that the
value of one system variable is associated with
the value of another. Sequential laws of interac-
tion express time ordered relationships between
the values of two or more system variables. Se-
quential laws are commonly used to suggest cau-
sal relationships between various system variable
states. A deterministic law of interaction is one
that associates specific deterministic values of
one system variable with deterministic values of
another. GCT contingency functions may be
categoric, sequential or deterministic.
192
Academy of Management Review - April 1977
PCk
Si
P ijk GE. P*ijk
FIGURE 5. An Example
The third major problem is development of
a computer software code capable of effectively
and efficiently processing the tremendous
amounts of data involved with operationalizing
a GCT data base matrix of meaningful capacity.
Developing this code requires consideration of
such factors as input/output modes, input/out-
put formats, storage requirements, data analysis
options, advantages/disadvantages of various
programming languages and system hardware
compatability.
of a Finil
D S LT MjkS2
S4
Pijk LT. P*ijk
te Contingency Matrix.
The problems confronting development of
an operational automated GCT matrix data base
are complex. Just as research is a continuing
process, the development, expansion and refine-
ment of the data base to include an increasing
number of system variable states and functional
contingency relationships is an unbounded ef-
fort, commensurate with development of man-
agement knowledge. This process of operation-
alizing the GCT matrix has been initiated by the
authors in the form of descriptive research de-
193
A General Contingency Theory of Management
signed to identify and discuss specific problems,
assumptions and decision processes attendant
to development of operational system variable
taxonomies, data reduction and contingency
audit instruments, operational measures of con-
tingency functions, and a computer code for
feasibility testing.
Conclusions and Implications
for the Future
In spite of the significant practical problems
to be resolved, GCT offers the theorist, research-
er and practitioner a real and potential frame-
work for integrating existing contingency ap-
proaches and for orchestrating future manage-
ment research and development. As the rate of
change and the associated degree of complexity
continues to accelerate, the influence of envi-
ronmental variables will be increasingly signifi-
cant to effective management. This increasing
environmental impact should make a contingen-
cy approach to management more important in
the future. However, if the contingency ap-
proach is to realize its potential as an effective
construct for maintaining and improving man-
agerial effectiveness in a hyperdynamic environ-
ment, its development must proceed in a system-
atic, unified and directed manner. The General
Contingency Theory of Management is offered
as a conceptually-pragmatic, research-based
framework with considerable potential for im-
pact on the future course of management.
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