Contingency Theory

Contingency theorists argue that an organization that adapts to its environment will perform better than an organization that does not (Donaldson, 1996) and that mismatched characteristics within organizational configurations will prevent an organization from achieving natural harmony with its environment that will lead to better performance (Mitzberg, 1981). In contrast to the classical scholars, most theorists today believe that there is no one best way to organize. What is important is that there be a fit between the organization's structure, its size, its technology, and the requirements of its environment. This perspective is known as "contingency theory" and contrasts with the perspective of classical theorists like Weber, Taylor, Fayol, etc. who thought that there probably was one way to run organizations that was the best.

Critics assert that no cohesive contingency theory exists, that "contingency theory" is a collection of different ideas that represent a contingency approach, which research does not validate because there seems to be neither a standard definition nor measurement for either fit or performance. Further, holding that contingency causes structure places contingency theory against strategic choice theory, which argues that organizations in misfit can regain fit by changing the contingency to fit the structure so the managers can retain the structure they prefer (Child, 1972). It can be argued that most organizational performance research fails to identify a connection between performance and measured variables because researchers do not pay attention to the complications of dynamic competitive environments, attempt to simplify complex scenarios, and rely on retrospective accounts rather than direct observation. Environment, technology, age and size emerged as the primary contingency factors.
Size- refers to capacity, # of personnel, outputs (customers, sales), resources. Blau's studies show that differentiation (# of levels, departments,