Organisation Structure & Strategy

MMC201

Staff Supervisor: Ran Bhamra

Submission Date: 17th November 2014

The Validity of the

Contingency
Approach
Karim Habbas B122608

Loughborough University

The Wolfson School of Mechanical and Manufacturing Engineering

1,197 Words

Contents
1.0 Introduction ...........................................................................................................1

2.0 Definition of the Contingency Approach ...............................................................1

3.0 Situational Factors ................................................................................................2

3.1 Size & Age .........................................................................................................2

3.2 Technology .........................................................................................................2

3.3 Environment .......................................................................................................4

3.31 Mechanistic & Organic ................................................................................4

3.32 Integration & Dierentiation .........................................................................5

3.4 Power .................................................................................................................6

4.0 Conclusion ............................................................................................................7

5.0 Bibliography .........................................................................................................8

5.1 References .........................................................................................................8

5.2 Figures ...............................................................................................................9

1.0 Introduction
The purpose of this report is to investigate the validity of the Contingency Approach
in relation to the organisational structure of modern industrial organisations, and
determine if or not it has practical value for managers.

The report will define the Contingency Approach, discuss the significance of the
three key situational factors, and through the use of examples evaluate how suitable
the Contingency Approach is. The situational factors addressed include: Size & Age,
Technology and Environment. Power will also be briefly touched on.

2.0 Definition of the Contingency Approach

The Contingency Approach to organisation structure is an expansion of Mintzbergs
Systems Approach and emphasis the need for flexibility. It suggests that there is not
one best method to structure organisations. Instead it provides insights into the
situational factors which may influence the needs of the organisation (Mullins 2010,
p59).

The if-then matrix, shown in Figure 1.0 below, illustrates the theory of the
Contingency Approach. If a particular situational factor exists, then there are
corresponding variables in the organisational structure that are most appropriate to
addressing that particular situation.

Figure 1.0: The if-then Matrix

3.0 Situational Factors

3.1 Size & Age
Size of an organisation is generally proportionally with age (Hofler, 2014).Older
organisations tend to be more formalised in behaviour, larger in size and more
bureaucratic. Globalisation, expansion into emerging markets and adoption of new
technology suggest the need for dynamic organisational structures.

Over a relatively short 10 years, Facebook has grown in size to over 8000
employees (Cohen, 2012). Initially, its structure was organic, but to facilitate its rapid
growth the structure evolved to a more mechanistic authoritative style with clearly
defined rules to control the implementation of its new strategies (Kurush, 2014).

Child concluded (Mullins 2010, p589): The more profitable and faster growing
companies in the larger size category of 2000 employees and above, with increased
size and complexity, were those who had developed bureaucratised organisational
structures to deliver organisations had the greater the association between more
bureaucracy and superior performance.

He also stated: among smaller firms of less than 100 employees, the better
performers were generally managed with minimal formal organisational structure.

The balance between: formalised relationships, greater use of rules and strictly
enforced standardised procedures against fiduciary agreements, mutual respect
and creative licence are key trade-os to be determined by mangers and
organisations. The outcomes of these decisions made influence how organisations
control process, maximise work output and mange sta.

3.2 Technology
Woodward, a pioneer of organisational theory, hypothesised that: Industrial
organisations which design their formal organisational structures to fit the type of
production technology they employ are likely to be commercially
successful (Mullins 2010, p589).

Organisational structures were found to be related more to similarity of business

objectives and production technology utilisation rather than to size, type of industry
or the business success of the organisation (Mullins 2010, p590). Therefore, certain
organisational structures are appropriate for certain work technology types.

For example, Coca Colas soft drink products are produced via continuous flow
production (Coca-Cola Inventory, 2010). The production line is highly standardised,
automated and utilises progressive transfer lines to keep up with consumption rates
of 1.8 billion bottles per day (Statistic Brain, 2014).

In contrast Aston Martin produces fewer than 4000 (Ebhardt, 2013) highly
customisable, high performance supercars per year. Consequently, they deploy a
mix of flexible manufacturing systems and traditional hand crafted operations to
meet their target production quota (Aston Martin, 2014).

Figure 2.0, below, shows the relationship between production volume output and
flexibility by manufacturing process.

Figure 2.0: Production Volume vs Flexibility

Dierences in manufacturing operations illustrate its impractical, and can

significantly hinder business performance if all organisations were to adopt a
perfect or ideal organisational structure. This is because its not tailored to the
business needs, and fails to consider other aecting situational factors.

3.3 Environment
3.31 Mechanistic & Organic
A mechanistic structure implies a rigid, bureaucratic operational approach (Mullins
2010, p594). Its suited to organisations operating in relatively stable environments,
who implement strict control and hierarchical structures to manage performance
output. Strategic decisions are centralised, and through rules of guidance
performance is measured to how well employees conform to process and
procedure.

An organic structure is more suited to unstable environments they tend to be

decentralised, results orientated and have a flat hierarchy with fewer process
structures (Thompson, 2013). Organic structures encourage individual initiative and
relies on eective communication and information flow between all departments.
People of superior knowledge or competence are considered to be more powerful.
The benefit of organic structures, if done correctly, is the greater business
responsiveness and the ability to adapt to changes in the environment.

Figure 3.0 below compares features of Mechanistic and Organic Structures:

Figure 2.0: Mechanistic vs Organic Structures

The stark contrast in mechanistic and organic structures, suggest that neither
system can be superior under all possible situations. The contingency approach
emphasis that a particular structure is appropriate, dependent upon specific
conditions. All companies are unique with their own independent situational factors,
internal and external uncertainties, and business goals. Therefore its impractical to
define an ideal organisational structure model. This leads to organisations
optimising their structure by using a hybrid of both mechanistic and organic
structures.

In a restaurant, the food preparation would be mechanistic, where chefs would

follow set recipes. The customer facing service element would lean towards an
organic structure, where flexibility in meeting the customer requirements defines
good service.

3.32 Integration & Dierentiation

Integration defines how organisations bring teams together to achieve a common
goal (Mullins 2010, p597). Although, departments can have individual distinctive
forms of structure, managers must consider the interaction between other aspects
of the organisation. Factors according to the nature of their task, level of
collaboration required and operating environment are of importance.

The use of concurrent teams, as opposed to the over the wall approach is
commonly adopted in the manufacturing industry. Furthermore, oil companies are
vertically integrated, concerned with all aspects of product life cycle. From locating
depositories, drilling, refining and distributing the petroleum product to end
customer.

Dierentiation is the tendency of the parts of an organisation to disperse into

segmented specialisms (Mullins 2010, p597) and as a result, specialist units behave
in specific, delimited ways, with instances minimal coordinating with other parts of
the organisation. Organisationally, this can be referred to as individual business
units, which are likely to be managed in dierent ways, due to variations resulting
from their sub-environments. Unilever is an example of a dierentiated organisation,
with three global divisions (Unilever, 2012) that are further dierentiated to
organisationally and operationally cover manage their diverse product portfolio.

The structure of organisations in the future is critical, as industry moves towards

Flexible Connected Enterprises (Bhamra, 2014), see Figure 4.0 below, the push for
innovative customer focused solutions will drive organisations to become more
responsive.

Figure 4.0: The Flexible Connected Enterprise

The Contingency Approach can be referred to as ecological - organisations that can

best adapt to the environment will survive, compete and thrive.

3.4 Power
Application of management behaviours (i.e. span of control, management style, and
organisational levels) are also factors that influence organisational performance
(Grimsley, 2014). The way managers operate will depend on the aecting situational
factors, level of uncertainty they face and the strategic organisational aims intended
to be achieved.

4.0 Conclusion
In summation, the Contingency Approach is a sensible and valid view of modern
industrial organisations and adds value to mangers that understand and use it
correctly.

The Contingency Approach provides a multi-criteria holistic view, by considering all

relevant situational factors and their interdependent relationships with each other;
and how this may aect how an organisation is structured to maximise, optimise
and deliver performance. There is not one particular model for success, because
each organisation is unique. In order for organisations to succeed they must adopt a
structure suitable for the environment in which they operate. One size does not fit
all.

5.0 Bibliography
5.1 References
Aston Martin. (2014).Aston Martin invests millions in new manufacturing facilities at Gaydon [Online]
Available from: http://www.astonmartin.com/en/live/news/2014/05/28/aston-martin-invests-millionsin-new-manufacturing-facilities-at-gaydon [Accessed 5 November 2014].

Bhamra, R (2014). Organisational Structures 4, Slides 8 - 15, lecture notes distributed in MMC201 Organisational Structure & Strategy, at Loughborough University on 23rd October 2014.

Coca-Cola Inventory. (2010).Continuous Product Flow and Made To Stock [Online] Available from:
http://cocacolainventory.blogspot.co.uk/2010/03/continuous-product-flow-and-made-to.html.
[Accessed 5 November 2014].

Cohen, D. (2012).Zuckerberg On Facebooks Employee Total: Small Is Good.[Online] Available from:

http://allfacebook.com/zuckerberg-employee-total_b95730. [Accessed 5 November 2014].

Ebhardt, T. (2013).Aston Martin Said to Plan New CEO to Double Auto Sales [Online] Available from:
http://www.bloomberg.com/news/2013-09-09/aston-martin-said-to-plan-new-ceo-to-doublesales.html [Accessed 5 November 2014].

Grimsley,S. (2014).Contingency Approach of Management: Definition, Example & Quiz [Online]

Available from: http://education-portal.com/academy/lesson/contingency-approach-ofmanagement-definition-example-quiz.html#lesson [Accessed 6 November 2014].

Hofler, D. (2014).Contingency Approach to Management.[Online] Available from: http://

www.referenceforbusiness.com/management/Comp-De/Contingency-Approach-toManagement.html. [Accessed 6 November 2014].

Kinicki, A, Williams,L (2012).Management: A Practical Introduction. 5th ed. Boston: McGraw-Hill.

p842 843.

Kurush, R (2014). Business Model of Facebook [Online] Available from: http://

rhearahuldivyaebizproject.blogspot.co.uk/2012/10/business-model-of-facebook-uol-ebiz.html
[Accessed 15 November 2014].

Mullins,L (2010).Management & Organisational Behaviour. 10th ed. London: Financial Times Prentice
Hall. p59, p588 590, p594, p597.

Statistic Brain. (2014).Coca-Cola Company Statistics [Online] Available from: http://

www.statisticbrain.com/coca-cola-company-statistics/ [Accessed 6 November 2014].

Thompson, S. (2013).How Do Organic Organizational Structures Aect External Hierarchical

Organizational Structures? [Online] Available from: http://smallbusiness.chron.com/organicorganizational-structures-aect-external-hierarchical-organizational-structures-44740.html
[Accessed 6 November 2014].

Unilever. (2012).Introduction to Unilever[Online] Available from : http://www.unilever.co.uk/aboutus/

introductiontounilever/. [Accessed 6 November 2014].

5.2 Figures
Figure 1.0:

Mullins,L (2010).Management & Organisational Behaviour. 10th ed. London: Financial Times Prentice
Hall. p588.

Figure 2.0:

Upton, D. (1994).A Flexible Structure For Computer-Controlled Manufacturing Systems [Online]

Available from: http://www.people.hbs.edu/dupton/papers/organic/WorkingPaper.html. [Accessed 6
November 2014].

Figure 3.0:

Borgatti, S. (2002).Organic vs Mechanistic Structures [Online] Available from: http://

www.analytictech.com/mb021/organic_vs_mechanistic_structure.htm. [Accessed 6 November
2014].

Figure 4.0:

Bhamra, R (2014). Organisational Structures 3, Slide 16, lecture notes distributed in MMC201 Organisational Structure & Strategy, at Loughborough University on 16th October 2014.