Contingency Approach of Management

“The goal of contingency view is to explain how differences in the contextual and structural dimensions are related. As the term contingency implies, this approach does not seek universal principles that can be used for every situation, but instead seeks to explain how one attribute or characteristic depends upon another. O7” As an extension of system approach, contingency approach put more emphasis on variable situations, the internal relationship within structure and system of management and interaction between system and environment are highly concerned.

Contingency theory helps managers to demonstrate the sub-systems that lie in structure and system of management. Back to MTS again, form a static point of view, the operation activities start with the company’s annual budge (Goal), managers then control (Managerial) their staff (Human) to implement relevant tasks, business activities are transmitted into digital flow within BPCS (Technical). At the same time, within a particular department, sub-systems can also be discovered. For example, equipped with specialized person and defined function, using accounting methods, financial department aims to reflect and affect business profitability.

Here we may find, the size of management system are related tightly to the system structure, the complex goal (company budget) needs a complex system (a company) in which it can be operated, while a single target (financial statement) can be adapted to an relatively simple system (financial department). From a dynamic point of view, contingency approach also provides us an ‘if-them’ model: ‘if certain situational factors exist, then certain variables in organization structure and systems of management are most appropriate.

O8′ Particular purposes are defined to structure a vehicle, private usage, public transportation, cargo delivery, construction ; project. Based on these, different standardised parts are selected and structured with designed link methods. Thus different vehicles are capable of carrying out different tasks. Likewise, in most of the organizations, we can find a set of single vertical management structures, as showed in organization chart figure 1. 1, different departments are formed based on different functions, and a group of person were pointed to take individual responsibilities within this hierarchy.

But these vertical structure and system of management can be broken in case of inter-department matrix co-operation are highly required, that is, for example, if a project is appointed, them a matrix structure and system of management is activated. I was once assigned to lead a project, aiming to analysis the profitability of customer service centers’ operation, which also including a computer system implementation process. As illustrated in figure 2. 1, parts of CS assistant and IT projector’s function were separated from their original position, a new structure and system of management specially operate of this project are formed.

This new structure penetrated the original vertical structure but did coexist with the original one. All of the above structure and system of management can be easily distinguished in organization chart or official files, they are defined as ‘Formal organization’, ‘the planned co-ordination of the activities of a number of people for the achievement of some common, explicit purpose or goal, through division of labor and function, and through a hierarchy of authority and responsibility. O9’ Meanwhile, there is another ‘objective’ form of organization which is presented in any organization, a so called ‘Informal organization’.

Informal groups may take effects within different levels of structure and system of management. For instance, a good personal relationship between the 2 persons who are positioned in different departments may helps them to communicate and improve their working experience and skills, thus enhance their working efficiency; on the contrary, morale conflicts between a manager and his subsidiaries could also leads to job dissatisfaction or job delay. ‘Informal group affects the morale, motivation, job satisfaction and performance of staff O10’.

In my point of view, sometimes people’s behaviour can be formulized as “lot of thinking turn into manner, lot of manner turn into nature”, as it is known to all, the power of nature should not be neglected at any time, (image that people always consider a bureaucracy department to be ‘slow’ and ‘costly’). To be sensitive leader, considering the normal working manner as kind of ‘informal group’, trying to turn it into an expected ‘formal’ working procedure will probably bring job satisfaction, enhance working efficiency and create relationship harmony.

“The basic concepts of the contingency approach help managers to develop a more thorough understanding of complex situations and to take appropriate action. It also draws attention to the difficulties with mixed forms of organization, and to the importance of different structures for different activities and situations. O11” Interaction with Environment More and more cars appear, traffic jams are increasing, and environment is then forced to make amendments, building traffic lights, publishing new rules. Now the drivers have to modify themselves according to the continuously changing circumstance…

As mentioned in paragraph 2 of second chapter, there are 4 sub-systems which have close relationship with structure and size. In an organization, this kind of relationship can be considered as a reflection of internal environment elements, such as company culture. For example, company like MTS has also suffered with overloaded information, complicated financial analysis and inaccurate decision making, it spends a quite long period to prepare annual budget, but still found business activities can not be well projected.

If the company tries to spread the tasks into independent units, say, dividing the whole into production company and sales company, or increase using outsourcing so as to concentrate on core business. Given that the complex environment and inter-department influence are simplified, the managerial decision can also become direct, timely and easily to be put into effect. Looking at the external environment, organization behaviour also varies accordantly.

“Open system” concept indicates that each of the sub-systems interacts with external environment, “organizational performance and effectiveness will be dependent upon the successful management of the opportunities, challenges and risks resented by changes in the external environment O12”. Taking a view of today’s china market, People now tend to spend less time on purchasing activities, instead of going a long way to dig department stores located in city centre.

Customer behaviour’s change leads to a dramatically increasing of super markets and 24 hours convenience shops; meanwhile, in order to raise employment ratio, the government also support the development of convenience shops. Market resegmentation calls for sensitive and specialized units to be the actors. After all, the structure and system of management does not only positively affected by environment. Any open system has 2 major linkages with the external environment, which are input and output, as showed in Figure 3.

1: Recently, most of the company begin to focus their activities on SCM & CRM O13, aiming at cost saving and maximized profitability though the resource reallocation and market retargeting procedure. The main motive power is violent competition, but the implementations of these procedures also optimize the environment where the organizations are involved. From year 1999 to 2001, Toyota (3rd market place) increased its vehicle sales around 13% (from 5,244,971 pcs to 5,927,968 pcs), while G.

E (1st market place) lost 5% in volume. Supply chain management helps Toyota to maintain a high quality and low price positioning. Toyota (China) has around 250 suppliers, 200 of which were ‘forced’ to locate in a radius less than 500 kilometres (while G. E has more than 2,000 suppliers all over the world). At the same time, Toyota send technical representative to resident in suppliers’ site, making sure the quality can meet its own standard. Toyota spent more than 3 years to give his suppliers training.

Nowadays, take a look at one of Toyota’s shop order: 1,021 pcs of glasses, delivered on 08:20am of DD/MM/YY. Such kind of precise time schedule arrangement for material supply made it successful in implementing ‘Zero stock’ to reduce production costs. On the other side, customer chain management also provides opportunities to change external environment. Typical Chinese cooking style used to cost a lot of time in kitchen, modern society’s development accelerates the living rhythm.

Taking this opportunity, Western fast food launched in China market since the middle of 90’s. In order to attract more consumers, McDonald in Shanghai started to develop some traditional Chinese style fast food, like spicy chicken and Chinese style breakfast. Moreover, new “McDonald’s toys” gained more and more attention form children, consumers’ age gradations were enlarged. Those were all proved to be successful. More Chinese consumers are now tending to accept and enjoy Western fast food.