The theory is based on two concepts i.e. ‘Contingency’ and ‘Strategic’ aspect of contingency.
A Contingency is a need for different tasks of a subunit in an organization on which tasks of other subunits create an effect. This contingency becomes strategic once other subunit starts controlling more contingencies and becomes powerful in an organization.
As per the Strategic contingency theory, a leader becomes a central part of an organization due to his/her unique skills to solve issues or problems which others are unable to solve. Too much dependency lies on a leader so he/she is not easily replaceable.
Hickson who is the founder of this theory wrote:
“Organizations can be described as a collection of departments or functions that align together to cope with uncertainty.”
Factors like politics and power play an important role in the management of strategic contingencies. Hickson also stated a practical example in support of his strategic contingency theory concept.
According to him, an engineering subunit of an organization is powerful due to its functional skills i.e. it removes uncertainty by its quality of fixing breakdown quickly which affects workflows in the organization at different output levels.
In the Strategic Contingency model, Hickson discussed the effect of some outside variables on the power of organizations. He concluded that both relationships factor of departments and differences of individuals affect organizational power. Power decisions can be influenced by departmental relationships and also individual differences play a vital role too as individuals are different in their skills, capabilities, etc.
Hickson also refuses the concept of earlier leadership theory i.e. Great Man theory which stated that a person having the charisma or leadership trait by birth can only be an effective leader. According to him, a person without Charisma but has the problem-solving ability can be an effective leader.
The author of the Strategic contingency theory is D.J. Hickson and he wrote the theory in 1971. Hickson’s concept is based on the political view of strategic contingencies i.e. bargaining and negotiation features of a leader or subunit that demonstrates great power or dependability of another subunit in an organization. Hickson defined power as the dependent variable in an organization by distributing it through all subunits and departments.
Strategic contingency theory is based on the below assumptions:
- The power of a subunit or individual depends on a few contingencies.
- A leader’s problem-solving skills or capabilities are a source of power as except him/ her no one can resolve issues in an organization. It gives him/ her bargaining power.
- Above results in fixing up a leader’s position and are not easily replaceable.
- It is based on uncertainty i.e. less information on future predictions and due to this different solution and their results cannot be predicted. This uncertainty is the main issue that the organization faces.
The author of the Strategic contingency theory is D.J. Hickson, and he wrote the theory in 1971. Hickson defined organizations having multiple departments and their alignment at the time of uncertainty. The term contingency is defined as a group of tasks required by a subunit which is affected by tasks of another subunit. When a subunit has control over more activities or contingencies than its power increases in the organization and considered as a strategic contingency. This theory connects a subunit’s power to its managing capability with different factors like centrality, uncertainty, and substitutability by controlling the strategic contingencies of other subunit’s dependent activities. This control comes from combining the above factors.
The theory is aimed at defining the dependency of subunits by the control of contingencies. Contingency changed to Strategic when backed up with more subunit power i.e. dependency of other subunits makes a subunit more powerful. Uncertainty is a crucial factor of theory as organizations run in an uncertain environment and all uncertainties are not required to be equally important. Like, regulatory changes can be one uncertainty for both the organization and its competitor which reduces the effect of uncertainty. There are crucial uncertainties where organizations can develop competitive advantage and subunits that can face and provide solutions to these uncertainties to become powerful in the organization. The power of a subunit also depends upon the solutions provided by other subunits on the same uncertainty. The power effect will be less if more alternatives are available by other subunits. So power source must be non-substitutable.
Further Centrality is also a source of power and can be categorized as pervasiveness and immediacy. Pervasiveness defines the position of the subunit in an organization. It focuses upon the interdependencies of activities between subunits i.e. the degree up-to which a subunit depends upon another subunit for its work. Wherein, immediacy is related to the power of a subunit in overall performance and results in an organization.
In an organization, subunit power has 3 elements i.e. domain, weight, and scope. The domain includes the number of affected other subunits by issues, Scope is the decision range that is affected by issues and weight is the degree of effect of subunit on issues.
Uncertainty and managing or coping uncertainty:
Uncertainty is related to insufficient information on future events and due to this, different alternatives and their possible results cannot be predicted in advance. The different environment- driven uncertainties affect inputs, processes, and output in an organization. To effective results of activities, organizations require means to manage uncertainties which are known as coping. So the power of a subunit is connected to uncertainty which affects an organization a lot. Subunit having the ability to deal with uncertainty retains power. The level of uncertainty becomes low from such ability and other subunits and people become dependent on that subunit having the ability. The ability also includes the problem-solving capability.
For example, a subunit can predict an accurate future or can use preventive steps like product development to prevent declining market share.
In an organization system, there are different roles, departments or subunits, and tasks. The centrality of a subunit is up-to what extent its tasks are interlinked into the organization system or with other subunits. It is stated that a subunit becomes central in the system if its activities are connected with different other activities and also termed as workflow pervasiveness. Any subunit that is central to an organization’s workflow plays an important role. Being central to the system, it has lots of responsibilities and if it fails to produce desirable results then it affects the whole organization.
For example, a production subunit in an organization plays a central role as it is responsible for manufacturing operation that includes unique and complex activities. In an emergency in manufacturing breakdown, the production manager can manage things well and deal with unions effectively.
Power also comes if there is no substitute available. Like a subunit having required skills, expertise and only talents to complete work then it is difficult to replace and is more powerful.
Substitutability is considered as different available alternatives. High power is considered when a subunit has control over a resource or activity that has no replacement. For example, a person having only expertise on a certain issue will have more power as compared to lots of people having the same expertise.
For example, the Production subunit has technical expertise that is non-substitutable by other subunits.
From an organizational point of view, Strategic contingency theory has relevancy that can be viewed in the below example of power contingencies of IT (Information Technology) Department or subunit of an organization.
In the above diagram, the IT department or subunit of an organization is a power subunit which describes sources of its power.
- Coping with Uncertainty: The IT department minimizes the uncertainty of critical business issues by providing relevant and quick information on raw data to different subunits or departments of an organization across regions. Different IT-related information systems and software are available that extract useful information from available data. These are very useful in strategic decision making, identifying business opportunities and threats and which is not possible manually. Due to this IT subunit can control, manipulate and process information of high quality and thus helps to reduce the uncertainty of activities of other subunits. This way the power of IT subunit increases.
- Non-Substitutability: Complex and more advanced IT solutions require a high level of expertise to manage and implement these. The power of the IT department increases as other subunits are not able to substitute the required expertise with available resources. Advance IT skills are required to handle more unique and sophisticated IT systems and these skills are hard to gain. So an increase in the complexity of IT in an organization demands more reliability on the IT subunit.
- Workflow Centrality: Organizations dependability has been increased on the IT subunit to manage their workflow and effective communication among them. Different IT systems like ERP Systems can manage information of other subunits centrally like HR, Marketing, Sales, Purchase, production, Customer relationship management, etc. Similarly, it is easy to communicate and to manage workflow which is disbursed in different areas through email systems.
There are different points on which Strategic contingency theory of leadership can be criticized like:
- Up-to what extent subunits are independent and powerful.
- What are the problem-solving skills of a leader states as different types of problems exist?
- No testing methodology was defined to assess the authenticity of the theory. Different other theories like Cognitive Resource theory challenges the Strategic contingencies theory and states that stress and different situations affect the problem-solving capability of a leader.
- It creates uncertainty as based on more dependency rather than problem-solving ability.
Due to the above points, Strategic Contingency theory was failed in aspects of rationality and efficiency.
Following advantages are there of Strategic contingencies theory of leadership:
- This theory is based on a task-oriented and problem-solving approach which states that solving problems should be the main focus of different tasks of a leader. To be an effective leader, a person is not required to have leadership qualities by birth and anyone having the appropriate problem-solving ability can be a leader.
- Moreover, there is no detail concept is required as the theory considers the problem-solving element as central to a leader’s role.
- This theory is much based on leadership techniques rather than depending upon the personality of a leader.
- This theory is easy to understand and implement as it is based on different contingencies or variables that affect the power of a subunit in an organization.
9. Limitations or Disadvantages
Limitations of Strategic contingencies theory are:
- In the theory power definition is not clear i.e. concerning psychological, physical, etc.
- There is no testing method to validate the authenticity of the strategic contingencies model.
- The effect of the stress factor is not considered in a leader’s problem-solving skills.
To conclude, the main power source is to cope up with uncertainty and in absence of this; a subunit cannot be most powerful in an organization and other subunits. Apart from uncertainty, other equally important factors of power are immediacy, pervasiveness, and non-substitutability.
A leader carrying exceptional skills to resolve issues is in high demand in organizations and will get the advantage to negotiate. If a leader’s work is centralized then tasks he/she initiates are of high importance and if he/she fails then other parts of the organization will be affected.