Contingency theory is a class of behavioral theory that says the effectiveness of a manager’s leadership, decisions, and rules depends on the present situation. What worked once may not be successful when applied to a different situation. As a result, management must make decisions or apply leadership styles contingent on internal and external factors to increase their effectiveness in the current situation. This theory is broken down into the theories of leadership, decision-making, and rules.
The contingency theory of leadership explains that a manager's success relies on variables such as the workforce, leadership style, task structure, perceived power of the manager, and corporate culture. Managers should not repeat demands and expect to have the same results each time. A major component of this theory is that different situations call for different leadership styles. Fred Fiedler’s contingency theory, Paul Hersey and Ken Blanchard’s situation theory, and William "Bill" Reddin’s 3-D management style theory have contributed the most to this theory of leadership.
For a decision to be effective, the contingency theory of decision-making asserts, managers must weigh its level of importance, their own qualifications, and acceptance of the decision by employees. A number of aspects of the particular situation affect how the decision will be implemented or carried out. If employees do not trust the manager or disagree with the decision, then employees will become discouraged, making the decision less effective. Major contributors to the contingency theory of decision-making are Victor Vroom and Philip Yetton.
The focus of the contingency rules theory is how employees abide by rules when placed in various situations. Rules are a method of providing employees with persuasive messages. Expectations about management or the policy will affect employee behavior toward the persuasive message. Smith’s contingency rules theory suggests that self-evaluative, adaptive, and behavioral rules evoke different responses to persuasive messages. This theory also emphasizes that threats and rewards are meaningless to employees unless they directly relate to their personal goals.
The contingency theory is composed of ideas from multiple contributors over time with no one person credited with its development. It filled the voids of Max Weber’s bureaucracy and Frederick Taylor’s scientific management theories from the late 1960s. Weber and Taylor did not discuss how internal and external forces impact management decisions and their leadership abilities. The contingency theory is similar to situational theory, except that it takes a broader view by including leadership capabilities and situational variables.