Fiedler’s Contingency Theory of Leadership

Fred Fiedler developed the contingency theory of leadership in 1967, in an attempt to

make sense of the complexities of human personalities and of the situations in which
leaders must act. The theory rest on the belief that situations influence the effectiveness
of any leader and that as a result, a leader who is successful in one situation may fail in
another situation. The theory tries to account in which certain types leaders should
perform well.

Fiedler’s theory focuses on the much between the leader’s personality and the
Situation. Fiedler’s describe the leader’s basic personality traits in terms of task versus
relationship motivation. He describes the situation in terms of how favorable it is for the
leader.

Fiedler’s concept of task motivation is similar to concern for production on the

managerial grid, and his relationship motivation parallels the grid’s concern for people.
Fiedler believes that person’s tendency to be task- oriented or relationship-oriented is
basically constant- if you are more concerned with people than with the task in one
situation, you will show the same tendency in other situations. Fiedler measured task and
relationship motivation through the use of the least-preferred co-worker (LPC) scale.
Leader’s think of one person with whom they have worked in the past and with whom
they would least like to work now and then rate that person on sixteen different qualities,
such as tendencies to be inefficient/efficient and unfriendly/friendly. Fiedler believes that
the LPC scores actually say more about the leader than the least-preferred co-worker
relatively (high LPC) are concerned with interpersonal relations, whereas a low LPC
score indicates the leader is more apt to be focused on a task.

According to Fiedler, three factors determine the degree to which a situation is

favorable or unfavorable to a leader: leader-member relations, task structure, and the
leader’s position power. The personal relationship between the leader and his or her
subordinates- leader-member relations depends on the degree of mutual trust, respect, and
confidence. Task structure includes such factors as the number of different ways a job
can be performed and whether there is one best way, the amount of feedback a job
provides, and the clarity of the requirements for the job. The theory assumes that highly
structured jobs- those that can be performed only one way, have clear requirements, and
provide feedback- are favorable to the leader. Such jobs are routine and easily
understood. Less structured jobs that involves more decisions and ambiguity are less
favorable for a leader, because those jobs require the to play a greater role in guiding and
directing subordinates.

The leader’s role provides the leader with position power. Leaders who have
control over their management decisions have high, or favorable, position power. Leaders
with high position power can assign work and reward and punish employees on their
own. Leaders with less favorable, low-power positions must get approval for such
action’s.

1. Fiedler has also encouraged the use of a leader match concept since effective
leadership is a function of both the individual leader and situation; two
alt6ernatives are available to the leader who wants a better match between the
two. The leader can either attempt to change his or her personality or work to
change the situational variables and make them more favorable. Fiedler argues
that it is too difficult to get leaders to change their personalities; it is more
effective to change the situation. As a result, Fiedler and his associates have
developed a self-paced program instruction work book for this purpose. The
booklet teaches leaders how to (1) assess their relationship based on their LPC
score, (2) assess the amount of situational favorableness that currently exists
in their environment, and (3) change the situation so that it matches their style.
The theory has been applied quite successfully.

2. Fiedler’s model suggests that managers develop a dominant style of leadership

early in their careers and it changes very little over time. In his view, this
predisposition to one style is strongly grounded in personality, and although
some marginal change in behavior is possible, a significant change is unlikely.
This conclusion has strong implications for staffing managerial positions and
for replacing managers. When there is a mismatch between a manager’s
predisposed leadership style and situation, that manager may have to be
replaced by someone more closely attuned to situational demands. If the
mismatch is not severe, however, a leader’s style may be sufficiently changed
by management development techniques. The best solution in fiedler’s view is
to modify the task structure or leader-member relationships.

3. When Fiedler examined the relationships among leadership style, situational

favorability, and group task performance, he found the pattern that task-
oriented leaders are more effective when the situation is either highly
favorable or highly unfavorable. Relationship-oriented leaders are more
effective in situations of moderate favorability. The reason the task-oriented
leaders excels in the favorable situations is that when everyone gets along the
task is clear, and the leader has power, all that is needed is for someone to take
charge and provide directions. Similarly, if the situation is highly unfavorable
to the leader, a great deal of structure and task direction is needed. A strong
leader defines task structure and can establish authority over subordinates.
Because leader-member relations are poor anyway, a strong task oriented will
make no difference in the leader’s popularity.

The reason the relationship-oriented leader performs better in situation of

intermediate favorability is that human relations skills important in achieving high group
performance. In these situations the leader may modify well liked, and have some power,
and supervise jobs that contain some ambiguity. A leader with good interpersonal skill
can create a positive group atmosphere that will improve relationships, clarify task
structure, and establish position power.

The leader, then, needs to know things in order to use Fiedler’s contingency
theory. First, the leader should know whether he or she has a relationship-or task-oriented
style. Second, the leader should diagnose the situation and determine whether leader-
member relations, task structure, and position power are favorable. Fittings leader style to
the situation can yield large dividends.

4. Fiedler believes that managers cannot easily change their LPC orientation or
management style. As a result, he argues that leaders need to understand their
leadership style and analyze the degree of favorability, or situational control.
If the match between the two is not good, a leader needs to either make
changes (e.g. increased task structure) or find a more compatible leadership
situation. Fiedler calls this approach “engineering the job to fit the manager.”

5. Where leader-position power is weak would call for a participative leadership

style. If the leader is uncomfortable with participative approaches, he or she
might be given additional position power. This would indicate the need for a
more directive approach.

6. In spite of extensive research to support the theory, critics, question the

reliability of the measurement of leadership style and the range and appropriateness of
three situational components the leader-member relations, task structure, and position
power. However, managers can use this model to diagnose the nature of several
contingencies that affect leadership style and begin to identify the appropriate style for a
given context.

House’s Path Goal Theory

Robert House of the University of Toronto has proposed a situational theory of

leadership called Path-Goal Theory. Unlike Fiedler’s contingency theory, which relies on
the somewhat ambiguous LPC trait, Path-Goal Theory is concerned with the situations
under which leader behaviors are most effective.

The theory why did house choose the name path-goal for his theory?
According to House, the most important activities of leaders are those that clarify the
paths to various goals of interest to subordinates. Such goals might include a promotion, a
sense of accomplishment, or a pleasant work climate. In turn, the opportunity to achieve
such goals should promote job satisfaction, leader acceptance, and high effort. Thus the
effective leaders form a connection between subordinate goals and organizational goals.

House argues that, to provide job satisfaction and leader acceptance, leader
behavior must be perceived as immediately satisfying or as leading to future satisfaction.
Leader that is seen as unnecessary or unhelpful will be resented. House contends that, to
promote subordinate effort, leaders must make rewards dependent on performance and
ensure that subordinates have a clear picture of how this reward can be achieved. To do
this, leader might have to provide support through direction, guidance, and coaching.

Leader Behavior Path-Theory is concerned with four specific kinds of leader

behavior. These include:

Supportive Leadership This style considers subordinates needs and supports a friendly
climate at work. When work is tedious or boring, supportive leaders ease frustrations and
make task more tolerable, thereby influencing more productive performance. However,
when work is pleasant and the environment enjoyable, supportive leaders have little
effect on performance or satisfaction.

Directive Leadership. This behavior reflects authority, rules, policies, and a formal
organization. Subordinates follow specific guidelines and traditional pattern of decision
making. When task are unstructured and roles ambiguous, directive leaders are effective
because subordinates perceive that closer supervision and more directive leadership will
increase their opportunities for success. In other words uncertain or unstructured work
environment make employees apprehensive, and in these circumstances a directive style
of leadership enhances their expectations for success and rewards related to high
performance. However, when subordinates know their jobs and feel confident about
performing well, directive leadership is viewed as unnecessary imposition.

Participative Leadership. Participative leaders emphasize a consensus environment of

team-building relationships. Results are similar to those of directive leadership. In
unstructured and ambiguous situations, participative leadership enhances performance
and satisfaction. However, unlike directive leadership, participative methods also
enhance satisfaction when work is tedious, boring, dangerous, or otherwise unpleasant.
Thus participative style incorporates supportive and directive advantages, and works in
many situations. But when work is structured and subordinates have clear understanding
of their jobs, participative leadership has little or no effect on performance.

Achievement leadership. This style of leadership sets challenging goals, encourages

innovation, and emphasize confidence in subordinates. It is particularly important when
subordinates have to perform nonrepetitive tasks in ambiguous circumstances. When
tasks are repetitive and clear, achievement-oriented leadership has or no effect on
performance or satisfaction.2

Identifying leadership style. Fielder believes a key factor in leadership success is

the individual’s basic leadership style. So he begins by trying to find out what that basis
style is. Fiedler created the LPC questionnaire for this purpose. It contains 16 contrasting
adjectives (such as pleasant – unpleasant, efficient – inefficient, open – guarded,
supportive – hostile). The questionnaire then asks respondents to think of all the co –
workers they have ever had and to describes the one person they least enjoyed working
with by rating him on a scale of 1 to 8 for each of the 16 sets of contrasting adjectives.
Fiedler believes that based on the respondents’ answer to this LPC questionnaire, he can
determine their basic leadership style. If the least preferred co – worker is described in
relatively positive terms (a high LPC score). Then the respondent is primarily interested
in good personal relations with his co – worker. That is if one essentially describes the
person he is least able to work with in favorable terms, Fiedler would label him
relationship oriented. In contrast, if the least preferred co – worker is seen relatively
unfavorable terms (a low LPC score), the respondent is primarily interested in
productivity and thus would be labeled task – oriented. About 16 percent of respondents
score in the middle range. Such individuals cannot be classified as either relationship
oriented or task oriented and thus fall outside the theory’s predictions. The rest of the
discussion therefore, relate to the 84 percent who score in wither the high or low range of
the LPC.

Fielder assumes that an individual’s leadership style is fixed. This is important

because it means that it a situation requires a task – oriented leader and the person in that
leadership position is relationship oriented, either the situation ha to be modified or the
leader removed and replaced if optimum effectiveness is to be achieved . Fiedler argues
that leadership style is innate to a person – one can’t change the style to fit changing
situations.

Defining the situation. After an individual’s basic leadership style has been
assessed through the LPC, it is necessary to match the leader with the situation. Fielder
has identified three contingency dimensions that, he argues, define the key situational
factors that determine leadership effectiveness. These are leader – member relations, task
structure, and position power. they are defined as follows:

1. Leader – member relation is the degree of confidence, trust, and respect

subordinates have in their leader.

2. Task structure is the degree to which job assignments are procedurized (that is,
structured or unstructured.

3. Position power is the degree of influence a leader has over variables such as
hiring, firing, discipline, promotions, and salary increases.

The next step in the Fiedler model is to evaluate the situation in terms of the three
contingency variables. Leader – member relations are either good or poor, task
structure is either high or low, and position is either strong or weak.

Fiedler states that the better the leader – member relations, the more highly
structured the job, and the stronger the position power, the more control or influence the
leader has. For example, a very favorable situation (where the leaders would have a great
deal of control) might involve a payroll manger who is well respected and whose
subordinates have confidence in him, (good leader – member relations), where the
activities to be done – such as wage computation, check writing, report filing – are
specific and clear (high task structure), and the job provides considerable freedom for
him to reward and punish his subordinates (strong position power). On the other hand, an
unfavorable situation might be the disliked chairperson of a voluntary fund – raising
team. In this jog the leader have very little control. Altogether, by mixing the three
contingency variables, there are potentially eight different situations or categories in
which leaders could find themselves.

Matching leaders and situations. With knowledge on an individual’s LPC and

an assessment of the three contingency variable, the Fiedler model proposes matching
them up to achieve maximum leadership effectiveness (Fiedler, Chemers and Mahar,
1997). Based on Fiedler’s study of over 1,200 groups, in which he compared relationship
versus task – oriented leadership styles in each of the eight situational categories, he
concluded that task – oriented leaders tend to perform better situational that were very
favorable to them and in situations that were very unfavorable. So Fiedler would predict
that when faced with a category I, II, III, VII, situation, or VIII task – oriented leaders
perform better. Relationship – oriented leaders; however, perform better in moderately
favorable situations – categories IV through VI.

Given Fiedler’s findings, how would one applies them? One would seek to match
leaders and situations. That “situation” would defined by evaluating the three
contingency factor of leader – member relations, task structure, and position power. But
remember the Fielder views an individual’s leadership style as being fixed. Therefore,
there are really only two ways in which to improve leader effectiveness.

First, once can change the leader to fit the situation, as in a baseball game; a
manger can reach into the bullpen and put in a right – handed pitcher of a left – handed
pitcher, depending on the situational characteristics of the hitter. So for example, if a
group situation rates a highly unfavorable but is currently led by relationship – oriented
manger, the group’s performance could be improved by replacing that manger with one
who is task oriented. The second alternative would be to change the situation to fit the
leader. That could be done by restructuring tasks or increasing or decreasing the power
that the leader has to control factors such as salary increases. Promotions and disciplinary
actions. To illustrate, a task – oriented leader is in a category IV situation. If this leader
could increase his power, then the leader would be operating in category III and the
leader – situation match could be compatible for high group performance.

Evaluation. As a whole, reviews of the major studies that tested the overall
validity of the Fiedler’s model lead to a generally positive conclusion. That is, there is
considerable evidence to support at least substantial parts of the model (Schriesheim,
Tepper and Tetrault, 1994; Ayman, Chemers, and Fiedler, 1995). But additional variables
are probably needed if an improved model is to fill in some of the remaining gaps. Move
over, there problems with the LPC and the practical use of the model that needs to be
addresses. For instance, the logic underlying the LPC is nor well understood and studies
have shown those respondents’ LPC scores are not stable (Kennedy, Houston, korgard,
and Gallo, 1997). Also, the contingency variables are complex and difficult for
practitioners to assess. It’s often difficult in practice to determine how good the leader –
member relations are, how structured the task is, and how much positions power the
leader has.

Cognitive Resource Theory: an update on Fiedler’s contingency model. More

recently, Chemers and Ayman (1993) reconceptualized the Fiedler’s original theory to
deal with ‘some serious oversight that need to be addressed.” Specifically, they are
concerned with trying to explain the process by which a leader obtains effective group
performance. They call this reconceptualization cognitive resource theory.

They began making two assumptions. First, intelligent and competent leaders
formulate more effective plans decisions, and action strategies than less intelligent and
competent leaders. Second, leaders communicate their plans decisions, and strategies
through directive behavior. They then show how stress and cognitive resources such as
experience, tenure, and intelligence act as important influences on leadership
effectiveness.

The essence of the new theory can be boiled down to three predictions: (1)
directive behavior results in good performance only if linked with intelligence in a
supportive, nonstressful leadership environment, (2) in highly stressful situations, there is
a positive relationship between job experience and performance, and 93) the intellectual
abilities of leaders correlate with group performance in situations that the leader
perceives as nonstresful.

The limited numbers of studies to test the theory have, to date generated mixed
results (Vecchio, 1990; Gibson, Fiedler and Barret, 1993) clearly, more research is
needed. Yet given the impact of Fiedler’s original model of leadership on organizational
behavior, the new theory’s link to this earlier model and the new theory’s introduction of
the leader’s cognitive abilities as an important influence on leadership effectiveness,
cognitive resource should not be dismissed out of hand.

Leader – Member Theory

The previous discussion on leadership theories covered have largely assumed that
leaders treat all their subordinates in the same manner. However, leaders often act very
differently toward different subordinates. The leader tends to have favorites who made up
his “ in – group”

The leader – member exchange (LMX) theory argues that because of time
pressures, leaders establish a special relationship with a small group of their subordinates.
These individuals make up the in – group – they are trusted, get a disproportionate
amount of the leader’s attention, and are more likely to receive special privileges. Other
subordinates fall into the out – group. They get less of the leader’s time, fewer of the
preferred rewards that the leader controls, and have superior – subordinates relations
based on formal authority interactions.

The theory proposes that early in the history of the interaction between a leader
and a given subordinates, the leader implicitly categorizes the subordinates as an “in” or
an “out” and that relationship is relatively stable over time (Liden, Wayne, and Stilwell,
1993) just precisely how the leader chooses who falls into each category is unclear, but
there is evidence that leaders tend to choose in – groups members because they have
personal characteristics (for example, age, gender attitudes) that are similar to the leader,
a higher level of competence than out – group members, and/or extroverted personality
(Liden, Wayne, and Stilwell, 1994; Deluga and Perry, 1994; Philips and Bedeian, 1994).
LMX theory predicts that subordinates with in – groups status will have higher
performance ratings, less turnover, and greater satisfaction with their superiors.

Research to test LMX theory has been generally supportive (Dockery and Steiner,
1990; Graen and Uhl – Bein, 1995; Settoon, Bennett and Liden, 1996). More specifically,
the theory and research surrounding it provide substantive evidence that leaders do
differentiate among subordinates, that these disparities are far form random, and that in –
group and out – group status is related to employee performance and satisfaction

Path-goal theory. A contingency approach to leadership specifying that the

leader’s responsibility is to increase subordinates’ motivation by clarifying the behaviors
necessary for task accomplishment and rewards.

Path Goal Theory. Currently, one of the most respected approaches to leadership
is the path – goal theory. Developed by Robert House, path – goal theory is a contingency
model.

A 1986 meta – analysis by Robert Lord and his associates remedied this
shortcoming with the following insights: First, the Lord study criticized leadership
researchers for misinterpreting Stogdill’s and Mann’s findings. Specifically, correlations
between traits and perceived leadership ability were misinterpreted as linkages between
traits and leader effectiveness. Second, a reanalysis of Mann’s data and subsequent
studies revealed that individuals tend to be perceived as leaders when they possess one or
more of the following traits: intelligence. Dominance and masculinity. Thus, Lord and his
colleagues concluded that personality traits are associated with leadership perceptions to
a higher degree and more consistently than the popular literature indicated. (Lord, Vader,
and Alliger, 1986). This conclusion was supported by results from several recent studies
(Atwater and Yammarino, 1993; Morgan, 1993: Malloy and Janowski, 1993).

Three recent meta – analysis of more than 61 studies uncovered three key results.
First, men and women differed in the type of leadership roles they assumed within work
groups. Mere were seen as displaying more overall leadership and task leadership. In
contrast, women were perceived as displaying more social leadership (Eagly and Karau,
1991). Secondly, leadership styles varied by gender. Women used a more democratic or
participative style than men. Men employed a more autocratic and directive style thatn
women (Eagly, Karau and Johnson, 1992). Third, female leaders were evaluated more
negatively that equivalent male leaders, this bias was considerably stronger when somen
used an autocratic or directive leadership style. Women evaluators were male (Eagly,
Makhihani, and Klonsky, 1992).

Behavioral Styles. This phase of leadership research began during World War II
as part of an effort to developed better military leaders. It was an outgrowth of two
events: the seeming inability of trait theory to explain leadership effectiveness and the
human relations movement, an outgrowth of the Hawtorne Studies. The thrust of early
behavioral leadership theory was to focus on leader behavior directly affected work group
effectiveness. This led researchers to identify patterns of behavior (called leadership
styles) that enabled leaders to effectively influence others.

Behavioral styles theory spawned a lot or research and generated many

perspective models. Perhaps the most widely known behavioral styles model of
leadership is the Managerial Grid, renamed the Leadership Grid in 1991 (bass and
Stogdill, 1991). This model is based on the premise that there is one best style of
leadership. This model prescribes that leaders should demonstrate a high concern of
people and a high concern for production. Situational leadership theory is another well –
known prescriptive theory. According to the theory, appropriate leadership is found by
cross referencing an employee’s readiness, which is defined as the extent to which an
employee possesses the ability and willingness to complete a task, with one of four
leadership styles.

By emphasizing leader behavior, something is learned; the behavioral style

approach makes it clear that leaders are made, not born. This is the opposite of the trait
theorists’ traditional assumption. Given what we know about behavior shaping and model
– based training, leader behaviors can be systematically improved and developed. Foe
example, a study demonstrated that employee creativity was increase when leaders were
trained to (1) help employees identify problems and (2) enhance employees feelings of
self – efficacy (Redmond, Mumford and teach, 2993).

Behavioral styles research also revealed that there is no one best style of
leadership. The effectiveness of a particular leadership depends on the situation at hand.
For instance, employees prefer structure to consideration when faced with role ambiguity
(Bass & Stogdill, 1995)

Situational leadership. Situational leadership theories grew out of an attempt to

explain the inconsistent findings about traits and styles. Situational theories propose that
the effectiveness of a particular style of leader behavior depends on the situation. As
situations change, different styles become appropriate. This directly challenges the idea
of one best of leadership. There are three alternative situational theories of leadership that
reject the notion of one best leadership style.
 Leader – member relations reflect the extent to which the leader has the support,
loyalty, and trust of the work group. This dimension is the most important component of
situational control. Good leader – member relations suggest that the leader can depend on
the groups, thus ensuring that the work will try t meet the leader’s goals and objectives.

Task structure is concerned with the amount of structure contained within tasks
performed by the work group. For example, a managerial job contains less structure that
that of a bank teller. Since structured tasks have guidelines for how the job should be
completed, the leader has more control and influence over employees performing such
task. This dimension is the second most important component of situational control.

Position power refers to the degree to which the leader has formal power to
reward, punish, or otherwise obtain compliance from employees (Fiedler, 1993).
Linking leadership style and situation control. Fiedler (1993) contends that task
oriented leaders are more effective in extreme situations of either high of low control, but
relationship – oriented leaders tend to be more effective in middle – of – the – road
situations of moderate control.

Overall accuracy of Fiedler’s contingency model was tested through a meta –

analysis of 35 studies containing 137 leaders – style performance relations. According to
the researcher’s findings: (1) the contingency theory was correctly included from studies
on which it was based, (2) for laboratory studies testing the model, the theory was
supported for all leadership situations except situation II, and (3) for fields studies testing
the model, three of the eight situations produce completely supportive results while
partial support was obtained for other situations. This last findings suggests that Fielder’s
model may need theoretical refinement (findings: (1) the contingency theory was
correctly included from studies on which it was based, (2) for laboratory studies testing
the model, the theory was supported for all leadership situations except situation II, and
(3) for field studies testing the model, three of the eight situations produced completely
supportive results whiled partial support was obtained of other situations. This last
finding suggests that Fiedler’s model may need theoretical refinement (Peters, Harke, and
pohlamann, 1993). In conclusion, except for the validity of the LPC scale, Fiedler’s
contingency model as considerable support. This implies that organizational effectiveness
can be enhanced by appropriately matching leaders with situations. Leaders with an
inappropriate style need to change their degree of situational control.

Path – goal theory. Robert House originated the path – goal theory of leadership.
He proposed a model that describes how expectancy perceptions are influenced by the
contingent relationships among four leadership styles and various employee attitudes and
behaviors. According to the path – goal model, leader behavior is acceptable when
employees view it as a source of satisfaction or as paving the way to future satisfaction.
In addition, leader behavior is motivational to the extent it (1) reduces roadblocks that
interfere with goal accomplishment, (2) provides the guidance and support needed by
employees, and (3) ties meaningful rewards to goal accomplishment. Because the model
deals with pathways to goals and rewards, it is called path – goal theory of leadership.
House sees the leader’s main job as helping employees stay on the right paths to
challenging goals and valued rewards.

House believes leaders can exhibit more than one leadership style. The contrasts
with Fiedler, who proposes that leaders have one, dominant style, the four styles
identified by House is:

Directive Leadership

Providing guidance to employee about what should be done and how to do it,
scheduling work, and maintaining standards of performance.

Supportive Leadership.

Showing concern for the well – being and needs of employees, being friendly and
approachable, and treating workers as equals.

Participative Leadership.

Consulting with employees and seriously considering their ideas when making
decisions.

Achievement – oriented leadership

Encouraging employees to perform to perform at their highest level by setting

challenging goals, emphasizing excellence, and demonstrating confidence in employee
abilities.

Research evidence supports the idea that leaders exhibit more than one leadership
style (House, 1993). Description on business leaders reinforces these findings. For
example, Michael Walsh, prior to his untimely death from cancer, used multiple styles of
leadership to engineer a turnaround at ailing Tenneco (Johnson, 1993)

Contingency Factors. Contingency factors are situational variables that cause one style of
leadership to be more effective than another. In the present context, these variables affect
expectancy or path – goal perceptions. This model has two groups of contingency
variables. They are employee characteristics and environmental factors. Five important
employee characteristics are locus of control, task ability, need for achievement,
experience, and need for clarity. Three relevant environmental factors are: the
employee’s task, the authority system, and the work group. All these factors have the
potential for hindering or motivating employees.

Research has focused on determining whether the various contingency factors

influence the effectiveness of different leadership styles. The employee characteristics of
need for achievement, experience, and need of clarity – affected employee’s preferences
for leadership. Specifically, a study of 298 ROTC cadets revealed that individuals with
high achievement needs preferred directive leadership (Kohli, 1990). People with low
achievement needs wanted supportive leadership. Experience salespeople were more
satisfied when leaders granted them more autonomy and less direction, whereas with a
high need of clarity performed better and were more satisfied with directive leadership.
With respect to environment contingency factors. Supportive leader behavior promoted
job satisfaction when individuals performed structured tasks (Schriesheim and De Nisi,
1991)

Managerial implications. There are three important managerial implications,

first, leaders possess and use more that one style of leadership. Managers thus should not
be hesitant to try new behaviors when the situation calls for them. second, managers
should modify their leadership style to fit employee characteristics. Employees with high
achievement needs. Little experience, and need for clarity generally should receive
directive leadership to increase satisfaction and performance. Third, the degree of task
structure is a relevant contingency factor. Managers should consider using supportive
supervisions when the task is structured. Supportive supervision is satisfying in this
context because employees already now that they should be doing.

Hofstede
Organizational Theory

What is Organizational Theory?

Organizational theory is the study of how organizations functions and how they
affect and are affected by the environment in which they operate. In this book, we
examine the principles that underlie the design and operation of effective organizations.
Understanding how organizations operate, however, is only the first step in learning how
to control and change organizations so that they can effectively create wealth and
resources. Thus the second is to equip manager in an organization, with the conceptual
tools to influence organizational situations in which you find yourself. The lessons of
organizational theory are as important at the level of first – line supervisor as they are at
the level of chief executives officer, in small or large organizations, and in settings as
diverse as a not – for – profit organizations or the assembly line of manufacturing
company.

Managers knowledgeable about organizations theory are able to analyzed the

structure and culture of their organization, diagnose problems, and, utilizing the process
of organizational design, make adjustments, that help the organizations to achieve its
goals
 Organizational Theory
The study of how organizations functions and how they affect and are affected by
the environment in which they operate.
Organizational Structure
• The formal system of task
and authority relationship that
controls how people are to
cooperate and use resources to
achieve the organization’s goals.
• Controls coordination and
motivation; shapes behaviors of
people and the organization.
• Is response to contingencies
involving environment,
technology, and human resources.
• Evolves as organization
grows and differentiates.
• Can be managed and
changed through the process of
organizational design
Organization Design
• The process by
which mangers select the
manage various
dimensions and
components of
organizational structure
and culture so that an
organization can control
the activities necessary to
achieve its goals.
• Balances the need
of the organization to
manage external and
internal pressures so
that it can survive in the
long run.
Organization Culture
• The set of shared values
and norms that controls
organizational members’
interactions with each other and
with people outside the
organization.
• Controls coordination and
motivation; shapes behavior of
people and the organization.
• Is shaped by people,
ethics, and organizational
structure.
• Evolves as organization
grows and differentiates.
• Can be manages and
changes through the process of
organizational design
The Importance of Organization Design

Because of increased global competitive pressures and because of the increasing use of
advanced information technologies, organizational design has become one of
management’s top priorities. Today, as never before, managers are searching for new and
better ways to coordinate and motivate their employees to increase the value their
organization’s can create. There are several specific reason why designing an
organization’s structure and culture is such an important task. Organizational design has
important implications for company’s ability to deal with contingencies, achieve, achieve
a competitive advantage, effectively manage diversity, and increase its efficiency and
ability to innovate new goods and services.

Dealing with Contingencies

A contingency is an event that might occur and must be planned for, such as changing
environment or a competitor like Amazon.com that decides to use now technology in an
innovative way. The design of an organization determines how effectively an
organization responds to various factors in its environment and obtains scarce resource.
For example, an organizations ability to attract skilled employees, loyal customers, or
government contracts is a function of the degree to which it can control those three
environment factors.

An organization can design its structure in many ways to increase control over its
environment. An organization might change employee task relationships so that
employees are more aware of the environment, or it might change the way the
organization relates to other organizations by establishing new contracts or joint ventures.
For example, when Microsoft wanted to attract new customer for its Windows 98
software both in the United States and globally, it recruited large numbers of customers
service representatives and created a new department to allow them to better meet
customers’ needs, the strategy was very successful, and Windows 98 has become the best
selling operating system in the world.

Changing technology is another contingency to which organization must respond.

Today, the emergence of the Internet as an important new medium through which
organizations mange relationships with their employee, customers, and suppliers is
fundamentally changing the design of organizational structure.

Gaining Competitive Advantage

Competitive advantage. The ability of one company to outperform another because its
mangers are able to create more value from the resources at their disposal.

Core Competences. Managers’ skills and abilities in value – creating activities.

Strategy. The specific pattern of decisions and actions that managers take to use core
competencies to achieve a competitive advantage and outperform competitors.

Managing Diversity

Differences in the race, gender, and national origin of organizational members

have important implications for the values of an organization’s culture and for
organizational effectiveness. The quality of organizational decision making, for example,
is a function of the diversity of the viewpoints that get considered and of the kind of
analysis that takes place. Similarly, in many organizations, particularly service
organizations, a large part of a workforce are minority employees, whose needs and
preferences must be taken into consideration. Also, changes in the characteristics of the
workforce, such an influx of immigrant workers or the aging of the current workforce,
require attention and advance planning. An organization needs to design a structure to
make optimal use of the talents of a diverse workforce and to developed cultural values
that encourages people to work together. An organization’s structure and culture
determine how effectively mangers are able to coordinate and motivate workers.

Efficiency and innovation

Organizations exist to produce goods and service that people value. There better
organizations functions, the more value, in the form of more or better goods and services,
they create. Historically, the capacity of organizations to create value has increase
enormously as organizations ha e introduced better ways of producing and distributing
goods and services. Earlier, we discussed the importance of the division of labor and the
use of modern technology in reducing costs and increasing efficiency. The design and use
of new and more efficient organizational structures is equally important. In today’s global
environment, for example, competition from countries with low labor costs is pressuring
companies all over the world to become more efficient in order to reduce costs or
increase quality.

Similarly, the ability of companies to compete successfully in today’s competitive

environment is increasingly a function of how well they innovate and how quickly they
can introduce new technologies. Organizational design plays an important role in
innovation. For example, the way an organization’s structure links people in different
specializations, such as research and marketing, determines how fast the organization can
introduced new products. Similarly, an organization’s culture can affect people’s desire
to be innovative. A culture that is based on entrepreneurial norms and values is more
likely to encourage innovation than is a culture that is conservative and bureaucratic
because entrepreneurial values encourage people to learn how to respond and adapt to a
changing situation.

Organizational design involves a constant search for new or better ways of

coordinating and motivating employees. Different structures and cultures cause
employees to behave in different ways.
The Consequences of Poor Organizational Design

Many management teams fail to understand the effect of organizational design on

their company’s performance and effectiveness. Although behavior is controlled by
organizational structure and culture, managers are often unaware of this relationship and
pay scant attention to the way employees behave and their role in the organization – until
something happens.

General Motors, IBM, Sears, Eastman Kodak, and AT & T have all experienced
enormous problems in the last decade adjusting to the reality of modern global
competition.

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 CENTER FOR
GRADUATE AND MANAGEMENT
PHILIPPINE CHRISTIAN UNIVERSITY
DASMARINAS, CAVITE

ORGANIZATION THEORY

A Report Paper Submitted

In Partial Fulfillment For The
Course PhD in Development Administration

Submitted to:

Dr. Revelino Garcia PhD

(Professor)

Submitted by:

MEDRADO O LASCUNA
&
CINSP SOFRONIO V AGUILA JR