Two Models: Contingency Theory and Organizational Life Cycle
Contingency theory is the behavioral theory that claims that there is no single best way to design organizational structures. The best way of organizing e.g. a company, is however contingent upon the internal and external situation of the company. Managers have always asked questioned such as :
- what is the right things to do ?
- Should we have a mechanistic or organic structure?
- Functional or divisional structure?
- wide or narrow spans of management?
- Tall or flat organizational structure?
- Should we be centralized or decentralized ?
Contingency theory also called situational approach to management assumes that there is no universal answer to these questions because organizations, people, region, behaviors and situation vary and change over time.
- Contingency theory purports to apply to all aspects of management and not just organizing and leading.
- Measures the effectiveness of group performance using leadership styles.
- It is used to help management choosing best leaders.
- It has been criticized because it has failed to explain fully why people with certain leadership styles are more effective in some situation then others.
- It fails to explain adequately what organizations should do when there is a mismatch between the leader and the situation in the workplace.
- Least prefer co worker scale (LPC) because it did not seem valid on the surface.
Organizational Life cycle / Business life cycle:
Organizational Life cycle is a model which purposes that businesses, over time progress through a fairly predictable sequence of development Four of Five stages which are:
- Introduction or development stage,
- growth ,
- maturity ,
- Diversification (situational )
- decline and death stage.
This model is linked with the study or organizational growth and development. It is based on the biological metaphor of the organism, which have a regular pattern of development. Diversification stage is optional it occur sometime when management takes decision to divert their business to save from decline or death.
- It help businesses to make choices.
- It implies that every one in the whole chain of product life cycle, from cradle to grave, has a responsibility and a role to play taking into account all the relevant impacts on the economy , the environment and the society.
- It avoid shifting approaches from one life cycle stage to another, from one geographic area to another.
- When you depreciate your small business assets you can spread the cost of those assets over their full life cycle , this allows you to receive part of the write-off for your assets as they produce income for you each year.
- Using life cycle concept can cause hardship in business and cost you more money than you may anticipate.
- Life cycle costing methods spread the expense of an asset out evenly over several years.
- Life cycle concept assumes an asset will be as productive in later years as it is when it's new., this may not be the case for example if a machine breaks down when use it for sometime then it will generate less productivity and hence income.
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