2. Defination
• Contingency theory is a class of behavioral
theory that claims that there is no best way to
organize a corporation, to lead a company, or
to make decisions.
3. Contingency management
• Contingency management leads to preparedness
in the event of an emergency, disaster, or system
failure
• It utilizes risk assessment and is intended to
identify vulnerabilities and threats, and to
implement countermeasures to prevent an
incident or limit its impact should it occur.
• Planning for operational continuity and disaster
recovery are key components of contingency
management.
4. Purpose of contingency management
• Some business resources and functions are
critical to an organization’s success and continued
operations.
• Therefore, it is essential that an organization's
processes operate effectively without excessive
interruption.
• Contingency management supports this objective
through the creation of plans, procedures and
technical measures that can enable the efficient
recovery of business operations following a
business disruption or disaster.
5. Vulnerability
• The identification of vulnerabilities is a vital step
in contingency planning and the implementation
of countermeasures that prevent an incident or
limit its impact if it does occur.
• A vulnerability is a weakness in a business
system, a security procedure or internal controls,
which can be exploited by a threat source.
• Some vulnerabilities can be eliminated or
minimized through operational or technical
solutions specified in a contingency plan.
However, it is not possible to eliminate all risks.
6. Threat
• Contingency management requires the
identification of threats.
• A threat may take the form of a natural event
such as a flood, tornado, earthquake or
hurricane, or it may assume a technical or man-
made form that may be radiological, chemical,
biological, mechanical or electrical in nature.
• A threat may also be an intentional act such as an
act of terrorism, a demonstration, a bomb,
assault, theft or a computer incident.
7. Contingency Planning
• Contingency planning identifies interim measures to
respond to threats and recover from a business or system
disruption.
• Such measures may involve the relocation of operations
and IT systems to an alternate site; the recovery of
functions using alternate equipment and personnel; or the
reliance on manual rather than technical methods to
perform critical functions.
• Contingency planning requires the creation of plans and
procedures and the identification and implementation of
technical measures that will enable the recovery of
business processes, IT systems and data following a
business disruption.
8. Factors affecting contingency
• A small business can be negatively impacted
by all sorts of changes or events, from natural
disasters to entrance of new competitors into
a market.
• A contingency plan is a document that
outlines how a business will respond to such
emergencies if they happen to occur.
Contingency planning is the process of
creating a contingency plan.
9. Goals
• One of the primary factors that influences
contingency planning are the goals of the
business owner or owners.
• The way business owners choose to respond to
different contingencies will reflect their ultimate
goal for the business.
• For example, a business owner might have the
goal of selling his company in the future, so he
might outline the circumstances under which he
will sell the business or how he will respond to
purchase offers in a contingency plan
10. Government Regulations
• Government regulations can have a large impact
on businesses, and a contingency plan might
include instructions for how the company should
deal with changing regulations.
• For example, if the government increases taxes
on certain types of business operations, it could
reduce the profitability of those
operations, prompting a business to shift its focus
toward more profitable activities.
11. Profitability
• A business owner might decide to pursue
different courses of actions in response to certain
contingencies based on the profitability of the
company.
• For example, a business owner might be more
willing to sell his company if turns out not to be
as profitable as he planned. Business owners
might also plan to shut down a business in the
future if it fails to make a profit within a certain
time frame.
12. Considerations
• The amount of time spent on brainstorming possible
contingencies and how to deal with them can influence
the thoroughness of contingency planning.
• If managers spend an inadequate amount of time
planning for contingencies or thinking about the
possible responses to contingencies, they might fail to
plan for certain events or choose the best way to
respond to contingencies.
• Companies not prepared to deal with contingencies
might be slower to respond to opportunities and
threats.
13. • The optimal course of action is contingent
(dependent) upon the internal and external
situation
• Contingency theory has sought to formulate
broad generalizations about the formal
structures that are typically associated with or
best fit the use of different technologies
14. • Organizations are open systems that need careful
management to satisfy and balance internal
needs and to adapt to environmental
circumstances
• There is no one best way of organizing. The
appropriate form depends on the kind of task or
environment one is dealing with.
• Management must be concerned, above all else,
with achieving alignments and good fits
• Different types or species of organizations are
needed in different types of environments
15. • Fred Fiedler’s contingency model focused on a contingency
model of leadership in organizations. This model contains the
relationship between leadership style and the favorableness
of the situation. Situational favorableness was described by
Fiedler in terms of three empirically derived dimensions
• The leader-member relationship, which is the most
important variable in determining the situation's
favorableness
• The degree of task structure, which is the second most
important input into the favorableness of the situation
• The leader's position power obtained through formal
authority, which is the third most important dimension of
the situation
16. Fiedler contingency model
• stress is a key determinant of leader
effectiveness
• distinction is made between stress related to
the leader’s superior, and stress related to
subordinates or the situation itself
• In stressful situations, leaders dwell on the
stressful relations with others and cannot
focus their intellectual abilities on the job
17. Fiedler contingency model(cont.)
• intelligence is more effective and used more
often in stress-free situations
• that experience impairs performance in low-
stress conditions but contributes to
performance under high-stress conditions
• altering or engineering the leadership
situation to capitalize on the leader’s
strengths
18. • William Richard Scott describes contingency
theory in the following manner: "The best way
to organize depends on the nature of the
environment to which the organization must
relate"
