The contribution of the above scholars led to the concrete development of the contingency theory. Basic theme of the Contingency Theory is that organisations have to deal with different situations in different ways. There is no single beast way of management applicable to all situations. In order to be effective, the internal functioning of an organization should co-relate to the demands of external environment. The managers must regulate the organizational functioning in harmony with the needs of the people, i.e. members from within and customers and other externally.

Contingency theory firmly understands the fact that our social and business environment is always subject to change. No single rule or law will solve management problems at all times, all places and for all individuals or institutions. The business manager has to study the external environment and define the course of his strategies and action process. The external environment is not static and rigid, but flexible and fast changing. It is not a constant but a variable factor. For example even today for a small family managed production unit employing a single digit number of employees, may still fare well adopting the scientific theory of management expounded by Frederick Winslow Taylor than by other theories. Put in a nutshell the theory advocates effective management as "the art of knowing exactly what you want men to do and seeing that they do it in the best and cheapest way". But we read in books that scientific management theory is out-dated, as it is not the one best way of doing things applicable to all situations. It is not out-dated, but business organizations have grown complex with large volume of turnover and manpower engaged consisting of not blue-collar workers, but white collar educated employees. The theory is a misfit for such organizations. But for units as it existed at the early days of Industrial Revolution scientific management theory may still hold good. As the family unit grows in size and volume and turns into a corporate body, the management will struggle to meet the problems of running the unit, if it does not change the style of management.

The main features of the contingency theory are as under:

1. Management is essentially situational. Consequently the techniques of management is contingent on the situation. If it properly conforms to the demands of the environment, the technique is effective and fruitful. In other words the diversity and complexity of the external situation with which the organization interacts alone should determine which measure or technique is to be chosen to be effective.

2. Management should therefore adopt its approach and strategy in tune to the requirements of each particular situation. Management policies and practices that spontaneously are responsive to environmental changes alone would be effective. To meet this, the organization should design its structure, leadership style, and control systems should all be oriented to the situation prevailing.

3. Since management effectiveness and success are directly related to its ability to cope up with the environment and to the changes overtaking therein, it should sharpen its diagnostic skills to be proactive and to anticipate and comprehend environmental changes.

4. In short the successful manager should recognise that there is no one best way or thumb rule to manage. They must not consider particular management principles and techniques as applicable to all time and all needs. There are no solution of universal applicability, as two situations may not be identical.

The contingency approach has a widespread applicability and practical utility in management of complex and large sized organizations. It advocates comparative analysis of organizations to bring about matching or fit between the organization structure and situational variables. Therefore this approach is also known as Situational Approach.

Its approach is pragmatic and open-minded. It discounts preconceived notions and universal validity of principle. It advocates that the problems faced in each situation be analysed and 'case studies' be conducted to list the options available and then to choose the best and cheapest and option. It thus avoids preconceived value judgements and widens the horizons of practising managers. It guides them to be alert and adoptive to environmental variables while choosing their styles and techniques. It provides freedom of choice by liberating them from dogmas and pre-conceived principles. Therefore they get the opportunity of becoming innovative and creative. Management is not a pure science, but it is a practising art. The theory focuses attention on specific situational analysis that helps practising managers to be pragmatic and develop competence for situational analysis. It combines the mechanistic and humanistic approaches to fit the particular situation. It is an improvement over the System Theory developed in the earlier period by authors like Kenneth Boulding. While the Systems Theory examines the relations between sub-systems of an organization, viewing the system as a set of distinguishable, but interdependent and inter-related parts operating in a logical manner or sequence in order to achieve a goal, the Contingency Theory advances further and stresses the need to additionally examine the relationship between the organization and its environment too.

"Basically, contingency theory asserts that when managers make a decision, they must take into account all aspects of the current situation and act on those aspects that are key to the situation at hand. Basically, it's the approach that "it depends". For example, the continuing effort to identify the best leadership or management style might now conclude that the best style depends on the situation. If one is leading troops in the Persian Gulf, an autocratic style is probably best (of course, many might argue here, too). If one is leading a hospital or university, a more participative and facilitative leadership style is probably best." [Carter McNamara, - Free Management Library located at http://www.mapnp.org/library ]

An example of practical application of contingency theory is the commonly referred "Z" theory also referred as Popular management theory, representing combining Japanese system of Management, with the best of the theories of X and Y of Douglas Mc Gregor in America. According to the Z theory "Successful organisations are ones that have a culture that reflects the values of the employees." In the past American workers valued individual decision making and responsibility, employee specialization, rapid promotions, etc., and did not get social satisfaction from the job. Instead the church, community, family, etc., provided social needs. Type Z model organizations now attempt to integrate parts of the Japanese model of management (collective decision making, slow evaluation and promotion, and holistic concern), individual responsibility from the U.S. model of management, and variations of other aspects of management models to create a hybrid model of management.

Characteristics: of Theory Z (Popular Management Theory)

Basic postulates of the Japanese management system is as under-

• collective decision making with ultimate responsibility lying with one person.

• close personal relationships.

• Trust

• emphasis on interpersonal skills.

• respect and value of employees

• long-term employment

• community feeling at work.

To sum up Contingency Theory represent the following attributes-

1. It treats each organisation as a unique entity.

2. It identifies the exact nature of interdependencies and their impact on organisational design and managerial style.

3. It is more pragmatic, down to earth and action oriented.

4. It firmly rejects blind application of principles regardless of realities of individual situations.

5. It relates organisational structure and design to the environment

6. It is neither vague nor complex, but pragmatic and action oriented.