# The Contingency Perspective - Principles of Management

At the heart of the contingency perspective is a simple proposition: The best leadership behavior to adopt depends on the context. There are a number of different contingency theories of leadership, and there is little agreement among leadership researchers about their validity. Here we briefly review three important contingency perspectives to see what we can learn about the elusive topic of leadership effectiveness. These perspectives are Fiedler’s contingency theory, path–goal theory, and the leadership substitutes theory.

FIEDLER’S CONTINGENCY THEORY

In the 1960s psychologist Fred Fiedler introduced his contingency theory of leadership in an attempt to move the field of leadership research away from an obsession with leadership and behaviors. Fiedler’s basic assumption was that it was difficult if not impossible for people to change their leadership style.

Fiedler accepted the two basic leadership styles we have just discussed (task-oriented and people-oriented) although he came up with his own way of measuring those styles. He believed that the effectiveness of a leader should be measured by how the team, group, or organization under the leader performed. His research suggests that the effectiveness of the two basic leadership styles depends on three main situational factors or contingencies (see Figure above ).

The first contingency is leader–member relations , which refers to how well followers respect, trust, and like their leaders. When leader–member relations are good, subordinates respect, trust, and like their leaders. The second contingency is task structure , which refers to the degree to which the jobs of subordinates are highly structured with clear work responsibilities, well-defined tasks, explicit goals, and specific procedures.

The jobs of assembly-line workers, for example, have a high degree of task structure. The job is clearly structured, and responsibilities, goals, and procedures are well understood. In contrast, creative jobs from fashion design to R&D tend to have a low degree of task structure by nature. The final contingency is position power , which is the power that derives from formal hierarchical power over subordinates and includes the legitimate power to hire, fire, reward, and punish subordinates.

Fiedler argued that the situational factors (contingencies) were favorable when leader– member relations were good, task structure was clearly defined and understood, and position power was high. Situational factors were unfavorable when leader–member relations were poor, task structure was ill-defined, and the position power of the leader was low.

Fiedler’s research showed that task-oriented leaders did well in two situations: when the situational factors were unfavorable or very favorable. Conversely, people-oriented leaders did better when the situational factors were moderately favorable (see Figure below).

Predictions of Fiedler’s Theory

Task-oriented leaders seem to do well in very favorable situations because everyone gets along, the task is clear, and the leader has the power needed to take charge and set the direction. According to Fiedler, task-oriented leaders also do well when situational factors are unfavorable because they can establish goals and impose structure on the tasks of subordinates, giving them direction, even if the leaders are not personally liked or trusted.

In moderately favorable situations, a leader with good people skills (a people-oriented leader) can create a positive atmosphere in his or her group that improves interpersonal relationships, clarifies task structure, and helps the leader influence subordinates.

The implication of Fiedler’s theory is that leaders must be matched to situations. It would not work, for example, to appoint a people-oriented leader in an unfavorable turnaround situation—a task-oriented leader would be better.

People-oriented leaders, who focus on building trusting relationships, might not be the best match when hard decisions have to be made: In Fiedler’s view a people-oriented leader would simply be incapable of imposing the required structure and goals. Anecdotal evidence supports this. For example, in 2001 Merrill Lynch appointed Stan O’Neal as CEO of the troubled financial institution.

At the time Merrill’s profits were down, it was losing market share, and outside observers believed that the company had a bloated bureaucracy and far too many stockbrokers. O’Neal is a classic task-oriented leader.

Described as cold, calculating, aloof, and ruthless, O’Neal cut costs with zeal, laying off 24,000 employees, closing more than 300 field offices, and firing dozens of veteran managers, including some of his closest subordinates in 2003 after they went behind his back and tried to lobby the board to replace him. Nevertheless O’Neal engineered an impressive turnaround at Merrill Lynch with net earnings surging to a record $5.2 billion in 2005, up from$2.5 billion in 2002.

The great virtue of Fiedler’s theory is that it advocates matching the leader to the situation, which has some intuitive appeal. A weakness with this theory is that it seems simplistic.

Like the behavioral theories, which it extends, classifying leadership behavior into two broad types seems an unwarranted generalization. Moreover, the division of leaders into people-oriented and task-oriented styles ignores the fact that sometimes the same leader can exhibit elements of both styles. Fiedler’s theory also suggests that a leader who succeeds in changing the situation (as Stan O’Neal has done at Merrill Lynch) should perhaps be replaced by another leader more suited to the new situation.

However, it seems unrealistic to “reward” an effective leader like O’Neal by removing him because he has done his job so well that an unfavorable situation has become more favorable. Finally, Fiedler assumes that leaders cannot change their style, but not everyone agrees with this. The next perspective we look at, path–goal theory, asserts that leaders can change their style to match the situation.

PATH–GOAL THEORY

Path–goal theory is the most complex leadership theory we review here. Like Fiedler’s theory, path–goal theory is a contingency theory. It states that the best leadership style depends on the situation. Unlike Fiedler’s theory, path–goal theory is based on the assumption that leaders can change their style to match the situation. Path–goal theory would state, for example, that having engineered an impressive turnaround at Merrill Lynch, Stan O’Neal can continue to be an effective leader by adopting different behaviors, including a more people-oriented style.

Effective Leadership The core proposition of path–goal theory is that leaders can increase the performance of their subordinates by clarifying and clearing the “path” that subordinates have to follow to attain their goals, and by identifying and offering rewards that motivate subordinates to work toward their goals. Clarifying the path means leaders work with subordinates to help them identify and learn behaviors that will lead to goal attainment.

In other words, they mentor and coach subordinates. Clearing the path means leaders try to take care of problems and remove obstacles that make it difficult for subordinates to attain their goals. For example, they might remove unnecessary tasks, such as excessive meetings, so subordinates can focus on important work. Identifying and offering rewards means leaders identify what will motivate their subordinates to work toward goals attainment, and then put the appropriate rewards in place.

As the chair of an academic department, the current author once had to lead some 23 other faculty members (a difficult proposition even in the best of times)! Clarifying the path involved helping other faculty members understand what was required both for them to get a good performance review and for the business school to improve its standing in the academic community as measured by rankings.

What was stressed continually was the need to publish research in the best academic journals and to get excellent teaching evaluations for their classroom performance. Time was also spent in coaching junior faculty members to help them improve both their research and teaching performance.

Clearing the path involved removing obstacles impeding work to attain these goals by, for example, reducing the number of committees faculty members had to serve on. Identifying and offering rewards meant finding and using the right incentives—including pay raises, promotions, and awards—to motivate faculty members to work harder toward goal attainment.

## Contingency Perspective of Leadership

Leadership Styles Path–goal theory describes four different leadership styles (see Figure below ).First there is directive leadership , which occurs when leaders tell subordinates exactly what they are supposed to do, giving them goals, specific tasks, guidelines for performing those tasks, and the like. Directive leadership is essentially the same as the taskoriented leadership concept discussed earlier.

A second leadership style is supportive leadership , which can be defined as a leadership style in which the leader is approachable and friendly, shows concern for the welfare of subordinates, and treats them as equals. Supportive leadership is similar to people-oriented leadership.

A third leadership style is known as participative leadership, in which a leader consults with his or her subordinates, asking for their opinions before making a decision. The participative leader encourages subordinates to make suggestions and to offer input into the decision-making process. The final leadership style, known as achievement-oriented leadership, occurs when a leader sets high goals for subordinates, has high expectations for their performance, and displays confidence in subordinates, encouraging and helping them to take on greater responsibilities.

Path–Goal Theory

Contingencies Path–goal theory argues that a leader can change his or her leadership style, and that two important contingencies dictate the best choice of leadership style:

(1) the personal characteristics of subordinates and

(2) the nature of the work environment (see Figure above ).

The personal characteristics of subordinates include factors such as the abilities, skills, needs, and motivations of employees. For example, academics are skilled and self-motivated individuals with a high sense of their own self-worth. As such, they respond poorly to directive leadership (they resent being told what to do).

Conversely, they are generally open to a participative leadership style that recognizes that they have substantial expertise and experience and much advice to offer the leader. The same can be said of most professional employees, such as lawyers, doctors, and research scientists.

The nature of the work environment refers to the task structure (is the task well-defined and standardized or complex and varied?), the dynamics of the work group or team (is the team cohesive or fragmented?), and the formal power in the organization (is it strong or weak?). Assembly-line work, for example, is well-defined, standardized, and predictable.

Such work can be dull, leading to apathy and boredom among employees. To counter this, path–goal theory suggests achievement-oriented leadership, where the leader motivates subordinates by setting challenging goals and expressing confidence in subordinates’ ability to attain those goals.

Path–goal theory makes a number of key predictions. First, the theory states that if followers lack confidence, supportive leadership will increase subordinates’ confidence that they can achieve goals, which raises performance. If the task of subordinates is ambiguous, directive leadership may be preferred because this helps clarify the path subordinates must follow, which again increases performance.

If the task of subordinates is standardized and dull, achievement-oriented leadership can motivate subordinates by setting high goals and expressing confidence in their abilities. If the rewards offered to employees are inappropriate, participative leadership may allow the leader to clarify the needs of subordinates and change rewards to improve performance.

Contributions and Limitations A virtue of path–goal theory is that it recognizes a wider diversity of leadership styles than either behavioral theory or Fiedler’s theory. The recognition that in addition to directive (task-oriented) and supportive (people-oriented) styles leaders can adopt achievement-oriented and participative leadership styles adds richness to any discussion of what effective leadership entails.

Some might see another virtue in the assumption that leaders can match their style to the situation they confront. This implies that leaders are at least in part made, not born, which is an encouraging message for managers trying to improve their leadership capabilities. In addition, path–goal theory tries to predict what style is best suited to what situation, which might be useful information for managers trying to determine how they should lead.

On the other hand, path–goal theory has weaknesses. First, the implicit assumption that a leader can adopt only one style at a time seems simplistic. A leader might develop a successful individual style that combines elements of the styles discussed here. A leader can direct subordinates to perform certain tasks while still being approachable and friendly (supportive leadership), setting high goals (achievement-oriented leadership), and consulting with employees about how to improve the work environment (participative leadership).

Second, despite significant research, there is still no strong empirical consensus that path–goal theory does a good job of explaining what is required for effective leadership. Many of the propositions of path–goal theory are difficult to test, and they remain unexplored.

Finally, and perhaps most seriously, path–goal theory has a narrow definition of leadership effectiveness. The theory focuses on what a leader can do to increase subordinates’ motivation by clarifying and clearing the path toward a goal and putting appropriate rewards in place.

What is ignored are other potentially important factors in the leadership process— such as the central role of leaders in crafting a strategic vision, the need for leaders to interact with external stakeholders, the ability of the leader to energize employees through eloquent words, the importance of personality characteristics such as charisma, and the significance of leading by example. Thus as insightful as path–goal theory is, it too seems to provide only a partial definition of effective leadership.

Unlike path–goal leadership, which recommends different leadership styles in various situations, the leadership substitutes approach identifies contingencies that may be “substitutes” for a leadership style. A substitute is a situational variable (a contingency) that makes a leadership style unnecessary. The theory identifies several contingencies that substitute for task-oriented and people-oriented leadership styles.

For example, it is argued that highly professional subordinates who know how to do their tasks, such as lawyers or doctors, do not need a task-oriented leader who structures their work and tells them what to do. Moreover, because such professional subordinates derive substantial intrinsic satisfaction from their work and have a high sense of self-worth, a people-oriented leadership style is also less necessary.

Professionalism on the part of subordinates, in other words, substitutes for both task- and people-oriented leadership styles. Leaders of organizations with a highly professional workforce, therefore, are often considered “first among equals,” and their own leadership focuses on providing strategic direction for the organization and interacting with stakeholders.

More generally, any situational variable that results in employees managing their own behavior and directing themselves toward the attainment of goals (what we might call selfleadership ) reduces the need for proactive task-oriented and people-oriented leadership styles. For example, performance-based reward systems can keep employees directed toward organizational goals, so they might replace or reduce the need for task-oriented leadership.

Similarly, cohesive self-managing work teams can be a substitute for both task- and people-oriented leadership. In a cohesive team coworkers can become substitutes for hierarchical leadership. Coworkers can direct new employees, explaining to them how the team works and what the tasks entail. Coworkers can also provide the social support that might otherwise be provided by a people-oriented leader.

Moreover, when bonus pay for a team is linked to team performance, peer control within the team can act as a substitute for achievement-oriented leadership, with team members stretching themselves to attain team goals and encouraging each other to work hard toward that end. Such conditions are found within companies such as Toyota, 3M, and Nucor Steel, all of which group employees into self-managing teams that take on direct responsibility for a portion of the work process.

In these enterprises team self-management substitutes for hierarchical leadership, enabling the firms to operate with flatter organizational structures that have fewer management layers and wider spans of control.

The idea of leadership substitutes has intuitive appeal, but the empirical evidence so far is mixed. Some studies show that a few substitutes do replace the need for task- or peopleoriented leadership, but others do not. The messiness of statistically testing for leadership substitutes may account for some problems. However, other writers contend that the limited support is evidence that leadership plays a critical role regardless of the situation.

Probably at best we can conclude that a few contingencies such as self-managing work teams, self-leadership, and appropriate reward systems might reduce the importance of proactive leadership