Contingency theory and Corporate Social Responsibility.
An organization placed in the context of a globally interactive environment is in a position to reap huge profits through an efficient organization of its resources and effective coordination between its component elements. No one standard organizational method can be said to be the best way, rather every organization must determine the optimum fit between its component elements. As a result, the Contingency Theory is becoming increasingly relevant in the present day context, especially in maintaining ethical standards of corporate conduct and organizational integrity.
The Contingency Theory may be applied in the analysis of the complex interactions occurring among the different dimensions of any particular phenomenon within an organization. As first mooted by Herbert Simon (1976), the contingency organizational theory revolves around the interaction of the organization with the environment and its impact upon the performance outcomes of the individuals within the organization. According to Zeithaml, Varadarajan and Zeithaml (1988), the existing situational factors play a significant role in how organizations are managed, and must be taken into account in order to arrive at one best way in which an organization can be managed for optimum performance and output. These authors suggest a three pronged approach in determining this best solution (a) the identification of important situational factors which function as contingency variables that provide the distinctions between the different situational contexts (b) grouping of these contingency variables on the basis of similarity of the contexts that they occur in and (c) analyze each group in order to arrive at the best possible solution and management style and method that is likely to produce the best results (Zeithaml, Varadarajan and Zeithaml, 1988).