A thesis submitted to mba program of azerbaijan state oil and industry university by adila bahmani

Figure 3.1. Contingency Theory



Source: Fowler, A. (1997) Striking a Balance: A Guide to Enhancing the Effectiveness of NGOs in International Development, London: Earthscan.
The Situational Approach explores the relationship between the elements that characterize the structure of an organization and the circumstances and conditions facing the organization.

Classical and neo-classical approaches do not take into consideration the circumstances and conditions and emphasize the necessity of applying specific principles during the organization's activities and, in the case of application of these principles, the best structure and operation mechanism. However, a situational approach explores the underlying issues and conditions in which the principles apply. Thus, the principles and their application vary according to the situation. Here is an example of what we have mentioned above. One of the basic principles of the classical approach is the principle of command-command. According to classical theory, if it is desirable to have a good organization structure and a working mechanism, it is necessary to follow this principle everywhere and in every situation. However, the situational approach examines such issues as "what can and can be applied under this principle" and "what conditions and conditions applying this principle can create problems".

In order to clarify the relationship between situational approach and the structure of the organization, it is essential to first identify the elements that characterize the structure of the organization. First, it should be noted that when we say the structure of the organization, it is understood that "the clear definition of the relationship between the work of the organization and those who will do it". As an element characterizing the structure of the organization, we cannot the following (Fowler, A. 1997):

• 
  Number of control points in the organization
  
• 
  Number of subsystems that organize the organization
  
• 
  Control area
  
• 
  Authority of each organizational task (functions, etc.)
  
• 
  Job division and speciality degree
  
• 
  The degree of formalization (the prioritization of what is to be used by someone and the use of the necessary methods and methods)
  
• 
  Centralization (a division of decision-making power among the levels of the organization)
  
• 
  The size of the organization
  
• 
  Communication tools and forms
  
• 
  Management intensity (percentage of managers and administrators)
  

In addition to the elements listed above, there is also an internal organization (process) that describes an organization. Examples include leadership, performance evaluation, communication, decision-making, information flow, motivation, and changing processes.

When we examine the organization's structure and operating mechanism for a situational approach, the point where we need to focus is on how the conditions and circumstances affect the elements and activities we have mentioned above. That is, these elements will be shaped according to circumstances and conditions. It is wrong to make a generalization as to situational approach, saying, "Democratic leadership is the best leadership style." What kind of leadership style is best for the organization depends on the situation and the circumstances. In some situations and conditions, authoritarian leadership can be the best leadership style.

Another important issue is the situation and conditions that affect the structure and operation of the organization we mentioned above. So far, two main factors have been highlighted on the situation and the circumstances. These are technology and environment factors. In addition to these two factors, factors such as "magnitude" and "characteristics of the staff (staff)" are also studied.

Another contingency that situates on the situational approach is the concept of the environment. The result of the environmental approach is the following: Organizations' structures and activities differ from each other depending on the environmental conditions.

As the situational approach is perceived as an open system, the key issue that this approach explores is how environmental conditions affect this open system.

What is the environment? We can describe everything outside the boundaries of the organization. The boundaries of the organization are an imaginary line that separates the elements that are not under the control of the organization and the elements under the control of the organization. All other physical and social factors outside the boundary are elements that make up the outer environment. Examples of these elements are demographic composition, economic and political situation, cultural status, legal conditions, geographical and technological conditions. We consider these terms to be directly relevant to the organization, given the circumstances in which we have set an example in the decision-making phase of the organization. In this case, it is important to identify environmental factors that have the ability to directly identify each organization, to clarify in which direction these factors influence organizations, and to investigate how organizations' structures respond to these effects.

Relationships and relationships between the organization and the environment have been studied in several different aspects. In these studies, we can list the following:

• Burns and Stalker research

• Lawrence Lorsch's review

• Emery Trist's review

• James Thompson's review

• Robert Duncan's research

Chandler considers strategy changes as a result of the developmental opportunities that arise as a result of changes in the environment and as a creative response to these changes. Four of the above mentioned companies have identified new strategies to adapt to changing environmental conditions, address their own problems, and meet the environmental needs. As a result, they have undergone a structural change in their organizational structures. However, these strategic and structural changes have not been influenced or imitated by other theories and organizations. Over time, the innovations they have made and their success have been recognized by others as examples and have been applied by those companies at the same time.

According to Chandler, the enterprise develops its own strategy begins with the discovery of the needs and opportunities created by the changing population, income, technology.

The key issue is the use of existing or growing resources in strategic development more efficiently.

According to Chandler, there are 4 stages of strategic development. Thus, these stages lead to structural change in enterprises.

1 - Volumetric expansion: The further expansion and expansion of some of the basic functionalities of existing businesses.

2 - Geographical Growth: The enterprise creates regional production and sales departments.

3 - Vertical Integrity Decision Stage: Creation of some new functionalities and starting of the enterprise's auxiliary materials and raw materials

4 - Diversification: organizational excellence through the creation of new product lines (the product makes product diversification after other structural changes)

Structural changes are due to environmental changes. For example: A number of changes in demand and technology cause differentiation.

According to Chandler, when the structure of the organization becomes narrow, the organization is going to change its structure. Thus, the environment should be taken into account for the development of a suitable organizational structure.

According to Chandler, if there is stability in the market, if a change in technology or production methods is not needed, a management team with a small number of staff may succeed if the offer continues. The organization does not need reorganization. It is enough to apply classical management. If the above-mentioned factors (market, technology, production methods, etc.) are eliminated, the issue of organizational structure adapting to changes that will occur if environmental changes are accelerated. The staff is skillful, knowledgeable and experienced, but environmental changes will overcome the potential of a narrow board. At that time, there will be a need for organizational differentiation. Then, strategic decisions must be made to ensure organizational integrity (integration). These types of strategic decisions can not be handled by traditional management.

Organizations identify new strategies to adapt to environmental changes and these new strategies require new organizational structures. Thus, environmental changes determine structural changes. Rapid shift of environment (technology, marketing, and supply) increases the need for strategy and structural change.

One of the most well-known studies on organizational and environmental relations is the study by Tom Burns, a representative of the London Tavistock Institute, and G.Stalker's research on 20 industrial enterprises in the UK in 1961. Burns and Stalker have tried to find the answer to this question: "What are the effects of business structures and management processes on the external environment?

"Burns and Stalker have studied the" environment "element in terms of" technology and market change speeds "in detail in 20 enterprises, including the speed of change, the emergence of new discoveries, technological innovations, and the rise in new and different goods demand. Technology and market-related changes and the speed of change have been identified as the most important factors affecting the corporate governance process, in other words, the management process (the management process) has been deemed as an affirmative factor, and as a result of these studies, Burns and Stalker "mechanical" and "organic".

The mechanical structure is considered to be the most appropriate organization structure when environmental conditions are stagnant, where the rate of change is very small, and the organic organization structure changes rapidly and continuously. The importance of this classification has increased in such a period of globalization and the development of information and telecommunication technologies.

 Mechanical and Organic Organization Structures can be represented as structures representing two different ends in the direction of change. There are different types of structures among these two structures.

The features of the organization structure, called "Mechanical", are:

- Problems and issues encountered by the enterprise are split up according to predefined specialities.

- Every employee in the enterprise behaves according to the aims of the whole organization, which is part of the scope of his department, instead of considering and pursuing the interests of the organization.

 - The rights and responsibilities of each qualification and functional stage have been specifically defined and predetermined by which methods and methods to use at these specialities and stages.

 -The power and hierarchy relations were clearly and clearly defined.

- The relationship between the members of the organization is basically a vertical relationship based on the principle of subordination.

- Most of the work to be done and the behaviours to be exhibited will be determined on the basis of decisions and orders issued by the upper layers.

- The differences between the management and the executive personnel have been clearly defined.

 - The control area is narrow and there is close supervision.

 The key features of the organization structure, called Organic, are:

-The work of the members of the organization is constantly being restructured according to the relationship of the members of the organization with each other.

 Instead of a distorted and "narrow" job description, the system based on "job enlargement" is more important.

- Many decisions are given downstairs and the "transmission of power" is the basis.

- Instead of closely closing the solid hierarchy system, contacts and relationships with those who are able to solve problems are emphasized.

- It is more important for a worker to change his / her work in accordance with the general goals of the organization, rather than specializing in certain jobs.

-Free communication is as important as at least vertical communication,

-The communication between the members of the organization is consultative.

- In general, the organization is more open against environmental factors.

-The structure of a non-governmental organization is a structure away from the structure of the mechanical organization's structure and the hierarchical structure.

- In the mechanical structure, the worker works on his own field. The worker is expected to do his job in the best possible way. What others do is not interested. Whereas, in an organic structure, the worker determines what he/she is going to do and how he/she will communicate with others.

At the end of their research, Burns and Stalker concluded:

One way to reach an organization structure to be considered the "best" is not a principle to be applied. Because of the structure of the organization, which corresponds to the peculiarities of the environment. Thus, the structure of the organic organization would be more appropriate for enterprises working in an environment where rapidly changing environmental conditions. Mechanical organization structure will be more appropriate for enterprises working in an environment where environmental conditions are stagnant and balanced. Administrators need to be aware of this.