Strategy And Structural Adjustment To Regain Fit And Performance: In Defence Of Contingency Theory

Comparative, contingency approaches to organization structure have been criticized as being inherently static. The present article argues that functionalist theories and quantitative methods can explain structural change. This is exemplified by a diachronic enquiry into strategy and structure. Several propositions about organizational dynamics relating diversification, reorganization and performance are supported. However, the notion of contingency adjustment to structure to attain match as a frequent alternative to structural adjustment to contingencies is not borne out. Neither of the two prevailing theories of structural change, ‘contingency determinism’nor ‘strategic choice’, is completely adequate and a third formulation is advanced: that of ‘structural adjustment to regain fit’. While structural‐functional enquiry into organizations using comparative quantitative methods has yielded information about structural statics, the contribution to knowledge of dynamics seems more problematic. This article seeks to record that structural‐functionalism does inform the analysis of organizational change and to show that quantitative contingency approaches can illuminate change if the theory used in the analysis is formalized properly. This involves the partial abandonment of both of the main prevailing theories of structural change: contingency determinism and strategic choice. In their place this article offers as a potentially more fruitful model the structural adaptation to regain fit formulation. Within this the role of performance is shown to be important. The advantage of this framework is demonstrated empirically by means of an examination of the relationship between strategy and structure.