Difference Between System Theory and Contingency Theory

The key difference between system theory and contingency theory is that system theory focuses on the internal dynamics of an organization’s structure and behaviour whereas contingency theory focuses on the external factors of the organization’s behaviour and structure.

Both theories are considered as recent developments in management theories. Also, it is important to note that contingency theory acts as an addition to system theory as it attempts to fill the gaps of the system theory.

CONTENTS

1. Overview and Key Difference
2. What is System Theory 
3. What is Contingency Theory
4. Relationship Between System Theory and Contingency Theory
5. Side by Side Comparison – System Theory vs Contingency Theory in Tabular Form
6. Summary

What is System Theory?

System theory focuses on the internal environment and the subsystems of the organization. Mainly, it considers the inter-dependence and interaction among sub-systems. Moreover, depending on the expectations of the organization, the interaction between organization and environment constantly change.

A systematic approach treats all organizations in the same way. However, it does not take the background of the target organisation into account. Further, this approach provides a theoretical model for the organisation, as well as its various sub-systems. However, it doesn’t downgrade any of the classical management principles in which the target industry commonly function. Lack of universality and abstract approach are considered as limitations of systems theory.

What is Contingency Theory?

Contingency theory acts as an addition to system theory as it considers the relationship between organization and external environment to fill the lapses of system theory. The theory states that there is no specific managerial action or organizational design that suits all situations. In fact, it is the situation that determines the design, as well as the managerial decision. In other words, it is contingent on the situation. Thus, situational theory is another name for contingency theory.

Contingency organizational theory does not describe the most appropriate way to organize a corporation or lead an organization or make managerial decisions. Hence, the best course of action is dependent or liable on internal and external conditions.

Besides, this theory also highlights the impact of the environment on an organisation’s design, principles and its’ hierarchy. Organizations are considered a unique entity. According to contingency theory, the environmental impact on the organization’s structure and authoritative structure are described as the major concerns.

Moreover, the contingency theory uses to highlight the multivariate nature of an organization. It illustrates how an organization works under varying conditions in specific circumstances. Furthermore, the contingency theory suggests that the most suitable way of solving problems is giving practical solutions within the organization. Finally, this approach rejects the blind application of classical principles of management.

What is the Relationship Between System Theory and Contingency Theory?

• Contingency theory is an addition to system theory which fills its gaps.
• Both theories consider an organization as a system that consists of several sub-systems.
• Moreover, these two theories emphasize maintaining and adapting activities for the growth and survival of the system.
• Also, both theories deal with patterns of relationships and the interdependence among the elements of the system.

What is the Difference System Theory Between and Contingency Theory?

The key difference between system theory and contingency theory is that the system theory deals with the internal dynamics of the organization, whereas the contingency theory deals with external determinants of the organization’s structure and behaviour. Besides, the systems theory discusses the universal principles for application in all situations. On the contrary, the contingency organizational theory works on the remedy, which says that ‘it all depends’. So, this is also a vital difference between system theory and contingency theory.

Moreover, the contingency theory offers a more clear understanding of the relationship between different variables of the environment. Also, this theory is performance-oriented and directed towards the application of the system theory’s concepts.

Below infographic shows more facts related to the difference between system theory and contingency theory.

Summary – System Theory vs Contingency Theory

The key difference between system theory and contingency theory is that the system theory focuses on the internal dynamics of an organization’s structure and behaviour, whereas the contingency theory focuses on the external factors of the organization’s behaviour and structure. Moreover, contingency theory looks at the relationship between an organization and its external environment and activities to fill critical gaps of the systems theory. In other words, it is an addition to system theory.

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