Contingency theory is based on the premise that there is no exact template or blueprint for leading a team, building a successful business operation, or corporate structure. The optimal course of action depends on the unique internal and external variables of the enterprise. The contingency approach to managing relies on the ability of the manager to recognize and understand the structures that affect the unit both positively and negatively.
The contingency theory of leadership submits that the effectiveness of the leader is contingent on whether his or her skills, traits, and management style fit the situation. The organization thrives when these match, and suffers when these don’t. When leaders engage in both task-oriented and relationship-oriented behaviors, they can better manage people and resources and ensure such a fit.