- Systems Theory, introduced into management around the 1960s, describes organizations according to two core characteristics: Wholeness and Purpose.
- Wholeness means conceiving the organization globally as a system, assimilating the whole rather than isolated parts, so that the synergistic effect of the components makes the result greater than the sum of its parts.
- Purpose means that it is the function, not the structure, that produces the organization, which is the teleological view of organizational life.
- Contingency Theory emphasizes that everything is relative and everything depends, and holds that prosperous organizations are those able to adapt continuously to the pressures, constraints and contingencies of their environment.
Concepts such as leadership, communication, motivation, management styles, decision-making processes, and organizational behavior were reinforced and completely redirected the new paths of administrative theory. Around the 1960s, Systems Theory was introduced into management, describing organizations according to two core characteristics: Wholeness and Purpose.
What does wholeness mean in Systems Theory?
Organizations should be conceived globally, with a perception of the whole. They needed to be seen as systems, as global entities. The systemic approach means assimilating the whole rather than isolated parts, and embracing the synergistic, multiplicative effect of a system's components - where the result is greater than the sum of its parts.
What does purpose mean in Systems Theory?
Just as every system has a purpose or goal to achieve, so does every organization. The vision of purpose shows that it is the function, not the structure, that produces the organization. This is the teleological view: organizations exist to fulfill a purpose, and that purpose is what gives them shape.
This approach contributed to a new way of understanding organizations from a macro perspective - envisioning systemic and synergistic effects, recognizing that the whole is different from its constituent parts, and appreciating the importance of subsystems and their functions. The understanding of organizations as living systems would later be deepened by connecting it with quantum physics.
The Rise of Contingency Thinking
After the 1970s, research began pointing toward a new reality. Prosperous organizations came to be seen as those capable of continuously adapting and adjusting to environmental demands with greater agility, flexibility, and ability to seize opportunities. Successful organizations became those that could adapt to pressures, constraints, and contingencies in their environment.
Contingency means an eventuality - a possibility of something happening or not. Everything contingent is fleeting and transient. The only thing that remains permanent is change. Any entity in development, needing improvement, constant revision, and adjustment to its external environment, follows the Contingency approach: a situational framework.
In this way, flexibility, adaptability, innovation, revitalization, and continuous improvement became watchwords for organizations seeking alignment with the market in pursuit of survival, growth, and success. Contingency Theory emphasized the condition that "everything is relative" and "everything depends" - that contingent factors, such as the environment and the size of the institution, exert influence. From another perspective, Contingency Theory came to be seen not as a standalone theory, but as one that incorporated the assumptions of Systems Theory about the interdependence and organic nature of the organization: open and adaptive, preserving flexibility in response to the frequent changes of the environment.
A Question Worth Sitting With
Systems Theory and Contingency Theory are invoked here to help us reflect on the present moment: What do we still want to believe in that no longer makes sense? Why are we postponing necessary changes? What do we gain by staying as we are? What do we lose by changing? What matters more in the medium and long term?
The short answer
Systems Theory gave organizations two characteristics to be understood by: wholeness, which asks that the organization be seen globally as a system whose result is greater than the sum of its parts, and purpose, which holds that it is the function and not the structure that produces the organization. Contingency Theory then added that everything is relative and everything depends, so that the organizations which prosper are the ones able to keep adapting to their environment. Since the only thing that remains permanent is change, flexibility, adaptability, innovation and continuous improvement became the watchwords for survival and growth.