Contingency Theory and Its Implications to Corporate Financial Planning and Organization Structure
Abstract: The
development of the
organization theory has
existed for such
long periods especially in terms
of management theory. The driving force behind the evolution of management
theory is that its efforts to look for better ways in managing organizational
resources. Contingency theory which is a part of the organizational environment
theories has brought many
implications in management’s
decision at any
organization. Especially in
finance, contingency theory has been employed in some financial
decisions including the decision of corporate
financial planning as
a part of
the most important
considerations, and those actions
would certainly have implications to the
corporate organizational
structure. The contingency theory has
been implemented by financial managers in decision making especially in
strategic long-term and short-term financial planning regarding many
assumptions that underlying the
decision. In practice, financial managers can implement
the contingency theory by using Scenario Planning. The advantages of the
contingency theory are that the theory has enriched the management theories by
addressing the environment as one of the keys for managerial decision making.
The theory has also helped management of organi-zations in improving the
quality of decision making by addressing the contingent variables. The
limitation of the contingency theory is that the contingent factors are still
in debates until nowadays so that we cannot determine the precise numbers of
contingent factors.
Author: Mokhamad Anwar
Journal Code: jpmanajemengg150028
