My PhD research studied the use of management systems (the processes and procedures used in managing an organisation) in highly complex business environments and the importance of these systems to successfully achieving business objectives. For the purposes of my research, I studied the management of mega infrastructure projects being delivered in Australia, however the concepts and their application can be applied in a wider business management context.

Complex business environments are typified by high levels of volatility, uncertainty, and ambiguity either internally or externally to the organisation or both. This level of complexity may be created by the nature of the work involved and /or the environment within the work is performed. Customer facing organisations for example are typically complex because of the uncertainty created by the customer.

A study in 2017 identified that one of the key management theories – Contingency Theory – developed in the 1960’s was still very much relevant today. Contingency theory suggests that there is no right or wrong way to manage an organisation, and that the best way is contingent on both the internal factors associated with the business and the external environment within which a business operates. The three internal factors contingency theory focussed on were structure and authority, management systems and employee engagement.

Contingency theory (1961) categorises a management approach as being either mechanistic (like a machine) or organic (like an organism). Under contingency theory, a mechanistic approach to structure and authority would be based on seniority whereas an organic approach would be based on capability. Business processes would be based on formal documented controls in a mechanistic organisation, whereas they would be based on shared beliefs (not written down) in an organic organisation. A mechanistic organisation would base its employee engagement on command whereas an organic organisation would engage its employees through consultation.

Contingency theory suggests that if the internal or external environment in which a business operates is complex then a more organic management approach would be best suited.

Both complexity theory (2000) and control theory (2014) support a self-managed or even self-organised approach to being able to successfully manage a business faced with uncertainty and complexity. Both these theories support the empowerment of the front-line managers and a focus on employee engagement.

Categories Mechanistic approach Organic approach Organisational system
Structure and authority (normative) Based on seniority Based on capability Explicit factors
Processes and control mechanisms (regulative) Based on formal controls Based on shared beliefs
Employee engagement drivers (cultural) Based on command Based on consultation Implicit factors
Assessing levels of complexity through the external and internal environment factors

Figure 1 – Research Framework

In studying management organisational systems, the research included aspects of organisation structure, authorities, controls, processes, and information management, as well as organisational behaviour and the aspects of organisational culture and the interface between human behaviour and the organisation. These various organisational systems factors were characterised as either explicit or implicit, to avoid any confusion from the various interpretations of the colloquial terms ‘hard’ and ‘soft’. Under this definition explicit referred to the governance factors such as authority, structure, roles and responsibilities, business processes and controls, while implicit referred to the more cognitive factors of culture, trust, communication, and employee engagement.

The research framework mapped these explicit and implicit factors to the three internal factors described in contingency theory.

The management theory most of us were taught at business school focussed on the importance of structure and authority and management systems to maintain control. The research study conducted in 2017 identified that the importance of employee engagement from contingency theory had been, for the most part, over-looked in management practice.

My research identified that there were 13 factors that were important to managing an organisation faced with complexity. Of these nine were implicit factors and four were explicit factors.

My research concluded that businesses faced with complexity required a more organic approach to management with an emphasis on the implicit organisational systems factors.

BE Civil (UNSW), MBA (ULdn), PhD (USyd), FAICD, FIEAust
Honorary Professor, University College London
Research Affiliate, University of Sydney