Structural adaptation to regain fit theory

Critics assert that no cohesive contingency theory exists, that "contingency theory" is a collection of different ideas that represent a contingency approach, which research does not validate because there seems to be neither a standard definition nor measurement for either fit or performance (Schoonhoven, 1981; Scott & Davis, 2007). Further, holding that contingency causes, structure places contingency theory against strategic choice theory, which argues that organizations in misfit can regain fit by changing the contingency to fit the structure so the managers can retain the structure they prefer (Child, 1972).

James March and Robert Sutton (1997) expand their criticism beyond contingency theory to the entire field of organizational studies by arguing that most organizational performance research fails to identify a connection between performance and measured variables because researchers ignore the complications of dynamic competitive environments, attempt to simplify complex scenarios and rely on retrospective accounts rather than direct observation. While organizations researchers are aware of these limitations, competing demands from academics for scholarship and business for results cause researchers to publish conflicting conclusions, inferring that data does not support a causal relationship between performance and variables while simultaneously inferring that the connection exists (March & Sutton, 1997).

Addressing the critics with SARFIT

Donaldson (1996) argues that the lack of empirical support may be due to simplistic analytical models that lead to erroneous conclusions. Donaldson attempts to address contingency critics by synthesizing divergent contingency theories and research into Structural Adaptation to Regain Fit Theory (SARFIT), which provides a model for analyzing more accurately the processes in structural adaptation. SARFIT holds that a fit between contingency and structure positively affects performance, while a misfit negatively affects performance. SARFIT identifies a cycle of organizational adaptation that underlies varying structural contingency theories, as follows: fit, contingency change, misfit, structural adaptation, new fit [See Figure 1]. More specifically:

• The organization is initially in fit, which means it has a structure that matches its contingency variables. This fit positively influences performance.
• The organization changes its contingency variable but attempts to retain its existing structure.
• Failing to adapt to the change places the organization in misfit with its environment, which negatively affects performance.
• When performance becomes unbearably low, the organization adopts a new structure that fits the new contingency level.
• The new fit restores performance.

Empirical support for fit-performance connection

Analyzing studies of strategy and structure of 87 organizations in five countries using the SARFIT framework, Donaldson validated that organizations in fit outperform organizations in misfit, that strategy and structure affect performance. That misfit precedes structural change that causes adaptation. Calling Fit Strategy the "meta-principle of effective organizational structure," Donaldson (2000) concluded that "organizational structure should be designed to fit the organizational strategy" (p. 292).