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Contingency management in business is simply planning for the future. Ultimately management plans lead to preparedness in the event of an emergency, natural disaster or system failure. It is a round table discussion of "What if..." questions, followed by a centralized plan to avert complete immobilization of the company. There are three main benefits the plan provides.
First, a contingency management plan ensures there is a continuation of leadership in the event of a critical failure. The failure may come from an external or internal threat. An external threat would include the leadership board being arrested, the CEO dying, or dependent infrastructure failures. Internal threats are unique to the company and can include computer system failures, manufacture machines difficulties or worker strikes. A contingency plan ensures there are measures the company can take to continue operating or mitigate the damage from a temporary stoppage.
Another benefit is the plan can prevent threats to the company. By creating a contingency plan, it must be based on some real scenario that may threaten the company. Some of these scenarios can be avoided or lessened by addressing them before they happen. For example, if a system failure is a major concern the contingency plan may help to identify vulnerabilities in the current system and modify or upgrade it to decrease the likelihood of a system crash.
A contingency management plan will help to nullify the lasting effects of a company work flow stoppage or reduction. Consumers can be informed of the nature of the problem and how the company is addressing the issue. This will help modulate stock fluctuations and keep customers from abandoning the operation. Similarly it will boost the confidence of investors and board members vital to keeping the company capital intact. There is a universal understanding not all plans work all of the time, but there is also an expectation a problem will be addressed quickly when something does go wrong. The contingency management plan is the stop-gap measure to address these various issues.
There are two kinds of contingency management in business. The first relates to emergency contingency management and the second relates to leadership contingency management. Emergency contingency management accounts for internal or external emergencies that might disrupt business and implements risk assessment of vulnerabilities to insure operational continuity. Leadership contingency management is a leadership approach that combines "leadership psychology and group performance" (Subramaniam) to establish the strongest leadership style and approach to take in business.
Since your question does not include the word "emergency," I conclude you are asking about leadership contingency management. The benefits of leadership contingency management are that it accepts, in deed, encourages the use of different leadership styles, asserting that there is no one right leadership style and that the "right" leadership style is the one that can be flexible and adopt varying styles for varying circumstances. In leadership contingency management, the variety of leadership styles is the contingency for the variety of arising circumstances encountered in business, and the relationship between management and employees is the foundational operational management factor.
at the University of Michigan ... graduate researchers in the field of psychology found that a definite connection exists between flexible leadership behavior and employee productivity. ... [and] divided leadership methods into task-oriented behaviors and relation-oriented behaviors ... [helping] to form the foundation of contingency theory applied to the practice of business management. (Niran Subramaniam, "Contingency Theory")
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