Closely related to the situational approach is what has become known as contingency theory. The contingency theory of leadership was proposed by the Austrian psychologist Fred Edward Fiedler in his landmark 1964 article, "A Contingency Model of Leadership Effectiveness."

The contingency theory emphasizes the importance of both the leader's personality and the situation in which that leader operates. Fiedler and his associates studied leaders in a variety of contexts but mostly in military context and their model is based on their research findings.

They outline two styles of leadership:

• task-motivated and
• relationship-motivated.

Task refers to task accomplishment, and relationship-motivation refers to interpersonal relationships.

Fiedler measured leadership style with the Least Preferred Co-Worker Scale (LPC scale.) The leaders scoring high on this scale are relationship motivated and those scoring low are task motivated (Northouse, 2007, p.114).

Central to contingency theory is concept of the situation, which is characterized by three factors:

• Leader-member relations, deals with the general atmosphere of the group and the feelings such as trust, loyalty and confidence that the group has for its leader.
• Task structure, is related to task clarity and the means to task accomplishment.
• The position power, relates to the amount of reward-punishment authority the leader has over members of the group (Northouse, 2007, p.114-115).

These three factors determine the favorableness of various situations in organizations.

Read more about the Fiedler's Contingency Theory at the page: