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Drawing on both contingency and institutional theories, this paper examines how professionals in an institutionalized environment are coordinated and controlled and what forces shape the structures organizations adopt for this coordination and control. According to contingency theory, the coordination and control of organizational members is shaped by the task environment and the technical nature of the work they perform, while institutional theory proposes that an organization's need to demonstrate conformity to institutionalized expectations of rational practice also influences its choice of control and coordination mechanisms. We use both theoretical perspectives to develop hypotheses that are tested with data from a study of 96 audit teams in the United States General Accounting Office (GAO). Results show that the more institutionalized the environment, (a) the more the organization relies on a bureaucratic mode of control, (b) the greater the task difficulty and team interdependence and the more the organization relies on personal and group modes of control, and (c) the more the organization relies on personal and group modes of control to improve audit-team performance.*
Several theories have been used to explain differences in the rationalized, formal structures of organizations that are used to coordinate and control their members. Two of the most prominent theories, contingency theory and institutional theory, take almost opposite approaches to understanding the factors that lead to the development of different formal structures. Contingency theory suggests that the demands imposed by technical tasks in the organization encourage the development of strategies to coordinate and control internal activities, and institutional theory suggests that the expectations regarding appropriate organizational forms and behavior that are expressed in the wider social environment promote the development of an organization's formal structure. According to the contingency perspective, an organization focuses on its technical activities and shapes its work processes to promote those activities while protecting them from disturbances in the external task environment. More specifically, according to work-unit contingency theory, when the coordination and control practices applied to work-unit members coincide with the nature of the tasks to be performed, work-unit performance improves (Drazin and Van de Ven, 1985; Gresov, 1989).
In contrast, according to the institutional perspective, an organization, particularly a government or professional organization, gains legitimacy by conforming to external expectations of acceptable practice while separating its...