ABSTRACT
Organizational rationality is rooted in both technology and task environment. This chapter discusses that organizations may remove or reduce contingencies through organizational design. The organization which extends its boundaries to incorporate the sources of contingencies often finds that it has acquired capacity in excess of that called for by its major mission. When the intensive application of collected, specialized capacities represents a change in rather than merely a service to the client, the activity of the client himself becomes an important contingency for the organization. One major device for balancing the capacities of the organization against demand is to stimulate demand to the point where it equals capacity, but balancing technological capacity against demand does not automatically guarantee that output channels will be fully utilized. Diversification is most noticeable among business organizations, perhaps because it is often accomplished through widely publicized acquisitions or mergers of well-known firms.
