Both the trait and behavioral leadership theories were attempts to find the one best leadership style in all situations. In the late 1960s, it became apparent that there is no one best leadership style in all situations. Contingency leadership theories assume that the appropriate leadership style varies from situation to situation. Contingency, also called situational leadership, is based on the two-dimensional behaviors.

The major difference is selecting the appropriate leadership style based on the person and the situational factors. Changes in a dynamic environment may require changes in leadership styles, and the frequency of checking on employees varies based on the situation. Contingency leadership theory is used to determine whether a person’s leadership style is task- or relationship-oriented and if the situation matches the leader’s style. If there is no match, Fiedler recommends that the leader change the situation, rather than the leadership style.

Situational favorableness refers to the degree to which a situation enables the leader to exert influence over the followers. The more favorable the situation, the more power the leader has. There are three variables, in order of importance. Leader–member relations. Is the relationship good or poor? The better the relations, the more favorable the situation.

Task structure. Is the task structured or unstructured? The more structured the jobs are, the more favorable the situation. Position power. Is position power strong or weak? The more power, the more favorable the situation. To determine whether task or relationship leadership is appropriate, the user answers the three questions pertaining to situational favorableness.