Final answer:
A manager who designs an organizational hierarchy based on the environment is following the Contingency theory, which is customized to fit specific internal and external circumstances.
Step-by-step explanation:
If a manager designs the organizational hierarchy based on the characteristics of the organizational environment, he is acting in accordance with Contingency theory. This management approach suggests that there is no single best way to organize a corporation, to lead a company, or to make decisions. Instead, the optimal course of action is contingent (dependent) upon the internal and external situation.
A manager embracing this theory will tailor their management style to fit the circumstances they are dealing with, which could include the level of uncertainty in the environment, the sophistication of the technology in use, and specific employee needs.
Contingency theory suggests that there is no one universally effective way to organize a company, but rather, the appropriate organizational structure will depend on the specific circumstances and environment in which the company operates.
By considering the characteristics of the organizational environment, such as industry, market conditions, and technology, a manager can design a hierarchy that aligns with these factors and improves the organization's performance.
Therefore, the correct answer is C. Contingency theory.