Managerial Contractors: Does the Freedom Outweigh the Downsides?

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Wharton's Matthew Bidwell and Tracy Anderson discuss their research on contract workers employed in managerial roles.

Contracting has been around in some form or another for decades – government employees and tech workers are among the two categories that readily come to mind. But a contracted manager seems like a contradiction. Can a director who comes from outside the organization really exert the same kind of soft and hard power as a ranked supervisor? Does contracting diminish their chances of landing a permanent job? Wharton management professor Matthew Bidwell and Tracy Anderson, who recently earned her doctorate from Wharton, explore these themes and more in a paper titled, “Outside Insiders: Understanding the Role of Contracting in the Careers of Managerial Workers.” They spoke to Knowledge@Wharton about what they found in their study, including the trade-off between time and money that many managerial contractors face. (Listen to the podcast at the top of this page.)

An edited transcript of the conversation follows.

Knowledge@Wharton: What was the inspiration for this research?

Matthew Bidwell: I’ve been interested in contractors for about 20 years. I remember, when I was still working as a consultant, going to a presentation with somebody talking about the future of work. Even back to the late 1990s, there was a sense that contracting was our future, that our old model of regular employment no longer suited the flexibility that companies wanted from their employees, or indeed that employees wanted from their careers. So, I’ve always been very intrigued by what’s it like to work outside the boundaries of an organization, to be outside all the structures of regular employment. I did work a number of years ago looking at this in the context of IT contractors. We think about contracting as being very much a technical occupation, and IT workers are seen as kind of the elite contractor. I’ve spent time trying to understand who goes into contracting, and how they get used. Tracy came along with a bunch of really interesting questions about how does this apply when we look at managers, who seem like a weird population to contract.

Tracy Anderson: My interest in this stems from what I used to do before I did my Ph.D. I used to manage people who worked on projects, and then we restructured. A whole lot of people left, and then we would have people coming in as contractors in a managerial position. I was always curious as to what did that mean for their careers going forward? Matthew’s interest was what really prompted us to start looking into this a little bit more.

Knowledge@Wharton: How are contractors in managerial roles unique among other types of contractors? In the paper, you draw the distinction between them and IT workers.

Anderson: When you think of the typical IT contractor, you think of somebody who is perhaps working on a standalone task or independently. They can essentially do their work anywhere. When you think about a manager, you think about somebody who is working alongside other people, who is trying to direct their work, trying to integrate the efforts of other people. It’s a far more interdependent role that a manager plays than those people that we typically think of in contracting positions.

Bidwell: When you look at interviews that people have done with some of the more technical contractors, one of the things that often really appeals to people about contracting is the idea that I don’t have to take part in all of the organizational nonsense. I don’t need to go to all these meetings. I don’t need to worry about the politics. I don’t need to follow all these stupid processes just because someone wrote them down. That’s why people like to contract. Managers’ jobs are managing all of that organizational nonsense, so it does seem like a particular conundrum that the reason why people are contracting is to avoid doing precisely the sorts of things we expect managers to do. It’s like, how does all of this work?

Knowledge@Wharton: Are contractors growing in numbers?

Bidwell: It’s hard to know. You start by saying that contracting is growing, and we’ve been saying that for about 20 years. We don’t have very good data. When you look at, say, the size of the temporary help industry, that has grown exponentially. The government did a series of surveys from 1995 to about 2005, then they stopped doing it, and they did it again in 2017. One of the really weird things in that is the population of contractors hasn’t really changed. You see around 10% of the population throughout that time has been working as contractors. My sense is we’ve probably seen some change in the makeup of that population, so there are probably more highly skilled workers, [and contractors are] probably a little more prominent inside organizations. It may also be that a lot of the shifts actually happened in the 1980s and early 1990s. So yes, it feels like there probably ought to be more managerial contractors. It’s not clear that we have the data to be sure on that.

“I’ve always been very intrigued by what’s it like to work outside the boundaries of an organization, to be outside all the structures of regular employment.”–Matthew Bidwell

Anderson: Yes, I think Matt is right. It’s difficult for us to really put figures on what is changing here. Further research will shed more light on that.

Bidwell: Particularly, I think one of the things that the government surveys do show us is there are a lot of contractors in management occupations. For all the reasons we said, having contractors who are managers seems weird…. But one of the things we were surprised by is that, when you look at management, the rate of contracting is similar to what it is in a lot of other occupations. You see contractors across the spectrum of occupations.

Knowledge@Wharton: One of the connotations when we think of the word “manager” is that they manage people. Was that always the case with the people you studied, or was this a different definition for the word?

Anderson: We saw a mixture of types of work that these contractors undertook. If you think about what a manager does, they do a number of tasks. One of them is directly managing people in their jobs, but they also plan and they coordinate. We did find that there were some contractors that did directly manage people. But a lot of them were much more focused on the planning and coordination side of things, rather than having line management responsibility for employees within the organizations they were working.

Knowledge@Wharton: Can you talk about how you studied this topic and some of the key questions that you were trying to answer when you talked to these contractors?

Bidwell: We did a couple of things. About eight years ago, [Wharton management professor] Ethan Mollick and I did a survey of the Wharton MBA alumni where we asked them about all of the roles that they had held since they graduated. We learned a lot of things, perhaps most importantly that when you spam 30,000 of your alumni with an unreasonably long survey, you get a lot of hate mail! But we also learned a lot about all of the things that they had been doing. Some of the questions had been about whether they were working as regular employees or as contractors, self-employed, those sorts of things. We were able to use that to look in quite a lot of detail about how … the outcomes for people contracting looked different from regular employment.

To supplement that, we had questions in the survey about how many people are you managing? If you’re not managing people, what are you doing? In order to build on that, Tracy went out and interviewed a series of people who had worked, or were working, in contracting to try to get a much more detailed account. Why were they doing this? What did they do day to day? How was it different from what they had done before? What did they see as strengths and weaknesses?

Knowledge@Wharton: When you went out and did that, and then you looked at the survey data, what were some of your key findings? What were some of the major challenges for people, the benefits, and why were they doing it?

Anderson: Let me talk a little bit about the reasons they went into it first. I think one of the things that came through in the interviews definitely was that a lot of these people had had very standard managerial roles as employees before they entered contracting. They had direct reports, had been traveling, had been on call all the time to deal with whatever emergency was happening. For a lot of them, they wanted to gain control over their work life again. For a number of people, they were interested in having greater ability to draw a line in the sand and say, “This is my time and not work time anymore.”

That was definitely one of the things that was driving the people that I spoke with to think more about contracting. The types of work they were doing — because they were keen to remove themselves from some of these aspects that we typically associate with the managerial role, it meant that these people were taking on more bounded roles as contractors. They might not be managing people directly, but they might be involved in coordinating activities across the organization, involved in the strategic planning for various aspects of the business going forward and things like that. The roles that they were performing were definitely a subset of what one might think of as a typical managerial role that an employee might undertake.

Knowledge@Wharton: In looking at your results, it seems that they did benefit from being away from the office politics and maybe the day-to-day things that can sometimes get tedious. But on the other hand, they talked about some of the challenges of not being there or maybe knowing all the players in a particular situation. Could you talk to us about that?

“For a lot [managerial contractors], they wanted to gain control over their work life again.”–Tracy Anderson

Anderson: One of the things — and this also speaks to one of the reasons why we found it so interesting — is that people who are working as contractors don’t necessarily have a history with an organization. They don’t have the kind of social network within that organization. In terms of the influence that they can have, they’ve got a much more restricted toolbox on which to draw. I think that was definitely one of the things that came out, that people didn’t feel like they had the influence in the organization that they perhaps would have if they had a permanent, long-term position there. It is just the practical knowledge as well in terms of, if I need to get something done, whom do I go to within the organization? They didn’t always have that knowledge to draw upon.

Knowledge@Wharton: You also found tension between the positive impact that contracting had on work-life balance and the negative impact on pay. Can you tell us more?

Bidwell: Yes, and I think that came out probably most strongly when we started analyzing some of the data. The thing that leaps out is that the people who were working as contractors were earning about 20% to 30% less, if you look at the absolute numbers, compared to the people who were working as regular employees. That surprised us initially. Again, having looked at contracting in some of these other high-skilled occupations, contracting in IT is often seen as a way to make more money. If I’m constrained by the company’s pay scales and I can’t really negotiate my own pay, then I’m not doing so well, whereas if I work for myself and get to pick and choose my clients, then I can really capture the value of what I’m doing. Certainly, when we looked in the past at IT contractors, we found no evidence that they were being paid less. And that replicates [when] we looked at some of the government surveys: We find generally contractors make about the same as regular employees. When you look at managerial contractors, they’re making less, so there is a very stark difference there.

I think it speaks to the flipside of what Tracy was talking about: Yes, you get to take yourself out of the organization. You get a great deal more control, but you have to give something up in order to do that. The big trade-off seems to be that when I am a member of the organization, I’m able to be in roles that potentially have more impact. I’m able to be in roles where I’m managing people, where I’m seen as more central and people value and reward me for that. If I want to create that distance from the organization by contracting, for whatever reasons, it seems that employers aren’t prepared to pay quite as much for that.

Knowledge@Wharton: A lot of the contractors that you talked to said that they were contracting for a finite period of time, that they came in to work on a particular thing and then they left. For them, and even for people who did it for a longer period of time, what impact did contracting have on their resume as they went further in their careers?

Bidwell: What we saw was that people who have been contractors were earning less than people who looked very similar but had not been contractors. It’s very hard to know how much of that is a stigma, that it’s seen on the resume as not serious. In our interviews, people did talk about employers finding it very hard to parse what you’re doing. There is a concern that you were contracting. Does that basically mean you were staying home to look after your kids and working one or two hours a week? Do you put it there to cover up a spell of unemployment? Or were you working 60 hours a week on a variety of exciting projects? It’s very hard for people to tell the difference. They have a sense that employers and recruiters tend to just breeze through that and not take it very seriously, and they’re more interested in your regular employment experiences.

It is also possible that, what with some of the pay penalties, having contracted may also just reflect the fact that the same reasons that took people out of regular employment into contracting may also be shaping the kind of roles that they go back to next. So, even when they do go back into regular employment, it may be into roles that are a little more bounded, a little less central to the organization, and a little less rewarded for those reasons.

Knowledge@Wharton: What advice would you give for people who may be considering jobs as contractors, or who were contractors and thinking of how to present themselves when seeking regular employment?

Bidwell: I certainly wouldn’t panic. Let’s be clear, I don’t think anybody that we spoke to seemed to regret having spent time as a contractor, so I don’t want anyone to come away thinking, “Wow, this is a terrible thing.” People got tremendous benefits out of it. They loved the freedom to pick and choose. I think if you were contracting and you see this as an integral part of your skills, an integral part of your resume, then you should go to greater lengths to really spell out what you did as a contractor, what your major achievements were. If you see it as a serious role where you developed new skills and demonstrated achievements, be very clear about what those are because employers won’t automatically see that in the same way that a certain job title in an organization carries much clearer connotations.

Anderson: I think that’s clear, and I think that’s definitely what came through in the interviews when I spoke to people who had looked for work after contracting. They felt that they needed to go into more detail to justify what they had done and make sure that it was clear it wasn’t just filler on the resume.

“The people who were working as contractors were earning about 20% to 30% less compared to the people who were working as regular employees.”–Matthew Bidwell

Bidwell: It’s probably worth emphasizing that this type of contracting covers a multitude of things. Some of the contractors that we spoke to were taking on small projects here and there, organized around their life. Other contractors worked for one employer full time for a substantial chunk of time. You often see in organizations people taking contracting roles just because this is a job for which there isn’t currently head count. But they need it done and have budget to do it, so they can bring you in as a contractor, maybe in a project management role, and the role is no different from a regular employee. Being reasonably clear about why you contracted and what you got out of it, I think, is important.

Knowledge@Wharton: For some, contracting was a good fit when they had other things going on in their personal lives, in terms of trying to achieve that work life balance that maybe is harder to do with a full-time job.

Bidwell: Yes, that was a very strong theme that came out in a lot of our interviews. Again, not everybody. For some people, I think the broader issues were of control. For some people moving to a new location, it was a way to break into the labor market. You see quite a lot of things that people were doing.

Anderson: There were definitely people who entered it perhaps for that, but then realized that they had no intentions of going back to regular employment. They knew that [contracting] worked for them, and that was how they wanted to keep their employment arrangements in the longer term.

Knowledge@Wharton: Do you feel the stigma around contracting might be changing with the gig economy? Will people have to do less explaining in the future as they cobble together two, three or four contract jobs?

Bidwell: In a lot of areas, there is no stigma. If you’re a high-end IT contractor, being this kind of gun-for-hire to come and solve the hardest problems can be a good thing in many ways. So yes, I do think there is a wide variety of different employment relationships these days, and hopefully we see more and more focus on, what did you do, what did you learn, what do you know, rather than the specific legal arrangement under which you’re employed.

Knowledge@Wharton: What’s next for this research?

Anderson: There is another project that I’m working on with [Wharton management professor] Peter Cappelli where we’re looking at managerial contractors and addressing some of those questions of working in an organization in a managerial position where you haven’t got the kind of social networks and the reputation to influence people to get things done. I’ve been interviewing people who have been in these worlds and trying to understand what they draw upon in terms of trying to influence other employees within the organization to do their bidding, if you like. The things that stand out is that they are trying to leverage the fact that they might have skills that other people in the organization don’t have. And that if an employee works alongside them, then they get access to learn from this insider and develop skills that they might not if they were working alongside a manager who was an employee of the organization.

I guess the other thing that they’re also trying to leverage is their independence. They’re not part of the organization and not part of the politics, so they’re not trying to empire build, they’re not trying to play games. They just want to get the job done. I think they’re trying to leverage that in terms of, you can take what I’m saying at face value.

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"Managerial Contractors: Does the Freedom Outweigh the Downsides?." Knowledge@Wharton. The Wharton School, University of Pennsylvania, 03 June, 2019. Web. 11 December, 2019 <https://knowledge.wharton.upenn.edu/article/managerial-contract-worker-pros-and-cons/>

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Managerial Contractors: Does the Freedom Outweigh the Downsides?. Knowledge@Wharton (2019, June 03). Retrieved from https://knowledge.wharton.upenn.edu/article/managerial-contract-worker-pros-and-cons/

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"Managerial Contractors: Does the Freedom Outweigh the Downsides?" Knowledge@Wharton, June 03, 2019,
accessed December 11, 2019. https://knowledge.wharton.upenn.edu/article/managerial-contract-worker-pros-and-cons/


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