Does Contracting Pay for Managerial Workers? The Role of Contracting in the Careers of Managers

Abstract

Against a backdrop of growth in the managerial workforce and increasing interest in alternative working arrangements, we argue that tensions exist between the nature of managerial work and independent contracting. This restricts the viability of contracting as an alternative employment arrangement through which managerial workers can achieve their career goals. The benefits of contracting, in its ability to separate workers from the constraints and frustrations that come with organizational life, are considerable for managers who may experience particular difficulty in balancing their work and personal lives. However, these benefits are offset by costs for managerial workers whose role in coordinating activity and directing resources is situated at the heart of the organization. Rather than offering an opportunity to leverage their expertise for greater returns, we argue that contracting will substantially limit the performance of managerial workers, and their employment outcomes in both the short and long term. Examining the employment spells of MBA alumni of a US business school, we find support for our hypothesized mismatch between contracting and managerial work. Workers with greater managerial responsibilities are less likely to enter contracting and will be financially penalized if they do, both while they work as a contractor and if they return to regular employment. However, we do find that managerial workers benefit from contracting in terms of improved work life balance.