The Outsider Edge

Scholars have been examining the role of relationships in managerial work for decades. Managers are not individual contributors, after all. They lead projects, operate business units, and coordinate activity — in short, they get things done through others.

Back when social theorist Max Weber explained how bureaucracies function, managers did all this largely by relying on formal authority over subordinates.1 Since then, they’ve expanded their toolkits to include other forms of influence, such as calling in favors, drawing on shared values and experiences, and offering (or at least implying) reciprocal back-scratching.2 Such exercises in social power are rooted in the relationships managers have with others in the organization — their bosses, direct reports, and peers.3

Does being an effective manager require these relationships? Modern observers tend to assume that it does — and that the broader and deeper the relationships a manager maintains, the better. But is that really true? Existing research provides limited insight, because it focuses mainly on traditional managers — employees who have developed or will develop relationships within their organizations — and excludes people who do the same work without having established those connections. So we took a different approach. We looked at an atypical but long-standing practice in Europe that has now spread to the U.S. and elsewhere: giving independent contractors temporary management roles within companies.4 While this sort of arrangement isn’t the norm, it also isn’t rare. Survey data suggests that as many as 14% of independent contractors in the U.S. are doing work that is labeled managerial (although it’s not clear whether some of that is manager-level work done in individual contributor roles).5 And a number of companies are in the business of placing contractor-managers, with each reporting tens of thousands of placements.6

To be clear, these are not consultants acting as occasional advisers (something that is reasonably common), nor are they individuals brought in as contractors who later become employees or who are angling for a permanent job. They are true contractors, working under the terms of an agreement set out in advance, with a defined end point that is known to their client’s employees. And they are doing real, core management tasks: supervising employees, managing resources, and leading initiatives to achieve desired outcomes for the business.

As nonemployees, contractor-managers do not have a history in their client organization, and they do not have a future there beyond the end of their contract. For those reasons, you might not expect them to succeed in their roles. But we find that despite the challenges they face, most of them do succeed — by making use of their outsider status.

We were granted access to a global pool of contractor-managers by a-Connect, one of the largest intermediary companies placing people in such roles. A typical engagement for these contractors would be as a program lead or project manager, which involves planning, directing, and/or coordinating the activities of others to implement strategy. For instance, they might create and execute marketing and communication plans for new products, establish and monitor work streams across units for post-merger integration, or usher new drugs through clinical trials and the regulatory process.

After conducting exploratory interviews and surveying hundreds of contractor-managers in various industries (including pharmaceuticals, finance, agribusiness, and food manufacturing), we found that the leading reason they were hired was to supply a type of expertise the client didn’t have. The second most common reason was a lack of short-term capacity — meaning the client organization had some coverage in a given area, but not a sufficient amount to handle current needs. In these situations, clients needed to fill a temporary gap between role requirements and existing capabilities and didn’t want to create a permanent position to do so.7

Here, we’ll discuss the challenges that contractor-managers face as organizational outsiders, the somewhat surprising advantages they enjoy, and how organizations might expand their notion of what it means to be a good manager.

The Drawbacks of Being an Outsider

As you’d expect, being a contractor-manager has some real challenges. Evidence of five key drawbacks emerged from our qualitative interviews with contractor-managers and the employee-managers who worked alongside them in client organizations. (See “The Trade-Offs of Hiring Contractors as Managers.”)

First, given their lack of history in an organization and their short-term commitment to it, contractor-managers don’t acquire much social capital. (Employee-managers hired from the outside are in a similar position at first but soon start acquiring social capital that they can use down the road. Contractors generally aren’t around long enough to build much of a “bank.”) The employee-managers we spoke with appreciated the role that personal relationships played in getting their work done — particularly, calling in favors to obtain resources or getting information on the underlying situation — and recognized that contractors were at a disadvantage in this regard. Clients spoke about how not having relationships made it difficult for contractor-managers to overcome pushback they encountered, because they could not leverage the influence of colleagues.

The second and third challenges relate to organization-specific knowledge. Contractor-managers were inhibited by not understanding cultural norms — for instance, when and how it was acceptable to express an opinion in the organization. As a result, they sometimes violated unspoken rules and failed to connect with employees. Contractor-managers also lacked other important contextual knowledge. In particular, they did not always know who it was they needed to influence in a given situation, because the reality of the organizational functioning and decision-making was often poorly represented by formal reporting structures.

The fourth challenge stems from not being part of the formal organization and from the time-limited nature of their engagements. Most contractor-managers played a small role, if any, in making decisions about employee appraisals, rewards, recognition, and compensation. (About half of our survey respondents said they had some input, but it was limited.) Employees did not expect them to be influential in future assessments of their performance, which meant that they were less likely to simply do what the contractor-managers wanted in order to avoid negative consequences.

And finally, contractor-managers’ status as nonemployees also meant that they did not always have access to the same systems and information as employee-managers. They might not have access to corporatewide information systems, for example, or the ability to research company records, especially in organizations where intellectual property is closely guarded.

Of course, these disadvantages for contractors, culled from our interviews, also highlight the benefits of managing as an employee. In our surveys, respondents recognized some of the same trade-offs. When asked what helped them succeed in their last contract assignment and in past employee-manager roles, they said that strong relationships with peers and with subordinates, and knowledge about organizational functioning, were important in their work as employees but did not contribute to their success as contractor-managers. (See “When Expertise Matters More Than Relationships.”)

The Unexpected Leverage

In light of the challenges they face, how do contractor-managers do their jobs effectively? In both of our surveys and in interviews, they reported relying on their personal expertise and credibility — enhanced by their experiences working elsewhere — to a much greater extent than they had in previous employee-manager roles.8 The next most important factor, and perhaps the most interesting, was their ability to connect with employees and create trust thanks to the objectivity and independence that come from not being an employee. So, as we further explain below, some of the apparent limitations of being an outsider can actually be used to create opportunities.

Outside experience and expertise. While the contractor-managers we studied lacked organization-specific experience, they typically had greater breadth of experience and more recent external experience than even the more senior employees at client companies. Having something that others in the organization did not gave the contractors an important source of social power and legitimacy. After all, the clients we spoke with often cited internal gaps in skills or experience as their main reason for bringing in outsiders to do managerial work.

Still, the expertise of the contractor-manager, and its value, was not immediately accepted as a given. Because of their lack of history within the company, the contractors needed to quickly prove that they knew their stuff upon starting an assignment. One of them pointed out that even though clients want to bring in a manager with a strong profile, “the minute you’re there and the contract is signed … they don’t want you to just call the shots, either.” Before they’ll really trust you, he said, you have to deliver “insights or materials or access to research … which the company before didn’t have,” and do so in a humble, respectful way.

The tension between quickly demonstrating valuable expertise and demonstrating humility was also raised by clients who highlighted the need for contractors to respect internal expertise while proving their own. For example, one client said, “They also need to understand, ‘Where are the pockets of internal expertise that I could tap into?’ The more these folks actively look for that and actively engage internal capabilities, the more acceptance they will find.” Displaying humility and respect was also suggested as a way in which contractors could themselves earn respect in the absence of an existing reputation.

Contractor-managers also used their positions as outside experts to create opportunities for employees to develop and shine — for example, by bringing them into projects they’re running, mentoring them as they contribute, and allowing them to take the lead in making presentations that report project successes to senior executives. As one contractor-manager told us, “We’re basically there to support them and make them look good. We’re not there to make ourselves look good. … I try to really emphasize that when I’m working with them.”

One client was particularly aware of this potential for mentoring and sponsorship: “These are individuals who bring a wave of experience. There’s a great appetite, I think, [for employees] … to learn and to embrace some new thinking. I’ve seen some great relationships develop between consultants that we’ve had on board and employees.”

Such relationships were mutually beneficial, of course. While they gave employees opportunities for growth, they also created avenues for the contractor-manager to engage employees and secure their buy-in and commitment.

Relative freedom from organizational politics and constraints. The contractors we spoke with also used the time-limited nature of their engagements to gain the respect of employees and create connections. Because they could operate relatively unencumbered by organizational norms, politics, and reputational concerns, others tended to view them as direct, apolitical, and objective. That same freedom also gave the contractors some leeway (after they’d proved themselves early on) to make mistakes and ask for forgiveness. It can be harder for employees to be that straightforward, because they are aware that anything they say or do may affect their future in the organization. As one contractor told us, “[As an employee,] you think, ‘What’s best for me: to make my career go well, or make me look good, or make my department look good?’ or, ‘How can I get my promotion?’ and it’s actually a very different agenda.”

Being able to speak candidly, unconcerned about building a future at the client company, helped contractors earn respect, which they could then draw upon to work constructively with others. This outsider advantage highlights a common truth about organizations: Employees often have an incentive to please current leadership rather than look after the longer-term interests of the organization.

Some contractors also talked about how a time-limited work arrangement can facilitate personal connections, because workers feel they can be less guarded with an outsider who has no stake in the status quo and no social network in the company through which sensitive conversations could be revealed. In other words, an outsider can be trusted.

You might imagine that calling in the contractor-manager’s corporate sponsor to help clear organizational roadblocks would be useful, but the contractor-managers reported that doing so undercut their other sources of power, particularly their independence.

New Possibilities for Organizations

Seeing contractors tackle the core functions of managing people and resources to execute strategy is new to many of us. It broadens our notion of what management is — and what it takes to be effective.

Contractors do not have the relationships that people tend to assume are essential to good management. And yet, as we’ve shown, their independence can bestow credibility, objectivity, and candor that may be lacking among those within the formal structure. Their distance from organizational politics can help them build trust, making others more receptive to their instructions, support, and advice — and more willing to share their own ideas. Having developed a breadth of knowledge and experience through various short-term engagements, contractor-managers can also command respect in a client organization and share their expertise as a reward to employees who are eager for growth. These tools can be used to boost workers’ engagement, commitment, and performance.

Such insights deepen our understanding of “helping behaviors” inside organizations. Short-term relationships can yield long-term benefits on both sides: Employees learn and grow by working with the contractor, and the contractor’s experience and knowledge become even richer in the process. And status difference becomes less of a barrier (for both accepting and giving help) when you remove political risk and angst from the equation.9 Turning this idea around, we can also see how an organization’s formal hierarchy, culture, and social structures might limit trust in employee-managers, who, as organizational insiders, may be driven by a desire to protect their own long-term interests within the company.

While our findings can help individual managers think more deeply about their roles and more creatively about their careers, the insights also have immediate practical value for organizations seeking greater flexibility. The idea of creating time-limited management roles may be particularly attractive to fast-growing companies where managerial needs evolve quickly, rendering longer-term placements undesirable, or to companies considering how to adapt to an uncertain future. Indeed, contractors may sometimes be better suited than employees to manage projects that challenge existing norms and processes — in organizations where substantial change is sought, for instance, or where internal politics are an obstacle to progress. Or they might flourish in startups, where norms and processes have yet to be established and everyone is new to one another. Someone who has operated only as an established employee-manager, especially in larger organizations full of formal procedures and cultural norms, may struggle in such an environment.

Conversely, contractor-managers may be less successful in organizations where cultural transformations are necessary, because they have fewer tools to change behavior than do competent employee-managers. More generally, they have relatively little to contribute to such change efforts. The perception that executives bring in contractors to perform layoffs and other unpleasant tasks simply to avoid having to do those tasks themselves may well be true, but that is quite different from working effectively with the remaining employees to change fundamental mindsets and behaviors.

Whether there are limits to the managerial tasks that contractors can perform for their clients and where those limits might be are interesting questions that cut to the heart of what it means to be a company and where the boundaries lie. The fact that clients cannot tell contractors how to perform their tasks without turning them into employees could be a substantial barrier for projects that are likely to change a lot and that might require a fair amount of redirection along the way. The contracts themselves — highly specific, legally binding documents — would become moving targets: They would need to be redone each time the desired tasks and outcomes changed. For that reason, it may be that contractor-managers, like other contractors, are best brought in when the tasks and desired outcomes are well defined and can be clearly articulated in advance. Otherwise, the work of writing, enforcing, and continually rewriting the contract could become all-consuming.

Other considerations about using contractor-managers may come from the supply side. The independent contractors in our study were not very interested in becoming employees.10 They preferred having independence: Their top three reasons for being a contractor-manager were control over the work they did, flexibility in hours worked, and the ability to take time off when they wanted to, none of which typical employees have. If more and more experienced and skilled managers start to feel this way, organizations wanting just-in-time talent will be pushed further in the contractor direction.

While managing as an organizational insider has its advantages, our findings suggest that contractors have a different kind of leverage. In many situations, their outside perspective and capabilities are exactly what’s needed.

These days, employee-managers are being advised and coached to build relationships with people in their teams to engage them and develop them more effectively. That approach tends to pay off for those who are sticking around long term — and for management challenges that require many deep and broad connections in the organization — but it’s not the only way. Sometimes there are benefits to being one step removed and having an end point in sight.