Contracting: A new form of professional practice

Academy of Management Perspectives

Volumn 20, Issue 1, 2006, Pages 45-66

  Barley, Stephen R ^a,b   Kunda, Gideon ^c  

^a Department of Management Science and Engineering ^*  (United States)

^b Stanford University   (United States)

^c TEL AVIV UNIVERSITY   (Israel)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 33748809009     PISSN: 15589080     EISSN: None     Source Type: Journal    
DOI: 10.5465/AMP.2006.19873409     Document Type: Review

References (118)

1. Handy's book, The Age of Unreason,
2. was a best seller: Handy, C. 1989. The age of unreason. Boston: Harvard University Press.
3. The academic literature indicates that firms frequently hire contractors for the reasons Handy promoted. For empirical evidence on firm's motives for hiring contractors see: Mangum, G., Mayall, D. & Nelson, K. 1985. The temporary help industry: A response to the dual internal labor market. Industrial and Labor Relations Review 88: 599-611;
4. Abraham, K.G. 1988. Flexible staffing arrangements and employers' short-term adjustment strategies, in Employment, unemployment and labour utilization (Ed.) R.A. Hart. London: Unwin Hyman, 288-311;
5. Pfeffer, J. & Baron, J.N. 1988. Taking the workers back out: Recent trends in the structuring of employment, 257-303 in Research in organizational behavior, vol. 10, (Eds.) Staw, B. & Cummings, L. Greenwich, CT: JAI Press, 257-303;
6. Hakim, C. 1990. Core and periphery in employers' workforce strategies: Evidence from the 1987 ELUS survey. Work, employment and society 4: 157-188;
7. Davis-Blake, A. & Uzzi, B. 1993. Determinants of employment externalization: A study of temporary workers and independent contractors. Administrative Science Quarterly 38: 195-223;
8. Abraham, K.G. & S.K. Taylor, S.K. 1996. Firms' use of outside contractors: Theory and evidence. Journal of Labor Economics 14: 394-424;
9. Matusik, S.F. & Hill, C.W.L. 1998. The utilization of contingent work: Knowledge creation and competitive advantage. Academy of Management Review 23: 680-697;
10. Kalleberg, A.L. & Reynolds, J. 1988. Externalizing employment: Flexible staffing arrangements in U.S. organizations. Paper presented at the Society for the Advancement of Socioeconomics, Vienna, Austria. July 1988.
11. "Institutional" and "institutionalist" are words with rich and thick meaning in the social sciences. We use the term to refer to analysts who view markets as "socially embedded," who ask how institutions shape labor markets. By institutions they typically mean not only laws and established organizations, but cultural norms and practices. Economists who study how social structures affect markets have historically been called "institutional economists." For institutionalists who have written about contingent labor, see: Osterman, P. 1988. Employment futures: Reorganization, dislocation and public policy. New York: Oxford University Press;
12. Parker, R. E. 1994. Flesh peddlers and warm bodies: The temporary help industry and its workers. New Brunswick, N.J.: Rutgers University Press;
13. Barker, K. & Christensen, K. 1998. Controversy and challenges raised by contingent work arrangements. In Contingent work: American employment in transition (Eds.) Barker, K. and Christensen, K. Ithaca, NY: ILR Press, 1-20;
14. Cappelli, P., Bassi, L. Katz, H., Knoke, D. Osterman, P. & Useem, M. 1997. Change at work. New York: Oxford;
15. Carre, F.J. & Joshi, P. 1997. Building stability for transient workforces: exploring the possibilities of intermediary institutions helping workers cope with labor market instability. Cambridge, MA: Radcliffe College;
16. Kalleberg, A.L., Rasell, E., Hudson, K., Webster, D., Reskin, B.F., Naoi, C., & Appelbaum, A. 1997. Non standard work, substandard jobs: Flexible work arrangements in the U.S. Washington, D.C.: Economic Policy Institute;
17. Smith, V. 1998. The fractured world of the temporary worker: Power, participation, and fragmentation in the contemporary workplace. Social Problems 45: 1-20.
18. For extended discussions of dual labor market theory, see: Berger, S. & Piore, M.J. 1980. Dualism and discontinuity in industrial societies. New York: Cambridge University Press;
19. Piore, M. J. & Sabel, C.F. 1984. The second industrial divide: Possibilities for prosperity. New York: Basic;
20. Osterman, P. 1984. Internal labor markets. Cambridge, MA: MIT Press;
21. Baron, James N. & Bielby, W.T. 1984. The organization of work in a segmented economy. American Sociological Review 49: 454-473.
22. For discussions of the negative social consequences of an expanding contingent workforce, see: Dillon, R.L. 1987. The changing labor market: Contingent workers and the self-employed in California. Sacramento, CA: Senate Office of Research; Osterman, 1988, supra note 2;
23. Martella, M. 1991. Just a temp: Expectations and experiences of women clerical temporary workers. Washington, DC: U.S. Department of Labor, Women's Bureau;
24. Cohen, Y. & Haberfeld, Y. 1993. Temporary help service workers: Employment characteristics and wage determinants." Industrial Relations 32: 272-287;
25. Hippie, S.F. & Stewart, J. 1996. Earnings and benefits of workers in alternative work arrangements. Monthly Labor Review 119: 46-54;
26. Polivka, A.E. 1996. A profile of contingent workers. Monthly Labor Review 119: 10-21;
27. Christensen, K. 1998. Countervailing human resource trends in family-sensitive firms. In Contingent work: American employment in transition (Eds.) Barker, K. & Christensen, K. Ithaca, NY: ILR Press, 103-126;
28. Barker, K. 1998. Toiling for piece-rates and accumulating deficits: Contingent work in higher education. In Contingent work: American employment in transition (Eds,) Barker, K. & Christensen, K. Ithaca, NY: ILR Press, 195-220;
29. Spalter-Roth, R. & Hartmann, H.I. 1998. Gauging the consequences for gender relations, pay equity, and the public purse. In Contingent work: American employment in transition (Eds.) Barker, K. & Christensen, K. Ithaca, NY: ILR Press, 69-102;
30. Banigin, W. 1998. Visa program, high-tech workers exploited, critics say. Washington Post, July 26:1;.
31. Houseman, S.N. & Polivka, A.E. 1999. The implications of flexible staffing arrangements for job stability. Working Paper 99-056. W.E. Upjohn Institute for Employment Research, Kalamazoo, MI.
32. For demographic data on the contingent workforce, see: Spalter-Roth, R.M., Kalleberg, A.L., Rasell, E., Cassirer, N., Reskin, B.F., Hudson, K., Webster, D., Appelbaum, E., & Dooley, E.F. 1997. Managing work and family: Nonstandard work arrangements among managers and professionals. Washington, DC: Economic Policy Institute;
33. Kalleberg, et al., 1997, op. cit.; Managing Work and Family: Nonstandard Work Arrangements among Managers and Professionals
34. Kalleberg, A.L., Reskin, B.F. & Hudson, K. 2000. Bad jobs in America: Standard and nonstandard employment relations and job quality in the United States. "American Sociological Review" 65: 256-279.
35. Charges of union busting are leveled in Aronowitz, S. & DeFazio, W. 1994. The jobless future: Sci-tech and the dogma of work. Minneapolis, MN: University of Minnesota Press;
36. and Rifkin, J. 1995. The end of work. New York: Putnam.
37. Free agency's spokespersons include: Bridges, W. 1995. A nation of owners. INC 17: 89-91;
38. Bridges, W. 1994. Job shift: How to prosper in a workplace without jobs. Reading, MA: Addison Wesley;
39. Pink, D.H. 2001. Free agent nation: How America's new independent workers are transforming the way we live. New York: Warner Business Books;
40. Pink, D.H. 1998. Free agent nation. Fast Company Dec/Jan: 131-147;
41. Beck, N. 1992. Shifting gears: Thriving in the new economy. Toronto: Harper Collins; Caulkin, S. Skills, not loyalty, new are key if you want job security. San Francisco Sunday Examiner and Chronicle September 7 (4): 2;
42. Darby, J.B. 1997. The ultimate contractor: Lessons from a parallel universe. Contract Professional 2: 27-32;
43. Reinhold, B.B. 2001. Free to succeed: Designing the life you want in the free agent economy. New York: Plume;
44. McGovern, M. & Russell, D. 2001. The new brand of expertise: How independent contractors, free agents and interim managers are transforming the world of work. Woburn, MA: Butterworth-Heinemann. Although Bridges was the first to market with the idea, Pink coined the name and gained notoriety. Pink runs a web page called "Free Agent Nation" (http://www.freeagentnation.com).
45. Bridges, 1994, supra note 7, 64-65.
46. We entered the world of contracting in the fall of 1997 and remained there until the fall of 1999. Collecting and analyzing these data consumed the better part of four years. About a year after we left the field, as we were pondering the significance the data, the economic conditions of high-tech employment changed dramatically. The Internet boom and the tight labor market it spawned collapsed, ushering in a recession. Along with the rest of the economy the world of contracting shifted as well. Whether the tale told here speaks only to a specific historical period and the extent to which it continues to be relevant, ultimately remains to be seen. But, we believe that the dynamics discussed in this article lie beyond the short cycles of the economy: The essence of contracting is an employment relationship. In the "Epilogue" of the book on which this article is based, we discuss what occurred after the recession began and how it affected contractors. The data show that, like full-time employees, contractors suffered, but they did not disappear. On the contrary, their presence remained a significant feature of the labor market even in the face of recession. According to the American Staffing Association, in 2004 contingent employment had returned to it pre-recession level. This has yet to occur for permanent employees. Thus, with appropriate modifications for changing levels of demand, the dynamics found in the labor market of the 1990s still hold.
47. The primary exception is Civil Engineering. Civil engineers must be licensed to practice and a significant percentage of their work takes place in structural engineering firms. The following studies provide useful discussions of the social organization of engineering in the United States and other industrial nations: Perrucci, R. 1971. Engineering: Professional servant of power. American Behavioral Scientist 14: 492-505;
48. Ritti, R.R. 1971. The engineer in the industrial corporation. New York: Columbia University Press;
49. Zussman, R. 1985. Mechanics of the middle class, Berkeley, CA: University of California Press;
50. Whalley, P. 1986. The social production of technical work. Albany, NY: State University of New York Press;
51. Meiksins, P.F. & Smith, C. 1993. Organizing engineering work: A comparative analysis. Work and Occupations 29: 123-146.
52. th century management itself appears to have begun to spin off specialties, such as marketing and finance, which have many of the attributes of professions.
53. Sociologists have written about the tensions experienced by professionals in corporations since the late 1950s, when the topic generated a small cottage industry of research. Most of the research focused on engineers. Key books and papers in this tradition include: Kornhauser, W. 1962. Scientists in industry: Conflict and accommodation. Berkeley, CA: University of California;
54. Scott, W.R. 1965. Reactions to supervision in a heteronomous professional organization. "Administrative Science Quarterly" 10: 65-81;
55. Pelz, D.C. & Andrews, F.M. 1966. Scientists in organisations: Productive climates for research and development. New York: Wiley;
56. Miller, G.A. 1967. Professionals in bureaucracy. American Sociological Review 32: 755-768;
57. Perrucci, R. & Gerstl, J.E. 1969. Engineers and the social system. New York: Wiley;
58. Perrucci, R. & Gerstl, J.E. 1969. Profession without community. New York: Random House;
59. Engel, G. 1970. Professional autonomy and bureaucratic organization. Administrative Science Quarterly 15: 12-21;
60. Raelin, J.A. 1985. The clash of cultures: Managers and crofessionals. Boston: Harvard University Press;
61. Von Glinow, M.A. 1988. The new professionals: Managing today's high tech employees. Cambridge, MA: Ballinger.
62. The dynamics of births and deaths among populations of organizations has received considerable empirical attention in the last two decades, spawning a school of organizational theory known as population ecology. For a comprehensive treatment of the tenets of population ecology, see: Hannan, M.T. & Freeman, J.H. 1988. Organizational ecology. Cambridge, MA: Harvard University Press.
63. The blurring of the distinction between newcomers and old-timers may reflect the fact that so many of the contractors we encountered worked in software development and IT related occupations. These areas of practice change so quickly that newly minted graduates are likely to have more cutting edge skills than do practitioners with years of experience.
64. To identify with a group, one must perceive oneself to be similar to other members along whatever dimensions are phenomenologically relevant to the group, but one must also perceive oneself to be different from individuals who are not members. For a discussion of the concept of community, see: Weber, M. 1968/1922. Economy and society. Berkeley, CA: University of California Press. In this work, Weber insisted that consciousness of kind occurs only in conjunction with consciousness of difference: "A common language, which arises from a similarity of tradition through the family and the surrounding social environment, facilitates mutual understanding...but, taken by itself, it is not sufficient to constitute a communal relationship...it is only with the emergence of a consciousness of difference from third persons who speak a different language that the fact that two person speak the same language and, in that respect, share a common situation, can lead them to a feeling of community and to modes of social organization consciously based on the sharing..."
65. For instance, even though the Accreditation Board for Engineering and Technology (ABET) certifies engineering programs, certification is not necessary for a school or department to train engineers and firms appear quite willing to hire graduates of non-ABET certified programs. In software development the situation is even less structured. Large numbers of software developers have never taken courses in programming or computer science. What matters in software development is whether one can write code and how elegantly one can write it.
66. Thomas Allen showed that engineers rarely rely on written materials, aside from textbooks and engineering reports in Allen, T.J. 1977. Managing the flow of innovation. Cambridge, MA: MIT Press. Instead, Allen argues, they prefer to acquire technical knowledge through conversation. For this reason, those engineers who do read - engineers whom he called "technical gatekeepers" - were particularly important in R&D labs.
67. For an account of the short-lived "revolt of the engineers," see: Layton, E. 1971. The revolt of the engineers: Social responsibility and the American engineering profession. Baltimore, MD: Johns Hopkins Press
68. In Gouldner, A.W. 1957-1958. Cosmopolitans and locals: Toward an analysis of latent social roles - II. Administrative Science Quarterly 2: 444-477,
69. Gouldner adopted the terms from Merton, R. K. 1957. Social theory and social structure. New York: Free Press.
70. Studies of the implications of the cosmopolitan-local dichotomy among technical professionals include: Goldner, F.H. & Ritti, R.R. 1967. Professionalization as career immobility. American Journal of Sociology 72: 489-501;
71. Kronus, C.L. 1976. Occupational versus organizational influences on reference group identification. Sociology of Work and Occupations 3: 303-330;
72. Goldberg, A.I. 1976. The relevance of cosmopolitan/local orientations to professional values and behavior. Sociology of Work and Occupations 3: 331-354;
73. Jauch, L.R., William G. Glueck, & Osborn, R.N. 1978. Organizational loyalty, professional commitment, and academic research productivity. Academy of Management Journal 21: 84-92.
74. For how knowledge emerges and is communicated within occupational communities and communities of practice, see: Van Maanen, J. & Barley, S.R. 1984. Occupational communities: Culture and control in organizations. In Research in organizational behavior, vol. 6 (Eds.) Staw, B.M. & Cummings, L.L. Greenwich, CN: JAI Press, 287-365;
75. Orr, J.E. 1997. Talking about machines: An ethnography of a modern job. Ithaca, NY: ILR Press;
76. Wenger, E. 1998. Communities of practice: Learning, meaning and identity. Cambridge: Cambridge University Press.
77. Working Today is a non-profit affinity and advocacy group founded by Sara Horowitz in 1995. Working Today serves contractors and other contingent workers in New York City. It offers contractors health insurance, portable pensions and other benefits. More information on Working Today can be found at http://www.working-today.org.
78. Pace is organized by James R. Zeigler who also publishes the extremely useful online book, The Contract Employees' Handbook. Information on PACE and the Handbook can be found at http://www.cehandbook.com.
79. Expert Solutions is located in Mountain View, CA. We interviewed the founders as part of our research.
80. These terms are to be found respectively in Byrne, J.A. 1993. The virtual corporation. Businessweek October 18: 66-72;
81. Handy, C. 1989. The age of unreason. Boston: Harvard University Press;
82. Powell, W. W. 1990. Neither market nor hierarchy: Network forms of organization. In Research in Organizational Behavior, vol. 12 (Eds.) Staw, B.M. & Cummings, L.L. Greenwich, CT: JAI Press, 295-335, 295-335;
83. Arthur, M.B. & Rousseau, D.M. 1996. The Boundaryless career: A new employment principle for a new organizational era. New York: Oxford University Press;
84. Womack, J.P., Jones, D.T. & Roos, D. 1990. The machine that changed the world: The story of lean production. Cambridge, MA: MIT.
85. See American Management Association. 1996. 1996 AMA survey on downsizing, job elimination and job creation. New York: American Management Association.
86. Vertical integration refers to acquiring firms and resources so that the acquirer owns interests in all steps of a manufacturing process from raw materials to the distribution of finished goods. Horizontal integration refers to acquiring firms and services in unrelated industries.
87. The research literature on strategic alliances constitutes a significant percentage of contemporary research on corporate strategy. The prominence of strategic alliances has given rise to network images of how industries are organized.
88. Supply chain analysis refers to methods for optimizing flows of resources, goods and services from suppliers to manufacturers and, then, on to distributors. Information technology is critical to the management of supply chains. Supply chain analysis has attracted much recent attention in operations research and industrial engineering.
89. For detailed analyses of the changing occupational structure in the U.S. and other industrial nations see: Block, F. 1990. Postindustrial possibilities: A critique of economic discourse. Berkeley: University of California Press;
90. Szafran, R.F. 1996. The effect of occupational growth on labor force task characteristics. Work and Occupations 23: 54-86;
91. Barley, S.R. 1996. The new world of work. London: British North-American Research Committee;
92. Hecker, D. E. 2001. Occupational employment projections to 2010. Monthly Labor Review 124: 57-84.
93. The percentage of employed Americans for 1950 and 1998 are drawn respectively from Table 1 in Barley, 1996, op. cit, and Table 1 in Braddock, D. 1999. Occupational employment projections to 2008.Labor Review, 122: 51-77.
94. This thesis is articulated by Bluestone, B. & Harrison, B. 1982. The deindustrialization of America. New York: Basic;
95. Aronowitz and DeFazio, 1994, op. cit., The Deindustrialization of America.
96. Ritzer, G. 1998. The McDonaldization of society: An Investigation into the changing character of contemporary social life. Thousand Oaks, CA: Pine Forge Press.
97. This estimate comes from Hecker, 2001, op. cit. The McDonaldization of Society: An Investigation into the Changing Character of Contemporary Social Life.
98. For Padgett's insightful work on the economy and social networks of Renaissance Florence, see: Padgett, J.F. & Ansell, C.K. 199.3. Robust action and the rise of the Medici: 1400-1434. American Journal of Sociology 98: 1259-1319;
99. Padgett, J.F. & McLean, P. forthcoming. Obligation, risk and opportunity in the Renaissance economy. In The U.S. economy in historical context (Ed.) Dobbin, F. New York: Russell Sage Foundation;
100. Padgett, J.F. 2001. Organizational genesis, identity and control: The transformation of banking in Renaissance Florence. In Markets and Networks (Eds.) Cassella, A. James, R. New York: Russell Sage Foundation.
101. Mark Grannovetter has been particularly influential in arguing for the importance of understanding how social relationships underwrite market transactions. See Granovetter, M. S. 1985. Economic action and social structure: The problem of embeddedness. American Journal of Sociology 91: 481-510;
102. 1974. Getting a job: A study of contacts and careers. Cambridge, MA: Harvard University Press;
103. 1973. The strength of weak ties. American Journal of Sociology 78: 1360-1379.
104. This perspective has been central to the emergence of the new field of economic sociology. See: Smelser, N.J. & Swedberg, R. (Eds.). 1994. The handbook of economic sociology. New York: Princeton University Press.
105. For Weber, 1968/1922, op. cit., bureaucracy was an advance over traditional forms of organizing. Bureaucracy drove out the inequities of patrimonial systems, creating more predictable and rational societies and opening opportunities based on merit. Those who view bureaucracy as inherently problematic would do well to consider what life was like prior to bureaucracy's emergence as a dominant organizational form.
106. James Coleman has written extensively on the role that the law played in defining the concept of the corporation as an actor, hence laying the philosophical groundwork for an organizational society. See: Coleman, J.S. 1990. Foundations of social theory. Boston: Harvard University Press;
107. Coleman, J. 1974. Power and the structure of society. New York: W. W. Norton and Company.
108. See Saxenian, A. & Hsu, J. 2000. The Silicon Valley-Hsinchu connection: Technical communities and industrial upgrading." Unpublished paper. Department of Urban Planning. University of California, Berkeley;
109. and Saxenian, A. & Li, W. forthcoming. Bay-to-Bay strategic alliances: Network linkages between Taiwan and U. S. venture capital industries." International Journal of Technology Management
110. For a discussion of the concept, benefits, and pitfalls of matrix organizations, see: Galbraith, J.R. 1971. Matrix organization design. Business Horizons February: 29-40;
111. Davis, S.M. & Lawrence, P.R. 1977. Matrix. Reading, MA: Addison-Wesley;
112. Allen, T.J. 1986. Organizational structure, information technology, and R&D productivity. IEEE Transactions on Engineering Management 3.3: 212-217;
113. Katz, R. and Allen, T.J. 1985. Project performance and the locus of influence in the R&D matrix. Academy of Management Journal, 1: 67-87.
114. Of course organizational life rarely conforms to ideal depictions. Like other engineering-based solutions to organizational problems, the matrix is more elegant on paper than in practice, In a matrix, joint control and ambiguity of authority and responsibility invariably produce conflict and politics. These may be managed to a firm's advantage, but they also produce frustrations that lead some technical professionals to seek alternatives to corporate employment.
115. Retirement options for contractors are complex. Here we only outline the main options. Any working American can set up a traditional or Roth Individual Retirement Account. Contributions are limited to no more than $3,500 per year and interest or dividends accumulate tax-free until retirement. The amount that can be contributed to an IRA decreases as income rises. Legally recognized self-employed contractors can establish a Keogh plan, which allows contributions of up to $35,000 per year or 25 percent of income, whichever is less. Incorporated contractors can also set up a Simplified Employee Pension (SEP) - IRA, and then contribute to the plan as their own employer. 401k plans require that the contractor be an employee of a firm that acts as an employer. In short, employment law requires contractors to either incorporate or to work for a firm before they can accrue significant retirement savings that carry tax advantages.
116. For an examination of benefits among temporary workers using data from the Current Population Survey, see: Spalter-Roth, R.M., Kalleberg, A.L., Rasell, E., Cassirer, N., Reskin, B.F., Hudson, K., Webster, D., Appelbaum, E. & Dooley, B.F. 1997. Managing work and family: Nonstandard work arrangements among managers and professionals. Washington, DC: Economic Policy Institute;
117. and Hipple, S.F. & Stewart, J. 1996. Earnings and benefits of workers in alternative work arrangements. "Monthly Labor Review" 119:46-54.
118. The Consolidated Omnibus Budget Reconciliation Act of 1985 allows employees who resign or who are terminated to continue to purchase, as individuals, the health insurance provided by their former employer for a period of 18 months after separation. The law was designed to allow workers and their families to have access to health insurance between jobs. Consequently, COBRA benefits are a stopgap option for people who become career contractors.