Recent research has illustrated how human demographic diversity influences the outcomes of public sector organizations. Most studies focus on workforce diversity and little is known about how managerial diversity affects organizational outcomes. This study focuses on top management team gender diversity. Theory suggests that diversity can lead to varied outcomes. It may provide knowledge and new ideas used for organizational development. However, team diversity is likely to slow down decision making and make consensus more difficult to reach. In a longitudinal study of top management teams in Danish municipalities this study finds diversity to be associated with an increased use of contracting but also higher budgetary instabilities. These results are interpreted in light of existing theory and implications are suggested.