This is part two of Myriam Robin’s series on interim executives. Part one, Guns for hire: The rise of the interim executive, was posted yesterday.
Executive jobs are drying up.
Global uncertainty has employers halting high-end hiring, says managing director of E.L. Consult, Grant Montgomery.
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In late 2011 demand for executives fell to the lowest point since 2003, with a 17% drop in October compounding a 12% fall the month before, according to executive search firm E.L. Consult. “As executive hiring is more affected by confidence globally than general hiring, the European crisis and the likelihood that Europe and the US are heading back into recession is skewering investment demand here,” he says.
For businesses needing extra capacity but reluctant to hire a new executive on a long-term basis for cost reasons, a temporary executive can provide an effective short term answer.
Why appoint an interim executive?
The option works best for medium-sized businesses, says Phil Tuck of Interim Executive Search.
Tuck’s typical clients are company with revenue between $20 million to $500 million.
“That’s where it’s most appealing,” he says. “Listed companies and other large organisations do use interim executives but, because their pool of talent in their own organisation is so big, they often redeploy people from the organisation to take on different roles.”
For medium-sized businesses intermim roles can attract a high calibre candidates because the role is not permanent, says Tuck. “Organisations can target more experienced executives than they would normally.”
Another advantage is that an interim appointment can pave the way to recruiting an outstanding executive for the long-term.
About a quarter of interim managers eventually choose to stay on with a company where they’ve been temporarily placed, according to Andrew Staite, from executive recruitment agency Staite Henningsen Klein.
A global executive recruitment firm, Watermark Search International, surveyed 250 Australian interim executives and found three quarters of them wants a permanent role, and less than a quarter were “very committed” to interim work.
How can they be used?
The Watermark study found 47% of interim managers work as general managers. Typically, Australian companies rely on interim executive to plug gaps, Tuck says. “If someone leaves suddenly, an interim executive [can] ‘hold the fort’,” he says.
But the overseas trends is to use interim executives for purposes such as special projects or managing period of change. “In the European and American marketplace in the last few years there’s been a greater level of openness to use interim executives for special projects,” Tuck adds.
A 2008 study by the Human Capital Institute found that permanent management teams often don’t have the experience necessary at critical junctures.
“Rarely do these companies have a management team with experience in mergers and acquisitions, IPO planning, turnarounds, reorganisations, strengthening or repositioning a company to sell it, risk management, or sales-related strategies such as increasing market share, advancing into new markets or geographies, or opportunity profiling.”
“It is to meet these types of challenges that small and mid-market companies often turn to interim executive solutions.”
Another use of interim managers is to have them train staff for specialised roles.
“They have a bit of grey hair; they’ve been around for a while,” says Watermark Search International’s Danny Hodgson. “It means they have a more objective view and people can come to them and expect honest advice. It helps cut through things.”
How to prepare for an interim executive
Richard Hill, who has worked for nine years as an interim, says a detailed brief of both the purpose and scope of work is key to a successful assignment.
“From time to time, you go into organisations, and then spend the first couple of months working through that level of detail so you can put a framework around what work is to be scoped,” he says.
Unlike consulting firms who bring in their own teams, interims generally come to a company alone. Hill says they need support, both with staff and in establishing their mandate.
He advises companies to develop clear reporting mechanisms for their interims. “What are the key milestones, what are the checking points, how clear are the metrics, what are the ongoing requirements?”
Tuck says giving authority to interims is important. “I think organisations that get the best value from them view the interim executive as a member of the leadership team… If they’re coming in to run a special project for the CEO or a member of the board, it should be made clear they have the authority of that member.”
Recruitment firms often handle the paperwork for interim appointments. Staite Henningsen Klein helps businesses find candidates, and arranges their payment. “We invoice the organisation on a weekly basis for the days or hours worked,” says Staite. “There’s no employment relationship between the contractor and the organisation that hires them. That makes it nice and easy, as they don’t have to set people up on payroll systems and can easily terminate them when it’s done.”
How much will it cost, and for how long?
Interims bill by the day, and most cost between $1000 and $3000 a day depending on the length and complexity of the appointment.
Assignment lengths vary. Watermark found the most common was longer than a year, about 40% in their survey. However, 30.5% reported their assignment lasted between one and five months, and 8.6% joined an organisation for less than one month.
Hodgson says interims might want to work fewer than five days a week. “These people often have non-executive commitments as well. For example, they may sit on boards with other companies. So don’t be afraid to suggest a part-time arrangement.”
What about consultants?
While some interim executive roles go to consultants, executives with operational experience are typically more effective in short term roles.
Hill has often helped a company implement the recommendations of a consulting review. “They’ve essentially got a consulting roadmap, but they don’t know how they’re going to act on that…I’ve picked up assignments where they’ve started themselves, but then realised they don’t have the skillset to pull [the recommendations] together.”
Tuck says interim executives are increasingly being used in cases where previously a management consultant would have been called in.
“The organisation may elect to appoint its own project director rather than a project director from the consulting firm,” says Tuck. “The project director works for the executive leadership team rather than the consulting firm… you don’t need to employ 20 extra people, but you just need one who sits on the side of the client.”
Can board members be used as interims?
Businesses boards are a rich talent pool of industry elders , and companies can call on board member to boost management capacity for short periods. “If there’s uncertainty over stability, a board member can be ideal,” Tuck says.
But its not always a good idea to appoint a board member, who can lack the independence of an interim executive. “The independence and objectivity of someone outside the organisation … is more important than knowledge of the organisation. If someone comes in and ignites the business in a new direction, that’s where an interim chief executive would add value over someone from the board.”