Why hire a full-time executive when you can just rent one? More and more companies are turning to interim execs to fill gaps in leadership and expertise.
Interim executives, according to those in the field, are professional problem solvers who “make something happen,” says Robert M. Kuhn, partner in charge of North American Operations for EIM.
“The people we bring [to a company] are C-suite people. Very senior. People who have been chief finance officer, head of R&D, HR, legal. People who have long and deep experience. There’s no learning curve” when they take on an assignment, Kuhn says.
Interim management firms such as his “are not houses that deal in bodies,” Kuhn says. Temp firms fill slots for a daily rate, while interim management firms have individuals who can respond to a client’s need “over and above the day-to-day situation. It’s driven by some type of urgency. We fix a problem, come in, put out a fire, resolve a crisis.”<!-- more -->
Interim executives usually are not freelancers. They work for firms like EIM as partners, employees or contractors.
Interim executives are not simply consultants either, although a growing number of consulting firms are adding interim executive components to their practices, according to Chris LaCorata, executive director of The Interim Association, an organization that supports the interim management industry.
Over the years, companies have become unhappy with the traditional consultant model, LaCorata says, because consultants study a problem, then “hand it off.”
Kuhn agrees. “We don’t do a six-month McKinsey study. We assume [clients] know what they want. You’ve made the decision, we implement it.”
With a good interim executive, says Pamela Wasley, CEO of Cerius Interim Executive Solutions, an interim executive placement firm, “there’s always a transition of knowledge to someone in the company.”
When hiring an interim executive makes sense
A company may take the interim executive route when it has lost a key executive and needs someone to keep a division or function running until it finds exactly the right person to fill the position permanently.
Sometimes a corporation can’t justify hiring a full-time executive, Wasley says, but can “put somebody in on a part-time basis to achieve a specific goal. Say you’ve had problem with [employee] lawsuits. You could put [an HR executive] in place to establish better policy procedures and better training.”
That interim executive can lay the groundwork for someone within the company to take over later, Wasley says. “You may not need an executive, you may need a manager to maintain it.”
And interim executives may have specific experience that’s not available within the company, such as turnarounds, acquisitions and expanding into international markets. Positioning a company for new ownership is especially difficult: “Most owners don’t know how to sell their company. You have to make yourself saleable,” Wasley says.
While it’s an accepted practice in Europe, interim management only started to gain traction in the United States in the beginning of last decade, says LaCorata.
Before the economic downturn, Wasley says that interim executives were hired mainly in the health care, manufacturing and technology sectors, but the field has expanded as companies from other industries look for alternative hiring strategies, partly because “they are fearful to plan too far in advance.” They turn to interim executives because “at the end of the day they know they can get rid of them,” she says.
Private equity deals have been essential to the growth of interim management, according to LaCorata. “The interim executive is perfect for their model. They’re buying companies they might be restructuring.”
What are interim execs made of?
What does it take to become an interim executive? Experience, yes, but not necessarily as much as people tend to think.
Wasley says people often assume interim executives are nearing retirement age, but more often they are in their late 40s. Some are even younger -- in their late 30s to mid 40s -- “typically entrepreneurs who have bought and sold companies several times. They really do a good job in companies that are looking to sell.”
It can be more economical in the long run to hire an interim executive because you are not paying hiring fees, benefits or severance, Wasley says. “But I can’t say it’s cheap. You do pay a premium.”
Interim executives generally earn from $1,000 to $2,000 a day, she says, because you are paying for quick results. “If you hire someone full-time, it takes 90 days to ramp up. When an interim executive has been on the job three days [the person is] 90%” effective.
Drumm McNaughton, chairman and CEO of the Institute of Management Consultants, has doubts about an interim executive’s ability to get up-to-speed so quickly.
“They can be very good in something like a turnaround,” McNaughton says, but “there’s almost no way someone can be ready to run a company in three days. If someone is really going to be a leader, it’s very difficult to do it on an interim basis.”
It might be better to move someone from inside the company into an interim position, McNaughton says, acknowledging the disadvantage of that model if that person is not eventually hired to fill the position full time.
Not a field for rookies
Charles Dunlap is in his fourth year as a partner with executive services firm Tatum and is on his fifth major CFO assignment, this time with a private equity-financed carve-out of an international bank.
“The company I’m with now is a spin off. The CFO left suddenly,” Dunlap says.
He came in to complete the closing and “put in an action plan. Now the new CFO is on board and I’m working with him on a project basis,” while he gets oriented to the new position.
It’s not a field for first-time executives, Dunlap says. “We’ve had bumps, scrapes and sores. All of us have been in battle.”
Having interim executives can be especially helpful during tense situations such as restructurings, Dunlap adds.
“We can be brought in as an intermediary who allows the financing structure to remain. We handle the tough negotiations. We engineer [the restructuring], so when we go away, some of that negative feeling goes away.”
Having the right technical background is an essential qualification for an interim executive, but these managers often walk into a new office just as tensions are at their highest, so soft skills are critical as well.
“You’re dropped into a situation that is in transition. You have to be comfortable. You have to be able to move forward, to make the tough decision.”
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