What Is Interim Management?

According to the Interim Management Association, “Interim Management is the rapid provision of senior executives to manage change or transition”.

In simpler terms, an interim manager is a highly experienced and specialized executive whom you can employ in your firm for a short period of time to solve a specific business problem. He is a master project manager and will not only act as a consultant and give you advice, but also solve the problem for you.

Let us take a hypothetical example to understand this better.

Company X has been performing badly from the past 5 years. It is a family run business and due to the internal politics amongst the family members, the company has lost its competitive edge in the market.

To make the situation worse, the Managing Director has suddenly resigned. Now, the Chairman of Company X realizes that the existing management team is inexperienced and incapable of running the company.

So, he has two alternatives. He can source and hire an existing senior level executive from another company and employ her on a permanent basis. But finding the right person uses valuable resources. The placement of a new senior staff member may cause further conflict between family members and insecurities in their roles, and they may seek work elsewhere. And worse, if the new executive turns out to be the wrong choice, removing her will be difficult.

The much better alternative is to employ an interim manager! Such an executive offers both past experience in short-term troubleshooting and company efficiency, and specialization in the particular field.

The Chairman will be able to select from a panel of executives deemed suitable by the recruitment agency, and spend less time and money doing the legwork on his own. Existing employees will feel less threatened by the interim manager because of the limited time he will spend with the company.

An interim executive provides the solution to any number of problems in business. They are committed to their role as a short-term staff member and their varied experience in critical situations gives them a strategic advantage when handling new problems.

For a layman, it may appear that “interim manager” is just a fancy word for a management consultant. This is not the case! Some of their responsibilities do overlap, but there are very simple – and important – differences between them. Let us investigate this properly.

What are the differences between Interim Managers and Management Consultants?

There is a vast distinction between them. Although on the surface they appear to be similar roles, their functions are quite distinguishable.

Essentially, an interim manager is a management consultant, but a management consultant is not an interim manager.

Their core differences are outlined below:
Interim Managers

  • An interim executive is hired as an independent person on the basis of his or her personal abilities and reputation.
  • An interim will always try to cut costs and improve company effectiveness to achieve organizational goals as quickly as possible. This will assist in building his or her reputation.
  • An interim does not only advise on the situation, he or she also implements measures to solve the problem.
  • An interim reports directly to you, the employer, and not through a third party agency, so you are well informed and there is no conflict of interest.
  • An interim works with your own team, provided by your company as you see fit.
  • Interim Managers are usually specialists in their particular fields. Their experience is vast and relates to the particular field that you hire them for.

Management Consultants

  • A consultant generally works through an agency and is hired on the basis of the agency’s merits more so than his or her own reputation.
  • A consultant may try to push additional services or “stretch out” the service to increase his or her own revenue or that of the agency.
  • A consultant does advise on a situation, but will not implement his or her own advice.
  • A consultant reports back to his or her agency, who then reports to you, costing valuable time and other resources.
  • A consultant works with the people he or she chooses and brings them into your company instead of adapting to work with the people you already have.
  • Consultants generally do not specialize in one area, but are a “jack of all trades” in business.

It is clear, then, that an interim manager is able to perform a far more specialized job for your company, using your own resources and reporting only to you. He or she does a “start to finish” job: overseeing the company’s current operations, developing strategies for improvement and then implementing the strategies. A recent survey of 100 senior directors reported that 78 per cent of them feel that interim executives are a better option than management consultants.

What this all means is that the interim management industry is beginning to expand. Companies increasingly prefer interims to their consultant counterparts because of the more complete service that they offer.

Interim Management Trends

The interim management industry is a relatively new field. It was borne into the European market in the 1970s and 80s and is projected to grow further in the coming years. It originated in order to be able to provide fast, specialized top management service in times of company and management crisis.

For example, at the time of its introduction to the Netherlands in the 1970s, companies were dealing with long terms of notice and high termination payouts. The oil crisis had occurred and industries faced a major setback. As a result, highly skilled and experienced managers were required on an immediate basis in order to rebuilt companies that were failing.

And so interim management was born.

Similar situations have occurred in other countries in Europe. Over the past 20 years, the size of the market has grown steadily.

The interim management market offers different areas of specialization, and these have different rates of demand. All are highly competitive.

Areas with the highest demand are schools of Human Resources and Finance & Operations, which account for almost 20 per cent of all assignments. Lesser levels of demand are found in areas including Purchasing, Supply Chain and IT. However, the highest remuneration is for IT and Managing Director/CEO roles.

The public sector employs almost 20 per cent more interim managers than the private sector, but there is evidence of a gradual growth in their employment within privately owned companies. Interim mangers are beginning to enjoy an excellent reputation for quick and effective strategic management, and this is contributing to industry awareness.

The interim management industry as a whole has experienced excellent growth in the past few years and it is expected that it will continue to grow at an accelerated rate in years to come.

What does this mean?

Despite its relative youth in the management industry, interim management has grown steadily. There is an excellent opportunity for individuals to become involved in interim management while it is still growing – “on the ground floor”, so to speak. There is basis for thinking that interim managers will begin to take over from management consultants as companies become even further specialized and have even more requirements for quick solutions.

Interim management is here to stay!

The Interim CFO and Private Equity

“The availability of interim managers has been invaluable to me. Interims have been particularly useful in turnaround situations, where skills are required to introduce changes the incumbent team are unable or unwilling to implement.” – Keith Jordan, chairman, various private equity investments, including Bank of Scotland and Murray Johnstone.

What are the ideal qualities of a successful interim CFO? Substantial change and transition implementation experience and the personal attributes to make it happen are essential. Without strong interpersonal and communication skills, gravitas and team leadership capabilities, interim CFO’s are unlikely to succeed, however strong their technical background might be. The demonstration of these qualities is paramount, especially when an interim is parachuted into a crisis situation requiring a fast turnaround.

Interim Finance executives will have a track record of at least five to ten years at or near board level within companies with 20m to 2bn GBP turnover. They will have held a senior management position and/or have been a head of function.

In today’s economic cycle the interim CFO must immediately consider whether the investment has sufficient resources to withstand a downturn. Alternatively, can it withstand a serious competitive attack and respond by funding alternative investments to ensure survival and growth.

Key issues requiring immediate impact from an interim CFO in private equity investments include:

– turnarounds;
– de-risking and debt pay down;
– banking relationships and managing covenants;
– cash management;
– poor internal controls;
– build foundations for growth or market downturn;
– restructurings, downsizing and cost management;
– acquisition integration;
– mergers;
– Board conflict and acceptance;
– preparation for sale, liquidity event or transaction

Personal attributes for success of an interim CFO include:

– indications of a high achiever (someone who is proactive, results-orientated, positive, prefers a hands-on approach and makes things happen);
– politically sensitive without being drawn into the politics;
-understands the need to stay objective and will not go “native,” particularly on an extended assignment. A private-equity firm will require the interim CFO to remain a strong link between them and the investment;
-someone who can stick their neck out and say it how it is, using fine judgement;
-not concerned with personal status and can take that necessary step down in responsibility level easily and willingly;
-ability to operate at different levels and to demonstrate flexibility is essential in a change situation, where the goal posts can move from the day one steps into the assignment. Equally important is the need to adapt quickly to different cultures, sectors and organisations;
-ability to establish immediate credibility – particularly important as the sponsoring client may have made a brave move in introducing the first interim executive into the organisation at or near board level;
-the interim will take the team with them very quickly, establish themselves with their peer group and generally sell the concept of why they are there on arrival;
-exceptional interpersonal skills and positive attitude should be immediately apparent and their “over-qualification,” combined with a touch of humility, ensures quick integration. – financial security and fulfilled permanent career ambitions are also key requirements. The new interim executive is, in effect, undertaking a business start-up with all the associated risks. If financial security is lacking, the executive will have his or her eye on the permanent job market and will be an unsuitable candidate for true interim executive roles.

Financial Turnaround

The use of interim managers in private-equity investments has become an increasingly common method for turning around enterprises or pushing through key changes in specific business areas. The interim CFO has the personal and professional impact and experience to enable the rapid results sought by private-equity firms.

De-Risking & Debt Pay Down

The interim CFO will focus on de-risking the business and pay down of debt where possible. Areas of action include working capital and how better to manage it, tightening receivables and lengthening payables. A large amount of debt simply focuses the mind of an experienced interim CFO on cash. They will instinctively understand that the investment is on a three to five-year trail, and will have been proven in managing the seemingly opposing demands of defensively repaying debt, as well as a focus on value growth.

Cost Management

CFO’s in private-equity backed businesses will not be programmed to be emotionally attached to any aspect of the cost base. Each asset and each line in the P&L is will be reviewed against return and efficiency. Negotiation of supplier contracts is a key influence on cost base. The negotiation skills and commercial resilience of an experienced interim CFO will drive supplier to a better financial deal – and feed directly to the bottom line.

Poor Internal Controls

A CFO should be able to produce a comprehensive list of internal control shortcomings and the risks to which they could expose the investment. It is important the interim ensures the material weaknesses are actually highlighted and dealt with.

Cash Management

Cash can often provide one of the earliest indicators of when things are going wrong. Knowing what your daily cash resources are, and how they are due to change in the coming eight to 12 weeks, is a core discipline. Unexpected cash outflows are regularly a warning that something is wrong. The interim CFO will offer experienced insight and natural instinct for cash management.

Board Conflict and Acceptance

Boards can be dominated by one individual, or several directors can be competing for the top job. The need for an open and honest culture around the board table, and for the appropriate degree of challenge to plans and performance, is important for boards to succeed. The brief case study below provides an example of where an interim CFO has played an influential role with a hostile CEO, whilst protecting the private-equity investment.

An Interim CFO in a Private Equity Investment – A Brief Case Study

The private equity firm had just bought out a European medical devices company with manufacturing operations in Germany and the Americas, with 14 international sales subsidiaries. There was a hostile CEO in place and no senior Finance executive in place. The CEO was inherited and was going to resist change. Neither was he keeping financial discipline, allowing costs to spiral. It was decided that an immediate solution was needed; someone able to hit the ground at speed that was fluent in German and could get a rapid understanding of costs. An interim CFO was brought in.

The interim CFO’s task was to look at the financial structure of the company and understand the data and management information, get a grip on the cash positions and forecast. It was also to work with the CEO and contain his excesses.

The CEO didn’t want anyone else involved in running the business. The interim CFO was therefore ‘forced’ upon him. The interim played it very well – his interpersonal skills enabled him to insert himself as interim CFO whilst not appearing to threaten the CEO. The CEO did his best to frustrate, keeping the private equity firm out of the loop – for example, he signed off on capital expenditure without advising them. As a result the interim CFO had to confront the CEO on this and many issues – it was unpleasant but it was dealt with in a no nonsense and nonthreatening way.

Key outputs included reports and accounts made sense, as did the cash forecasting. In a situation of significant turmoil and spiraling cost and an erratic CEO, the interim CFO steadied the ship.

In summary, the interim had to work by persuasion rather than having the backing of the CEO. He worked out very well under these circumstances, proving very able to draw in all the information and influence through making the right suggestions and decisions.

Top Ten Tips For Hiring A Senior Executive

There is no more important decision than choosing the people at the top or your organization. After all, they will hire or approve everyone else in the company, set the tome for values and make virtually all key decisions that will mean success or failure every business day.

A structured approach to hiring that includes all of the following items must ALWAYS be followed for any senior level hire (VP and above), where the cost of mistake can often be a six-figure sum.
Understand the direction in which the Board of Directors wants to take the company over the next few years and how the requisite skills are represented or missing on the current management team. Understand and be prepared to provide the necessary resources for growth. These are not difficult to define at the macro level and the new executive will certainly fill in the details later. Consider the possibility of hiring a consultant to do a “quick and dirty” job on this to get it in the right ball park. This will be money well spent as it will define who you will want to recruit and without it you are basically shooting dice.

Develop a detailed job description, with specific attributes and personality traits, which will help the company to accomplish its goals over the next few years. If you do not a have complete vision/plan then you need to seriously consider an interim executive develop one, taking into consideration the current management team’s depth and skills. Specific personality traits and success at specific functions are the most important criteria, not education, name brand company experience, or popularity. Staying on track with these priorities is difficult and must be managed by the most senior person available.

Circulate this job description to obtain input and comments from your Board and those senior executives that will have to work for or closely with this executive.

Decide on the interview process and order. Who will interview the candidate? Who will have final veto power or ultimate hiring authority? Who will interview as a courtesy, but not be a large factor in the hiring decision because they do not have the necessary experience to provide valuable input? Many companies fail here because they use people to screen without any experience in the skill set they are looking for. You should be leveraging your Board and network for people with the exact experience you are hiring during a FIRST interview. Recruiters generally only compare criteria on paper, they have rarely done that job before and therefore typically can not give a very credible opinion on the candidate’s ability to perform. Senior executive should never be interviewed in depth by an HR or personnel person. This can discourage the best candidates who should not be made to think the organization is so political that they would be beholden to the staff person in charge of coordinating candidates. This person should only coordinate interviews; they do not have the skill sets to screen high-level candidates.

Have the team meet immediately after each interview, by phone if necessary, to review their feelings about the candidate. Have the senior executive in charge of the final hiring decision structure the meeting and review process to focus on the key elements needed to make the executive successful in that position. The focus should not be on personality or other softer attributes they tend to dominate group discussions and opinions sometimes. While the chemistry must work, and there is a threshold here, the skill set and personality type being appropriate to the specific position will be a larger success factor. For example, an accounting position usually requires a personality type with attention to detail and a conservation approach, while a sales position requires strong people skills, a personality that is not deterred by constant rejection and an ability to manage their time and activity well to drive results.

Network first, and then consider an advertisement as a second resource. Make use of an executive recruiter as a last resort only after a first look at available candidates and if you do have not found several good choices. I have been recruited for a huge fee after that same company got my resume and a direct phone call first. That was a wasted $50,000 fee by the company! Remember, less than 15% of positions are filled by executive recruiters. You can easily conduct a confidential search on your own using a PO box, directors’ homes for interviews, non-disclosure agreements as well as other easy and convenient techniques.

Interview until you have at least 3 strong candidates, but compress them into as short a time span as possible because the best candidates will become unavailable the quickest. Using an interim executive can allow you to say “We do not have a GREAT candidate yet” and will allow you to wait for a better set. Repeat this process as long as necessary until the right candidate is found. Compromises here are very costly so you do not want to be under the gun.

Check references, less for the reference itself and more for a hint on the candidate’s strength and weaknesses and an understanding of how to work with and/or manage them later. Also get referrals to references the candidate did not give you through your own rolodex or from the references they did give. These are MUCH better reference checks as they are not friends, prepped or hand selected for the best or ideal work experience and perception. We all have weaknesses, if the reference is not providing you with any they are not a good reference.

Take your time to negotiate a package. The best candidates are going to want the best packages as they know what they are worth in the marketplace, not matter what the current conditions may be. You do not want someone working for your company as an executive that does not understand their worth in the marketplace. If they don’t negotiate the best deal for themselves how could they do it for your company? — The table will turn the minute they join the company and you will get back 10 fold on those negotiation and market knowledge skills, so be patient and be prepared to pay fair market value, at a minimum, to acquire the best quality candidates.

Don’t be rushed by day-to-day problems and compromise. If you get this right, everything else will begin to fall into place. However, if you get it wrong there is NO WAY you can be successful. Use a temporary solution to fill the vacuum with a plan to allow 3 to 6 months for the person to start.
Too many people ignore behavior, attitude, ability to learn and other unchangeable factors in the selection process because these are harder to discern during an interview. However, in the long term these are the most important indicators of success.

Knowledge and Experience are a Must For Certain Positions, But Behavior is where Exceptional long-term results can be created.

Intelligence, work ethic, self-motivation, ability and desire to learn make great long-term employee characteristics, not experience or knowledge.