QUESTIONS DIRECTORS SHOULD BE ASKING ABOUT INTERIM MANAGEMENT
Winning the war for talent is critical, but increasingly difficult, given the booming overall economy and unprecedented demand for senior executives from e-commerce and high-tech companies. In addition, the rapid evolution of business today penalizes companies willing to accept extended recruiting cycle times that have traditionally been the norm. New sources of rapidly available, seasoned executive talent are needed, as "human capital" becomes the driving force behind business growth.
Companies undergoing transition face many issues that are within the purview of Boards. Alternative means of accessing executive talent are increasing and the process for selecting among them is all too often ill defined. By asking the following questions, Boards can help assure themselves that operating management is aware of various alternatives and, that the course chosen is appropriate.
Does the company have available expertise in-house to address specific Board level change management issues? If not, what factors should be considered in addressing the need for outside change management expertise?
- Situation - what is the extent and timing of the change that is required?
- Degrees of urgency - is there time to complete a retained search or are there pressing issues that must be addressed now?
- Risk - what are the consequences of delay or of proceeding with an executive who lacks the experience/expertise needed to expedite a prompt solution?
- Is the job specification stable and well defined, or are there significant transition issues that must be addressed before a permanent solution can be pursued?
"Change jobs" are usually very different from "steady state" jobs. It is often a mistake to hire one person to do both. Better to place a seasoned executive in the change management role who has deep expertise and can 'overkill' the situation, while seeking a permanent hire to fill the position when the situation has been stabilized. In addition, many jobs are not 'permanent' and in fact may disappear at the conclusion of the assignment (e.g. close the plant, sell the division, or fill the position until a retained search can be completed and then hand-off to the permanent person and transition out).
If outside assistance is needed, what alternatives should operating management consider prior to making a decision?
Rationale Supporting Use of Interim Executives
- Consulting Services
- Retained Search
- Temporary Staffing
- Interim Management
One of the greatest challenges facing companies is being able to manage change and business transitions quickly and effectively. As companies shrink to their core competencies and their organizations flatten out, they frequently lack the management depth needed to address urgent issues that require immediate attention. As a result, they are adopting more flexible staffing approaches including: temps, outsourcing, employee leasing, consulting services and interim management to get things done.
Interim management provides significant advantages to companies working in rapid change environments:
When is an Interim Solution Appropriate?
- Instant access to highly qualified executives
- Flexibility during periods of change
- Bridging capability to provide cover until an executive search can be completed
There are many situations where use of an objective, experienced interim executive makes sense.
- Private equity firms always face management issues with portfolio companies. Interim management can work well, particularly when there isn't time to complete a retained search and the prospect of an exit mitigates in favor of a flexible solution, avoiding the expense of a signing bonus and "golden handshake" following a change of control.
- Global multinationals frequently face "management at a distance issues" at foreign subsidiaries where they lack bench strength needed to deal with out of the ordinary developments. An interim executive with the necessary experience can be introduced into the situation within 5 - 10 working days to lead the company through the period of transition and stabilize things until a permanent solution can be implemented.
- Position in transition where the skill sets that are needed today are different from what will be needed once things have been stabilized. The interim executive can manage the organization through the period of transition and then provide mentoring to the permanent executive based on knowledge gained during the interim assignment.
- Companies can move on poor performers sooner, by inserting an interim executive who can advance the change agenda and cover the position until a permanent replacement can be identified.
- Projects of limited duration that do not require a permanent senior executive. Companies are increasing their use of temporary experts for project management and execution.
- An industry expert is needed to steer the company through an expansion, bed down an acquisition or oversee a divestiture
- An international company thinking of coming into a new country market may hire a local interim executive to see if the business is likely to work out or not
- There is a scarcity of managers with top management experience. Interim executives can be used as mentors to assist with the development process until these people are ready for promotion.
- In emerging markets where there is a scarcity of local management talent, an interim executive can create the necessary infrastructure to solve the problem(s) and then transition over to local management.
Questions Operating Management Should Ask Potential Service Providers
What Characteristics Do Interim Executives Exhibit?
- Does the firm act as an agent or as a principal?
- Is the firm actively involved in managing the change process throughout the assignment to ensure success?
- To what extent is the firm accountable for the work that it undertakes?
- What happens if the Interim Manager fails to deliver?
- How long does a typical assignment take?
- What does it cost?
Interim executives have relevant line-management experience and are available to focus full time on a company's project for its duration. They differ from management consultants in that they assume executive responsibility to act on the client's behalf. They are brought into a company for a limited time with a clear mandate. They have managed similar challenges before and can help clients avoid an expensive learning curve or lost opportunities due to lack of expertise to manage an opportunity or solve a problem that the business faces.
Interim executives have the following characteristics:
- Available immediately - normally can be brought on board within 10-15 days, these executives closely match the industry, functional and situational knowledge/ experience that the assignment calls for
- Generally overqualified for the assignment with extensive functional, industry and turnaround experience
- Flexible - available on a contract, as-needed basis
- Require little supervision and are focused on achieving agreed-upon results
- Are generally less political, more objective and goal-oriented than longer-term, permanent employees
- Are hands-on and accountable for the project - - getting the job done
- Serve as mentors who support the talent around them
- Represent excellent value when compared to alternatives
Dennis W. Powers is Managing Director of Executive Interim Management in New York. Mr. Powers has had extensive experience as a senior operating line manager and management consultant in restructuring organizations to improve operating performance. In his current role as Managing Director of EIM-New York, Mr. Powers, working closely with members of EIM's team of Interim Executives, enables clients to accelerate change while managing risk. EIM is currently running more than 200 companies worldwide with interim executives and has completed more than 2500 assignments over its 20-year history. Its unique approach provides a new management tool for CEOs that promises to change longstanding paradigms about how best to leverage scarce resources during periods of critical change and transition. Dennis can be contacted at 212-751-4777 or via e-mail at:email@example.com.