Boyden global executive search

Executive Summary

Interim leadership is the strategic use of human capital to further a company’s business goals rapidly and expertly. Interim executives are often engaged to fill an unexpectedly vacant position, lead a transition in the company, guide the development of new initiatives, manage merger and acquisition or initial public offerings, or execute complex restructurings. Interim leaders, who approach a company to solve a problem rather than climb a career ladder, bring experience, expertise, dedication and commitment to the employing firm, which research tells us cannot be duplicated from the use of internal staffing initiatives.

In recent years, there has been a dramatic growth in the use of interim executives to provide focused leadership and management at the executive level. With accelerating change in market dynamics, technology, and demographics, companies are increasingly discovering that experienced executives providing short-term and specifically defined services can accelerate change, increase momentum, and introduce new perspectives and new approaches. The use of short-term, or contingent workers, is growing at a rate three to four times the rate of the traditional workforce, and is expected to be 25 percent of the entire workforce by 2012. The growth in the use of interim executives is even greater.

The use of interim executives to provide innovative and effective leadership has a relatively long history in the UK and Europe, and is emerging in North America as an effective way to fill critical business roles and provide quick introduction of new ideas and new techniques.

Broadly, the use of interim executives brings several benefits,including:

• Experience and rapid time to value
• New methods and techniques based on broad experience
• Sustained value
• Risk mitigation
• Lower cost of leadership talent

This white paper details the value proposition these interim executives bring to a business.

Addressing the Talent Gap

The scarcity of skilled talent is cited as the greatest issue for today’s business leaders as they consider their staffing requirements for the next decade. But these statements are based on what is known today—not what might happen in the future. Young, small and mid-market companies especially often lack the experience on staff to recognize the “stall points” that can seriously impede their business success. It is often the unforeseen that initially drives these corporations to seek the contract-based experienced professionals— “hired guns” as they are sometimes called—that constitute the growing ranks of interim executives that are filling C-level and board-level positions, usually on a temporary basis. Whether they are hired for two months or two years, interim executives bring a wealth of experience to the positions they now fill.

Why Interim Executives?

One obvious use of an interim leader is to fill the seat of an executive who suddenly or unexpectedly leaves the company. Around 25 percent of all interim executives are hired to fill shoes suddenly left vacant. And, despite the lip-service currently paid it, succession planning for key executive roles is lacking in the majority of businesses—especially in small and middle-market companies. Whether the executive is suddenly dismissed, quits, or is otherwise unavailable, the effect of the loss of an incumbent executive can be catastrophic. Traditional routes to replacement are slow: On average it takes 18 months to replace a senior level manager or executive. Often, in order to maintain continuity and momentum, particularly if the company is in a state of transition, companies choose to retain an interim executive.

Increasingly, companies are viewing the use of interim executive solutions from a new perspective: providing specialized experience and leadership to define and execute a strategy in a new area. One example is Sarbanes-Oxley compliance. The goal of creating and applying compliant business practices may be a stretch for the current financial team in addition to the existing management responsibilities they are already undertaking. Furthermore, the goal is such that once the processes and procedures are in place, it would not require a dedicated executive to manage them.

Other examples are developing new markets, expanding to international geographies, introducing new technologies, implementing new levels of performance, developing outsourcing capabilities, or preparing for a merger or acquisition.

The skills brought to the required strategic business planning are often not found in the incumbent executive team within many mid-market companies. These executive teams, often grown “organically” as a small business evolves, are excellent at continuing current operations but are focused on “doing what they do well” rather than creating and managing change. Rarely do these companies have a management team with experience in mergers and acquisitions, IPO planning, turnarounds, reorganizations, 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. Whether a single experienced professional or a team brought into accomplish a specific set of objectives, interim executives create and execute a program and, once it is running smoothly, transition it to the incumbent management team. These interim executives focus on accomplishing a company transition and then developing a sustaining competence within the company. This ensures retention of the value of this initial leadership while returning the  company to its traditional, ongoing management structure.

In addition to major strategic initiatives, interim executives are often relied upon in executing specific projects. Projects—generally described as events with a beginning and an end—frequently require a particular skill set to execute correctly and often represent the first foray into interim leadership a company may make. Project creation, management and execution can be strategic or tactical—but research studies show far more favorable results when a leader without the handicap of internal politics or past relationship that may taint the project steps in to manage the job. These results include faster time to market and time to production for new products, or new marketing or branding initiatives or projects with very explicit goals such as a need to increase profit margins, or improved operational and financial efficiencies.

But why not hire a management consultant? Are they not the same thing? Management consulting firms typically have standard methodologies and long assessment periods after which expensive consultants “consult” and provide advice. They develop a plan of attack, but only half the time do they implement their own recommendations. And even more rarely do they put the training and knowledge transfer in place to ensure that the best practices initiated are maintained by the permanent employees at the company.

With traditional consultants, therefore, the hard work of execution and the long-term benefits results rest on the internal team that may lack the skills or the time to execute the project. The goals sought go unmet.

The interim executive—whether an individual or a team—is in a very different position. In addition to the advisory role of a consultant, interim executives fill a vital, active role bringing extensive talent and management experience to execute projects to their successful conclusion. Because their tenure may be relatively short, interim executives are results-oriented. It is the achievement of results—not an internal career path that motivates these professional executives. Companies that hire interim executives can select from a rich assortment of verifiable resumes of deep experience that applies directly to the goals and challenges they now wish to address. Interim executive teams come in with an assignment—to open a new geography, lead a new product development effort, or evaluate and negotiate a new acquisition—one that they have successfully completed in the past, perhaps many times. They are uniquely positioned to add objectivity, detachment, and depth to existing senior management teams. Their fresh perspectives can be invaluable. The value of the interim executive team is generally sustained with the transfer of knowledge to the rest of the company. Research firm MORI found that companies regarded interim executives as both more suitable and cost-effective than management consultants.

The interim executive may be hired to fill a full-time vacancy or, when needed, work on a part-time basis. A company may want a professional for part-time over an extended period of time, or a few days a week throughout the duration of a project. Often the ability to hire an experienced professional for two or three days a week, provides a business that can ill afford the expense of a top tier professional with the maximum expertise at an manageable cost because the interim executive is not on premise every day.

The Interim Executive Value Proposition

Beyond looking at the reasons an interim executive is hired by a company—to fill a vacancy, lead a project, implement a new strategy or business initiative, or undertake a corporate turnaround or exit strategy—companies must evaluate the business value derived from a senior interim employee. Often for start-ups, smaller or mid-market companies, the interim executive provides a level of expertise and experience far beyond what the company could attract or afford on a permanent basis. Other key points of value include:

• Experience and rapid time to value. Executives who work as interim employees have the experience to hit the ground running, because they have successfully dealt with the issues at hand before. They can start contributing and providing high-value impact immediately. As they are hired to complete a task or fulfill a specific role, they are very results-oriented, thus continuously identifying, clarifying, and verifying the criteria by which the company will measure their performance. In addition, because of their unique role within an organization, interim executives are goal-oriented, rather than career-oriented. Interim leaders are not distracted by internal politics, and not from their experience, bringing fresh views to issues at hand.

• Unencumbered by processes, staff issues, or politics, interimexecutives provide an objective, fresh perspective and focus on the business strategies or processes at hand.
• The executives who fill interim positions in companies elect this as their career: These are individuals who enjoy putting out fires, relish the challenge of change, and thrive on walking into a new situation confident of a successful outcome. Their commitment is to the task at hand; their confidence is based on “been-there; done-that” experience.

• Execution management. Rather than acting in an advisory or consultancy role, interim executives are responsible and accountable leaders who expect to implement and manage a business or project to its successful conclusion, and be measured on delivering results.

• Sustainability. While their tenure may relatively short, interim leaders have long-term impact as they share their expertise with the internal teams with which they work and ensure that solutions are integrated into your company’s business processes.

• Risk mitigation. Seasoned executives constitute a risk-mitigation strategy for small and mid-sized companies in that they have a public track record. Because they have confronted similar challenges previously, they can articulate the pros and cons of planned actions based on experience rather than hypothesis. Change can be an inherent risk in itself: Executives with change management experience can ease painful transitions and serve as catalysts for positive change in the organization.

• Lower cost of leadership talent. Expense management is aided with interim employees at all levels. Particularly in times of fiscal or economic uncertainly, the ability to readily add and subtract both staff and executive management represents a return on capital strategy that impacts the bottom line. As assignmentbased employees, interim executives provide a cost-effective, short-term solution to fill business-critical gaps or drive major initiatives such as mitigating or overcoming crisis situations such as financial shortfalls, takeovers, turnarounds, or family conflicts. Companies can avoid unnecessarily tying up capital in human capital: They can avoid a permanent hire they do not need for things that should run by themselves if set up correctly (GAAP compliance in accounting, e.g.) or for initiatives that have an identifiable conclusion—such as a recruiting initiative that, once complete, does not require the long-term employ of a professional recruiter. In addition, companies can avoid the cost of a bad hire,
  hired quickly and with insufficient evaluation. Often if a new hire proves a mistake, it takes months or years to undo the damage and refill the position. Plus, hiring the wrong person is expensive. You suffer recruitment costs (for the misfit and for a replacement), lost productivity, lost business opportunities, severance pay, unemployment compensation, and maybe even legal fees. Many experts agree that, added up, hiring the wrong person will cost your company three times the person’s annual salary10. In addition to the monetary cost, a bad hiring decision adversely affects the morale of other employees. Hiring the wrong person, especially in a management role, can actually result in the loss of good workers.

Conclusion

Business leaders are continually challenged to deliver results, often under severe time constraints, while maintaining a vision for their company’s long-term strategy. However, when key skills are missing from the management team due to a sudden resignation; a gap in experience as the company expands or enters a new market; explores new business models; or requires immediate expertise in a new area; the company can find itself at a competitive disadvantage or suffer serious financial setbacks.

Interim executives are generally part of a team of skilled professionals who have their own pool of talent to draw from, adding bench strength (if needed) to the hiring company. And when very specific skill sets are in demand, these executives can span their broad network to help locate people with the skills required. The executives who fill interim positions in companies elect this as their career: These are individuals who enjoy putting out fires, relish the challenge of change, and thrive on walking into a new situation, confident of a successful outcome. Their commitment is to the task at hand; their confidence is based on “been-there; done-that” experience.

Companies that leverage their ability to access leadership talent on an interim basis have a competitive edge in their time to market, their return on executive investment, and their ability to execute their business strategies.

The Human Capital Institute

The Human Capital Institute is a global think tank, educator, and professional association defining the agenda and setting the pace for the new business science of strategic talent management. With more than 107,000 members in over 40 countries, HCI offers a new association framework that cuts across the silos of recruitment, HR/OD, finance, sales and marketing, operations, manufacturing and IT. We provide key executives, line managers and talent management professionals with the newest education, most effective tools and best practices in talent strategy, acquisition, alignment, engagement, deployment, measurement, and retention.

Through research and collaboration, HCI programs collect original, creative ideas from a field of the brightest thought leaders in talent management. Those ideas are then transformed into measurable, real-world strategies that help our members attract and retain high-performing people, build a diverse, inclusive workplace, and leverage individual and team performance throughout the enterprise.

The future belongs to leaders with innovative ideas and strategic knowledge. We invite you to learn, share and grow your career with HCI’s comprehensive resources, and to join our high-achieving, forward-looking membership community.