Interim managers: do you need one?
How an experienced outsider can rescue a business – sometimes from itself
Growing Business investigates how an outsider can rescue a private business, sometimes from itself
No one knew the Green Knight when he arrived at the court of King Arthur in the middle of a feast. The courtiers thought they were on a roll, but he was there to tell them they had problems they hadn’t seen.
You probably know the story. The Green Knight made the court do a lot of things they couldn’t see the point of, especially Sir Gawain. From suspicion at first, all the stakeholders ended up trusting this stranger, and Gawain definitely became willing to do whatever it took. After this intervention, the court was a more effective entity, focused on its core business and ready to get on with tracking down the Holy Grail.
Many private businesses operate just like King Arthur’s court. Maybe it’s a family concern. If it has been around for a long time, it may not have noticed changes in the world outside. If it was launched more recently, it’s quite likely to have got used to operating with a fair economic wind. Consequently, it could be unprepared for the realities of a recession, with its executives lacking experience in trimming the sails in adverse conditions – they may not have been born when the last storm hit. This is when bringing in an interim (the business equivalent of the Green Knight) to provide the necessary experience or plug a skills gap can prove invaluable.
Managers for a time
Interims are an embedded feature of the NHS and most local authorities, and a good proportion of the UK’s 20,000 or so career interims move from assignment to assignment in the public sector. But more than half work for private businesses of all sizes, according to Charles Russam, whose company Russam GMS has been placing interims for more than 30 years, and has 10,000 names on its network.
“Private businesses can have any number of reasons to bring in a specialist,” he says. “For example, if their problems relate to redundancies, managing part-time working, or reduced salaries, handling the extra human resources regulatory burden may require special expertise that many small and medium-sized businesses don’t have. So bringing in someone with the necessary skills could be the answer.”
It doesn’t have to be a full-time commitment. Many interims prefer working for a number of different companies simultaneously, even in good times, according to Russam. The fact is that more senior executives are available right now, and even career interims and turnaround specialists are finding work coming in more slowly. But if your company is under stress, this is definitely the time to look for the most cost-effective help you can get, not the cheapest.
In any case, it won’t break the bank, says Ian Gray, a turnaround specialist who put Tottenham Hotspur on a sound commercial footing 20 years ago, and since then has rescued more than 30 businesses, most in the private sector. “Private businesses often don’t accept that they have a problem, or if they do, they believe they can deal with it themselves,” he says. “What’s more, until they understand how interims work, they think we are very expensive.”
Interims do ask for and get eye-watering fees, but as Gray points out, you don’t have executive employment costs, termination fees, National Insurance and other charges relating to full-time appointments.
Gray says a turnaround manager is like the surgeon who comes in to perform an operation, and then departs after satisfying himself that the patient’s recovery plan is in good hands. The operation may be costly, but you definitely don’t begrudge the fee once you are returned to rude health. Gray talks of delivering multiples of 20 or 30 times his fee. Bruno Pace, managing director at Norman Broadbent, carries out rigorous post-assignment reviews and averages a multiple of five.
“We place interims to fill identified gaps; to work alongside and perhaps mentor particular permanent directors; to manage projects that overstretch the senior management,” he explains. “The fourth category is turnaround. Some firms have cut too deep and severed the jugular, which is the operational side of the business. It’s fine to cut costs, but when that affects operations it can slow the business. So it may be necessary to make the operation leaner before that affects every part of the business. Smaller companies are becoming more creative in their use of interims.”
The interim is generally more senior than his or her permanent equivalent, says Guy James of Veredus Interim Management. Financial expertise is necessary, but rarely a sufficient attribute – the interim is often brought in as a guru in a particular operational area. He cites a £25m specialist manufacturer in the Birmingham area which was looking for an interim production director. “It was still in profit, but the market had changed overnight and it needed to completely recast its production capability,” he says.
“But the person you bring in to do a production restructuring like that is probably not the person you’d take on full time to run it afterwards.”
This was no time to bring in a consulting firm, which could have recast production flows just as well, but whose first loyalty is always to the group. In this case, says James, the interim production director did the job forensically and with a light touch, so the company got the benefits without selling its soul.
Following Gray’s medical analogy, Midlands-based Celia Adams believes there’s no cure without diagnosis. “A turnaround specialist has to take a forensic approach,” she says. Adams has a niche interest in transport and distribution, but gets a kick out of community projects too. She has several not-for-profit rescues in her portfolio. Last year she joined the board of Worcester City Football Club, helping it survive a critical phase and continue to buy players while preparing to sell its prime site ground for development. “I took the football club on pro bono, for the experience,” she says.
Like many interims, Adams keeps many irons in the fire, holding a full hand of non-executive directorships and also acting as an angel investor, adding her money to her expertise in early-stage companies. It all adds to the value she can deliver to her clients, she says.
The interim relationship is an equal one and inverts the traditional selection process. You have to convince them that you will gain from their attention. Gray has only ever turned down two requests for his services. “They didn’t have a viable business model,” he explains. “I pride myself that I haven’t lost one, so I won’t take on a hopeless case.”
With more interims on the market than ever before, there is a genuine opportunity to benefit from some of the best business talent in the UK and employ them in a flexible, cost-effective way that suits your business needs and your budget.