The rise of the interim manager

by 14 Oct 2008

Australian businesses are often reluctant to use freelance interim managers to temporarily fill senior leadership vacancies while suitable permanent candidates are sought. However, as Phil Warburton reports, a change in attitude is starting to emerge

As a growing number of baby-boomer executives contemplate their impending retirement, companies face the prospect of regular vacancies in senior positions that will be difficult to fill because of the heavy reliance that businesses have placed on the experience of the boomers. All too regularly, there isn’t a viable internal succession plan and the available in-house candidates are simply not yet ready for the senior role.

Bernard Salt, a partner at KPMG, is a demographer and has been studying recruitment trends in Australia for many years. His view is that Australian companies, faced with an unexpected senior vacancy, have often elected to compromise and take a less experienced internal candidate for the leadership role for the sake of expediency.

According to Salt, companies would often say: “Look, he may not be ideal, but at least the internal guy knows all about our widget business – and where else in Australia would we get someone who knows as much about widgets?”

Very often, the option of searching globally for a replacement candidate would not have been considered seriously. Salt believes this reflects an historical lack of sophistication in many Australian businesses.

By contrast, he says, in some markets such as the US and the UK, companies have cast their recruitment nets much wider and aim to recruit from a larger talent pool. Salt believes that Australian businesses are now also embracing the need to recruit senior leaders from the widest possible pool of candidates. However, the longer process and the sheer number of impending senior vacancies, he says, means interim management solutions are increasingly being considered to plug the gap during the recruitment period.

Tony O’Leary of Heidrick & Struggles points to the UK, where the majority of captains of industry say they have used interim managers, according to Mori polls. The number is steadily increasing each year. O’Leary sees Australian business going down the same path, as the baby boomer executives leave the workforce. “Apart from situational departures, the crisis at the top of corporate Australia is exacerbated by the rolling retirement of baby boomers (those born between 1946 and 1964), who began stepping down in 2001. By 2011, the boomers start to reach 65,” says O’Leary.

Glenn O’Brien is HR Director for Asia, Africa and Oceania at consumer packaging company Huhtamaki and is passionate about selecting the best people for senior positions. “We operate in a global market and we need deep experience in international markets. You absolutely need to take the time to find the best possible candidates wherever they are to be found; the cost of a mistake is just so great. But that means you need time and space for a proper recruitment process,” he says.

O’Brien says he wouldn’t take lightly the decision to go for an interim manager for senior positions. “You’d always prefer to get the permanent solution in place as quickly as you can; nothing is worse than leadership instability. However, if it meant cutting corners finding the right person, I’d much rather get an experienced, interim manager in the meantime.

“Often you can get someone who is overpowered for the role; someone who will be a very safe pair of hands. I anticipate a lot of companies will need to be doing the same over the next few years – or face having to compromise and put underpowered people into the senior roles.”

A paradox in interim management

Paradoxically, it is the very same baby boomer top executives who leave full-time roles that are now making themselves available as interim managers for a few months a year. As many as 1000 former top executives are now available as “guns for hire” in Australia– a number that seems set to expand considerably.

Seasoned executives, who are now looking becoming freelancers, are doing so for a variety of reasons. In some cases they have other things they want to fit into their lives: a long-dreamed-of second career, maybe a start-up business of their own or simply a desire to get more control of their personal time. For others, the freelance executive career is far more challenging and stimulating than a conventional, permanent position. Invariably, freelance managers say that they find their portfolio career more interesting, more rewarding and better aligned to their personal goals.

Phil Tuck of Interim Executive Search is one of the “rainmakers” for the growing army of freelance executives, matching their skills to the needs of his clients. His is one of a handful of firms that marshals the growing band of freelancers and feeds it with assignments.

“Interim executives fill in for the key positions in a business such as the general manager or function head. Sometimes, they carry out special assignments or project work that, in the past, would have gone to consulting firms,” says Tuck. This parallels findings by Mori in the UK, where the overwhelming majority (66 per cent) of senior management who have used them, believe that interim managers are a better solution than consultants for implementing change or transition; only 6 per cent disagree. In the UK“special projects” are the largest single application area for employing interim managers.

The benefits of interim managers

Greg Rich of Hamilton Rich believes there are considerable benefits to clients who are open to using interim executives. “Often they are able to access very senior people who may seem to be over-qualified for the role,” says Rich.

While it sometimes seems like overkill, the result is a much reduced risk and a higher probability of a good outcome. It can give almost instant access to a highly experienced expert who can seamlessly join the senior management team or board. Rich says the interim solution is, thus, a cost-effective and rapid fix for tough business problems.

Alan Locke of Executive Interim Management puts it graphically: “Sometimes you need the best possible managers at the worst possible moment”.

The issue may be that the company is facing a crisis having lost a senior leader. Maybe a project has gone off-track with potentially disastrous consequences. “Often companies find that their internal resources are already busy or not well equipped to dealing with the issue,” says Locke. At those moments, companies want an experienced manager who has done it before in equally trying circumstances. Often the best solution is an interim executive who will do the job during the most critical period, for a number of weeks or months, before moving handing the reins over to a permanent recruit.

Haitham Ghantous has been an interim manager for 12 years and has completed 11 assignments. For him, the attraction is the unique challenge of a new industry every few months. “It is very stimulating to walk into a new business where you don’t know the industry, the business situation, the people or the culture. There is no time for a leisurely induction – you have to deliver from day one.”

Experienced interim executives are not daunted by the challenge, though. “You get the advantage of being able to speak candidly without having to be concerned about the politics. Being an interim manager actually helps you to be more impactful and I find it very rewarding as a result,” says Ghantous.

The interim management players see themselves as part of junior industry that is now coming of age. They are well aware of the historical reluctance of many Australian businesses to entertain temporary leadership solutions – but they see interim management growing as a response to the demographic and business challenges faced by Australian business. In the future that they envisage, freelance executive work will be a routine part of the employment mix.

Phil Warburton is a freelance writer and company director based in NSW