Interim Managers – A first choice for a private equity-backed business, not the last resort?

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“An expensive option, embedding instability, lacking long-term alignment, and leaving us still needing a proper leader at the end of the contract.”

Written by Steve Deverill – Partner & Head of Business Transformation & Technology Practice and Ed Fanshawe – Partner – Board Practice & Private Equity Specialist

A common view, perceived wisdom one could say, regarding the use of Interim Management Solutions. A perception that can lead to an ‘anything but’ mindset, with external consultants being considered the safe bet – and even the stretching of existing resources, a rushed permanent search, or just waiting it out and doing nothing being judged better options than an Interim appointment.

Somebody somewhere clearly didn’t get the memo detailing the powerfully efficient, cost effective and transformative impact of using professional Interim Managers when the market entry plan was set out many years ago! Especially when combined with the speed of implementation (often on the ground within 48-72 hours), which surely makes an Interim Solution a fantastic resource for Private Equity funds throughout the investment cycle; from transaction assessment and diligence to post deal stabilisation and successful exit?

Notwithstanding the trend to back management in the mid-market, change is frequent at Board and operational levels so why then are Interim Managers not more common place in Private Equity?

Heading up Eton Bridge’s Business Transformation & Technology Practice, Steve Deverill explains: “Leading the Business Transformation Team and working alongside Ed Fanshawe, Board & Private Equity Specialist, Ed and I get to work with an ever-growing network of Private Equity organisations and portfolio businesses – particularly in mid-market funds. What surprises me is that the value of an Interim solution is not commonly recognised and can even be treated with scepticism, despite the common goals and shared laser focus on delivering growth or transformation within a finite period of time.”

Alison Rotundo, currently leading a number of Interim Private Equity CFO appointments, commented, “given the values that drive Interim professionals, Private Equity-backed businesses can, in many instances, represent the ideal scenario to maximise value from their use.” This is especially relevant with the increasingly blurred line between a permanent and an interim appointment. Louise Chaplin, Head of Board Practice, points to “the rising demand for ‘permanent candidates’ in Private Equity roles with anticipated tenure of between one and three years.”

As an experienced Interim specialist with a 15-year track record in helping these businesses find the right talent to drive their growth and transformation strategies, who better than Steve to offer a suitable counterargument as to where Interim Solutions and access to first class ‘immediately available permanent resources’ are of the greatest value; something infrequently verbalised, but of increasing value in a world of ambiguity and uncertainty – especially in Private Equity. So we let him loose on these points one by one:

Interim managers are an expensive option

OK, so headlines rates can look high, with many highly skilled Interims at the top end of their profession commanding fees of up to £3,000 per day. That said, average day rate expectations typically sit more in the region of £600 – £2,000 per day.

You obviously get what you pay for, but we should also not forget that this represents a total cost, as you’re not paying any pension contributions, national insurance, healthcare, or any of the other benefits associated with full time hires.

As with everything, expense is relative and must be seen in the context of value derived. Take for example, the long-term savings that can be achieved by bringing on board a highly qualified Interim Manager to deliver a transformation project – and where their impact means a less costly permanent resource is needed for the long-term. It is frequently also the case that Interim leaders do not ask for, or give away, an equity stake as incentives to the permanent members of their teams.

Interims also compare well to their management consultant counterparts, with Interim Managers being integrated into the organisation from the very beginning (as opposed to the more disconnected, ‘advisory’ roles adopted by most management consultants). As a result, they’re afforded operational control over the many different aspects involved in delivering the plan, as well as responsibility for ensuring that all knowledge gained is retained within the business. This is not to decry the value of Management Consulting solutions, but rather to make the point that Interims are subject matter experts that also bring with them a consulting skill set – alongside the practical experience of having previously done the job they’ve been hired to do.

Considering opportunity cost, the picture changes again – what value is lost in terms of strategic leadership, physical transformation and business growth when a key leadership position is not filled (or when waiting c. 6-9 months for a full time manager to take their seat)? What is the opportunity cost of re-allocating resources from other areas of the business to cover an unfilled position?

It’s the total cost of the solution that must be considered and the value offered is significant in the right context.

A source of inherent instability

Let’s move on to the second objection. This is essentially the concern that taking on a temporary leader, and entrusting them to make changes to the business without expecting any long-term commitment in return, is a sure-fire way of introducing or exacerbating instability and uncertainty.

In practice however, I would strongly suggest that this perception is not born out by reality.

Professional Interims arrive with a tried and tested consulting tool kit – and deep expertise in their specialised fields. They’re experienced at inheriting complex situations, identifying key business drivers, and setting strategic objectives/roadmaps for delivering against target. They can structure and communicate clear plans, and actively embed stability at a time of change and fluidity – whilst also planning for their eventual replacement.

Interim Managers are business leaders, not purely consultants and because they are the ones having to deliver change, plans are crafted with practical insight and they are able to steer the business appropriately to stabilise a potentially disruptive situation… No 60 page pitch books insight!

So it seems, where change is needed or uncertainty and instability exist, an Interim Management solution acts to deliver clarity, direction and a platform for long term growth… A far cry from inducing and exacerbating instability.

Zero alignment with the business

The third point to address is that Interim Managers may lack long-term identification with a specific business. The problem being that because they don’t ‘get’ the business they’re deemed not to be in a position to truly understand or care about its future direction.

In reality, I’d say the opposite is true, and that actually this is one of the key reasons for hiring Interims in the first place – bringing in a leader who offers a completely dispassionate assessment of the situation at hand and someone who can make difficult decisions without the pressure and emotional considerations that come from being embedded in a senior management team, frequently also free from behaviours driven by financial incentive schemes.

Irrespective of any commercial agreement, the only thing that really matters for an Interim is the delivery of a successful outcome – because it is on this that their reputation (and their prospects for future employment) is built.

Professional Interim Management is a career choice, thriving on the impact made and the delivery of a stable, sustainable and successful platform for the long term.

Leave, still needing a ‘proper leader’

Finally, my sense is that business owners are still reluctant to consider Interim solutions because there is unfinished business to do in finding a long term leader.

In many instances, that long term leader is not possible (or desirable) to have in place from the outset. Consider the situation where change is needed, or a specific set of objectives need to be met (for example, to drive sales effectiveness, champion a digitisation agenda or take a business to successful exit) the right person to deliver on these objectives is often not necessarily the ideal person to manage them in the long-term.

Organisations can also be uncertain as to the exact nature of a senior role, and the personal characteristics required to own that role for the benefit of the business moving forward.

Working alongside Interim Managers can allow a company to explore and test different ideas, to define the role and the person clearly, without the potentially catastrophic impact of engaging the wrong full time employee. Interim Managers are also able to work alongside business owners to successfully onboard a permanent manager and can give a business the time to find the right person – a process which can take upwards of 4 and as much as 12 months, given standard notice periods and gardening leave.

There may well be a gap to fill for the long term, yes, but the business should be in a better position and able to articulate what that person needs to look like and what expectations they have laid at their feet. Interims may also facilitate the process by taking the urgency out of the situation and buying sufficient time to find the best long term solution without guess work, use of data bases or creating a mismatch in transformative vs long term, ‘business as usual’ skill sets.

In summary…

So, imagine a situation where you want to:

  • Buy a business… but, as a Fund, don’t have access to the right knowledge base to diligence and deliver a successful deal, or as a portfolio business, there’s a clear gap in breadth/depth of management expertise to cope with the rigours of accelerated growth.
  • Prepare your business for sale… but don’t have the right skills or scale of resource in house to do so.
  • Explore a new market or opportunity… but can’t spare Senior Management time.
  • Fill a key leadership position… but don’t quite know what’s best for the business or cannot afford the time to engage in a search process to find a permanent leader.

More urgent still, what if:

  • You own a company, and a member of the Board or Senior Leadership team leaves.
  • You require transformational change at a strategic and operational level, but need to maintain business as usual and without long-term employment liabilities?

These and many more scenarios point to the value of engaging with professionally managed Interim solutions, particularly in conjunction with a permanent Search process.

Ultimately the stage in business cycle has to be right. Clear objectives need setting and the right talent identified (with many shared complexities of a full Executive Search) but the reality is that Interim Management is a highly effective, action oriented mechanism to deliver change, bring about stability and give business owners valuable options.

To my mind, the traditional resistance to Interim placements over the years is based perhaps more on perception than reality. Interims may lack the big brand faith that comes with hiring a ‘McKinsey’. They can feel less ‘solid’ or well understood as a permanent employee. But for Private Equity firms looking to add the right people to their Board, to put in place the subject matter expertise needed to transform their investment, and to support effective skills transfer, they represent an ideal fit.

That’s why a professional search firm like Eton Bridge Partners can perhaps step in to fill the gap.  Providing the missing trust through the quality, choice and management of highly skilled, professional Interim Managers, consistently over time. From Finance and Business Transformation & Technology to HR and now Board, backed by first class Executive Search and an approach that’s flexible, long term and almost exclusively partnership based.  Maybe it’s through this trust that widespread faith and application of Interim solutions will continue to build.

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