There are always ups and downs in the world of executive interim management, however I’m not sure we have ever seen such a perfect storm affecting the market as the double whammy of a global pandemic and IR35. Whilst this led initially to reluctance to use interim contractors and a slowing of the interim market, just over 12 months on from IR35 and we seem to have seen an almost complete reverse in fortunes for our interim managers.
Recent data produced by the International Network of Interim Manager Associations (INIMA) in their annual survey suggests that use of interim managers has increased by 7% across Europe and a massive 16% (the highest in Europe) in the UK. This suggests that the market has done more than just bounce back, it suggests that businesses are embracing the use of highly skilled experts on a short-term basis to help expedite growth and change.
The introduction of IR35 in March 2021 now seems a very long time ago and the market has changed massively during this time. At that point, we were in our third (and hopefully last) Covid lockdown and, for many, it forced difficult career choices; the choice between continuing working as an interim manager as before and accepting that the market would likely change or potentially shrink, or moving back into the world of permanent work.
For many, both IR35 and Covid had led to a reduction in assignments. As a consequence, many made that move back to the world of permanent employment, a move that a few years before, none would have considered.
During the course of last year, I’ve spoken to many interims who made the move back into permanent work. For some, it has provided opportunities to take ownership of things again. For many others it was a decision taken through necessity rather than choice. However, the predictions of a deterioration of the interim market didn’t last long.
As restrictions relaxed we saw demand increase as organisations looked to reshape and reorganise. There has been significant acquisition and divestment activity and organisations reshaping how they operate to be more efficient. Since then, the demand has been even higher than our usual positive view on the market. The impact of this meant that, for the second half of last year, we saw a huge increase in demand compared to the previous 18 months, combined with a shortage of experienced interims.
As always, the market adapts to these challenges of supply and demand, but what has happened since this point?
The rise and fall of the fixed term contract
One of the side effects of this period was undoubtedly the rise in less attractive FTC. As organisations wrestled with IR35 and the inability or lack of experience to make accurate determinations on interims, many assumed (wrongly) that if it was ‘inside IR35’, it needed to be an FTC. It meant many roles that justifiably should have been deemed ‘outside IR35’ were being recruited on an FTC basis, citing cost and risks associated with IR35 as reasons. However, as demand for interims increased, the market became more competitive for interim talent and, since Q4 of 2021, we have seen the number of FTC assignments drop and the number of interim assignments once again increase.
There is undoubtedly still a market for FTCs and inside of IR35 roles for reasons of covering permanent roles. At the same time, as a result of the competitive pressures on the market, we’ve seen organisations incentivise roles differently, including FTCs being paid at a higher rate than permanent equivalents, to recognise the risks of engaging only for a fixed period.
We have also seen an increase in interims engaged on an inside determination as opposed to FTC, allowing interims to continue with this flexibility.
The positive effects of IR35
Whilst many were convinced that IR35 would cause havoc within the interim market, I remain convinced that there are numerous benefits coming from it. For most interims I work with, they became interims to do stimulating, interesting work for short periods and then leave once completed. So often interims were retained, falling into the “business as usual” trap. However, IR35 has forced organisations to become better at assessing their needs. No longer is there a request for “an extra head” to help with the workload. The roles now become better defined, shaped around clear deliverables and are outcome based. For many, this has created more interesting interim assignments with clear milestones for fixed periods of time.
Where is the demand coming from?
Whilst Eton Bridge Partners works across most sectors, we have seen particular demand for interims within the Private Equity space as organisations look to acquire new ventures. We have seen requirements for functional expertise to help “build out” capability in areas such as HR and Finance in new acquisitions, as well as expected transformation support. Again, the key is that this remains outcome focused and on fixed timescales to support commercial pressures. We have also seen significant over hiring in this space for short term delivery.
Whilst PE may have taken the lead in the early stages of recovery, many other businesses are now following suit. We have seen a number of organisations who steadfastly said they would no longer engage with interims retract from this stance and, although many have continued this stance, it has been clear that now interims have more choice. Those organisations only offering work on an FTC basis have been significantly hit and unable to attract the high quality of talent they have sought.
So, for interims who went back to permanent work through a fear of long-term change to the market, this may well have been premature. The bounce back has been strong and this recovery has remained consistent.
So, for interims who went back to permanent work through a fear of long-term change to the market, this may well have been premature. The bounce back has been strong and this recovery has remained consistent. Interim managers remain hugely busy, with the INIMA report suggesting an increase in utilisation from 33% in 2020 to 63% in 2021. We have already seen people reverse their decisions around permanent work and return to the contracting world. Whilst there will undoubtedly be concern around high interest rates and potential recessions, it seems highly likely that interims with a strong change management skillset and ability to work to a defined scope will definitely remain in high demand.
IR35 has not become the great blocker that many feared, and for many, interim management still enables them to return to a more flexible way of working. For others it is about delivering interesting work during a defined period before moving on.
Whatever the reasons, there seems to be plenty of evidence to suggest a return to the interim market should hold no fear and provide great opportunities to gain significant experience during periods of change.
To talk to Andy about interim management, or your interim needs, please do not hesitate to get in touch with him directly: [email protected]
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