Sending out an SOS

A few six months ago a well-known venture capital firm bought a failing engineering business with a #40m turnover operating on three sites for #1. They immediately set about turning it around.

One of their first actions was to dispose of the incumbent management team.

Venture capitalists GR were recruited as interim general manager to decide on the best way of extracting value from the company while continuing to manage the enterprise as a going concern.

Within two weeks it was agreed to close one factory and relocate its production to another site based in Germany, which had better infrastructure and distribution networks. GR then sold and leased back the third factory to release cash that could be used to fund the redevelopment of the product range at the German site.

The 450-strong management and workforce was reduced to 150, the company’s production and forward order book was protected and its customers have largely been retained. Phase one completed.

There is obviously a great deal more to achieve on this assignment before the business can be handed over to a new management team and then sold on.

Phase two will start soon with an interim manager who possesses a different set of skills and experience.

The job of completing phase one on time and within budget has been considerable, involving intense pressure, seven-day weeks, complex management and legal issues and the loss of two thirds of the workforce.

Interim managers often have a bad reputation. But they are deeply experienced executives from all sectors of commerce and industry whose skills have been built, developed and honed in the most demanding enterprises.

Unlikely to be aged less than 45, they have decided to run their own businesses, offering specialist services on a freelance basis to businesses going through or needing significant change.

UK industry has gone through a great deal of pain over the past decade. The most lasting impact of the last two recessions has been the delay of management structures, resulting in massive improvements in competitiveness with leaner, more agile enterprises.

This in turn has led to the release of redeployed freelance and outsourced labour to handle new projects and markets. At the top of this pile, alert modern managers have taken advantage of the availability of top class senior managers who have opted out, for one reason or another, of climbing the slippery corporate ladder and offered their skills to their preferred network of employers.

In the mid-1990s this created the need for specialist firms of interim management providers, an industry spawned in recession that has flourished since, in both good and not so good times.

Interim management is now well embedded in the human resources strategies of UK businesses and in the armouries of its stakeholders and advisers – allowing a new profession to emerge, recently embodied in its own institute.

Even in the current economic climate, interim management is being utilised as both a distress and a strategic purchase, in and out of crisis, across all sectors – multinationals, SMEs, public sector and not-for-profit organisations alike.

A start-up needing to impress the bank or potential investors is a classic opportunity to use the services of a seasoned executive without any long-term commitment.

Thousands of first class business plans have come to fruition because of the impact of an interim manager coming in at an early stage at board level.

The interim financial manager is probably the most obvious example. Slightly greying temples are a better bet for lenders and investors than a team of fresh-faced entrepreneurs with bright ideas and little business nous.

Interim managers are immediately available, they do not carry the political baggage and the high costs of management consultants. Neither do they carry the risks associated with recruiting permanent executives, such as hefty salaries, share options and severance costs that all hit the profit and loss account.

Indeed, with the average lifespan of a FTSE CEO at less than four years, one often hears the cry ‘is there any such thing as a permanent job anymore?’.

Approximately 40% of all current interim assignments involve those with core financial qualifications.

A further 40% rely on executives with a specific industry sector background, for example to launch a product in a specific marketplace or territory.

The balance require a particular discipline, such as human resources or supply chain management, to be applied in a business where there is weakness or lack of management expertise.

Interim managers usually operate at or near board level. In change management or turnaround projects it is essential that they have full authority to implement their recommendations with due speed.

In a world where it increasingly seems there is no respite for even the most highly rated management teams – every day it seems that another big name loses the battle with the marketplace or the institutions – it is gratifying to know UK industry and commerce can rely on the growing numbers of highly skilled and deeply experienced interim managers to troubleshoot and advise floundering companies.

  • James Wheeler is a partner at executive recruiter Ashton Penney

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