Note: This is part one of two parts. Part two will appear Friday.
Over the last 60 years, the executive search industry has experienced shifts in structure and design and how it serves its clients. Like any discipline, it’s not immune to the market dynamics that shape and refashion industries and business practices. Disruptors such as LinkedIn and the Internet-of-everything have fundamentally changed the way we do search, and as such, these changes to traditional employment have reached the highest company ranks, and it has big implications for executive search.
This change comes in the form of interim, or temporary, executives who are a new breed of insourced leadership. They are highly-specialized professionals employed to quickly turn businesses around or provide a shot in the arm until a long-term executive can be found. This is a good thing for executive search partners and in-house teams – if you are clear on how to employ this specialized professional and create well-defined parameters.
First, we must understand a few things about the interim executive.
Assessing the business case is an important discussion. At the macro level, the answer is business agility. Interims allow organizations the ability to quickly add needed expertise to respond to market changes or to capitalize on specific opportunities. For medium to large corporations it also gives them the chance to act like their enviable start-up competitors, moving quickly to take advantage of innovation and side-step prolonged, permanent staffing protocols. A Forbes article by Forrester’s Craig Le Clair discusses the need for agility in today’s business environment:
“Seventy percent of the companies that were on the Fortune 1000 list a mere ten years ago have now vanished – unable to adapt to change… Today, companies must break away from the assumption of sustainable competitive advantage and embrace adaptable differentiation, i.e., develop an agility advantage. But what does this mean? Forrester defines business agility as the quality that allows an enterprise to embrace market and operational changes as a matter of routine.”
While companies across all industries realize the value that interim executives offer in short-term situations, they are also discovering other reasons to turn to interim executives. Examples include warding off stakeholder worries when a high profile executive steps down. Being able to quickly engage top talent with internal teams can also help the company efficiently strategize in shifting markets.
But when exactly should this human capital strategy be employed? And how can executive search firms help, and what are the key elements necessary for success?
Two key events over the last 20 years point specifically to the broadening use of temporary talent in top slots. Toward the end of the 1990s, companies, corporate boards and stakeholders grew increasingly concerned about the effects of Y2K, and the conversion of technology. As a result, an immediate need for heads of technology and IT became apparent, even for organizations that hadn’t traditionally staffed those position. It was really the first time temporary executives were broadly stepping into positions that addressed a specific, targeted task with a specific end date.
The second landmark event leading to the acceptance of interim executives was the passing of the Sarbanes–Oxley Act (SOX) in 2002. This was the result of a series of large corporate frauds in the early 2000s (Enron, Tyco, and WorldCom among them). While SOX is typically associated primarily with financial departments, it also affects the technology division of companies with regard to the storage of electronic records.
The complexities and penalties linked to the federal law made it imperative for public corporations, as well as private companies and nonprofit organizations, to have a head of finance and accounting in place at all times. It also meant that organizations needed ground cover for these positions if a seat was vacated and a lengthy recruitment search was not an option. A company today cannot be absent a technology or finance lead for any length of time without seeing adverse effects.
From a recent survey by ExecuNet, executives reported it takes them an average of 6.4 months to find a job. At the same time, few companies have a succession plan in place for senior management. A 2010 report from Stanford University and executive search firm Heidrick & Struggles says barely 4-in-10 companies have an immediate successor to a CEO. And the American Management Association discovered a year later that only 14% of businesses consider themselves “well prepared” to handle a sudden loss in senior management.
With this in mind, interim execs can take some of the pressure off internal and external executive search to find the right fit and add value to your services. The search team can be highly strategic about filling the placement while providing internal leadership to the company as a placeholder.
True interim leadership isn’t a threat to the search process, says Robert Jordan, founder and CEO of the Association of Interim Executives. “The traditional concept of permanent employment is very different from that of an executive in a temporary role. Most interims stay clear of political agenda or bureaucracy because they are measured on one thing: results. They also aren’t distracted by other tasks that often come with permanent employment at any level.”
He says that interim management has been around in Europe for a generation and is not yet a household phrase here in the U.S. “But that trend is shifting here as companies begin to see they are getting the best of both worlds with temporary and expert.”
An interim executive has specific capabilities needed for filling a leadership void. They quickly assess the situation they are entering and determine what they have to do and what they need to accomplish. They are typically quick learners because they don’t have the luxury of time. Interim executives build relationships quickly and are adaptable especially in high-pressure situations – as a direct result of their proclivity for moving from one organization to the next on transitory assignments.
The “do no harm” mantra of an interim leader is to leave the organization in a better place than when he or she came, and transition the role seamlessly to the successor. This not only keeps the team from backsliding, but in fact moves it forward. Employing an interim executive also gives the organization an opportunity to test for culture fit; it can happen that an interim is asked to become the permanent hire.
In my interim executive roles, one of the first things I do is identify the team’s pain points and what I can do to help to immediately address them. It is a non-controversial, blocking and tackling approach that leads to immediate implementation and resolving team, P&L and operational issues.
Often, interim executives are either entrepreneurs who sold their companies to a larger organization, or “refugees” from big corporations who value the flexibility of temporary and project-based work. Typical assignments can last four to nine months, but can fall anywhere above or below this range depending on the scope and requirements of the executive’s role from point of entry to exit.
There are three phases to every interim assignment:
1. Entering the assignment
Entry typically involves both the prospective interim and the company jointly exploring the requirements in order for the company to be able to decide whether or not the executive is a good fit. Once brought on the team, it is the interim executive’s task to research the current situation in order to develop a detailed plan to address it.
Dr. Julian Birkinshaw is a professor of strategy and entrepreneurship at the London Business School and he recently wrote a piece for Forbes on “Interim Executives: Models of Modern Management.” It touched on the modus operandi of interim expertise:
In a strange way, interim executives are the models of modern management because they are only there for a short while. Remember the Hippocratic Oath: ‘First, do no harm.’ Every executive, whether interim or permanent, should have these four words etched on the back of their iPhone. So when starting a new job, your first priority is to figure out what is already working, without your input, that needs to be maintained. Then, plot the minimal number of interventions you need to make to sort out the problems. In the world of management, less is more.
2. Performing the role
Taking ownership of the position, the interim executive must firmly manage the new role or project, find a solution to key problems, and report on progress to the company. During this phase, the professional delves as deep into the company as necessary utilizing his or her expertise to achieve results quickly, while still remaining an independent practitioner. The interim executive will need to connect with many different people within the organization, and then chart a path for the desired results – results that will be measured in weeks or months, not years.
Once the situation analysis is complete, there needs to be a collective understanding between company and executive, as to what is in-scope and what is out-of-scope for this role. Scope creep can occur quickly and innocently, simply because so many decisions have implications for the future. By identifying low-hanging fruit, successful interims will be able to take fast action that will have a big impact without establishing long term commitments that might leave a permanent executive hamstrung. It is also important that the interim executive document activities throughout the assignment so as to prepare for the eventual changing of the guard. The goal here is to have the permanent person carry through what was started.
3. Exiting the position
There is a point of diminishing return to how long an interim executive is in place. If pushed past that point it creates instability within the team and the organization. The objective of this position is to fill a hole and leave it in better shape than when they entered. The lifecycle of the interim executive should include determining, up-front, the duration of the engagement, and the appropriate exit time and strategy.
Near the 9-12 month mark, an interim executive becomes embedded in the organization’s culture, and the team begins to rely on them in areas not initially envisioned. Additionally, the team, organization, and executive peer group – as well as the interim executive – becomes ready for some permanency. If there isn’t a clear demarcation of the role at that time, the lines begin to blur and it becomes just as disruptive when that person leaves as if he or she were a permanent executive.
Leveraging the talents of a seasoned interim executive can give an executive search team the breathing room it needs to be more strategic about a new hire than a quick fill might allow. This practice is a way to increase partnership value to the client or to management by supplying a temporary leader to provide the focused attention a company needs for stability. As a result, a company can expect quick results and a smooth transition when the position is filled.
But like anything, there are unknowns about the practice of placing interims at this level. Will interims become a commonly used talent strategy for the top of the house, and if so, what role does executive search play in that? Can executive search leaders be part of the sea change, and how does it become a strategic business lever? Time will tell.
Note: Tomorrow, in the second part of this article, Cindy Lubitz summarizes the six critical steps for an executive search team to work through with an organization to establish a successful interim executive lifecycle.
