Here Come the Interim Execs
November 2004, Staffing Industry Review

Headline-grabbing accounting scandals, controversial offshore outsourcing plans, a sudden executive exodus - all send tremors on Wall Street. And employee fear spreads to the four corners of a corporation, from the ivory tower to the factory floor.

During these turbulent times, smart companies turn to specialty staffing firms that provide interim executives, or "white knight" CEOs, CFOs, COOs and CIOs. "When we go in, there's already a problem... and usually it's chaos," says Ali Sarmiento, principal of Topologe LLC, a Burlington MA-based provider of interim CIOs.

Interim executives bring a wealth of experience to companies, particularly in areas where the need is most dire. They’re called in quickly to stop the bleeding. "A typical search for a permanent executive takes six months, whereas an interim [takes] a week or two," says Dennis Powers, a managing director at Executive Interim Management, a Paris -based firm. Interim executives not only come to assignments quickly, their guns are blazing. That's because they know their assignments will end in less than a year, freeing them from internal political handcuffs. They make tough decisions more easily than their permanent counterparts. “an interim manager is motivated by challenges and ready to take the risk,” Powers says. “A permanent person, on the other hand, is going to be cautious.”

Then again, critics counter that the model can work against itself. Interim executives, they say, hurt a company’s long-term prospects. That’s because C-level executives get paid to think and act strategically, making critical decisions whose impacts may not be felt for years, which flies in the face of the interim executive. “The biggest problem is the lack of accountability,” says Marc Cecere, vice president at Forrester Research of Cambridge MA. “ You can do a lot of damage because you know you’re not going to have to live with the results.”

Specialist Wanted

Either way, demand for interim executive services may be growing. The market goes hand-in-hand with business transformations, such as mergers-and acquisitions, initial public offerings, new regulations operational changes and global expansion events requiring highly specialized leadership and skills that a company's current executive team may not possess. Sarbanes-Oxley compliance, offshore outsourcing engagements and aggressive cost-cutting efforts head up today's business-transformation hot list.

"There are so many troubled company situations where they are revenue challenged or want to get a handle on expenses, " says Kerry Moynihan, managing partner of Cleveland-based Christian and Timbers, an executive search firm. With Sarbanes-Oxley, an interim CFO or CIO acts as an independent party. For a company heading toward offshore outsourcing, an interim CIO skilled in this transformation likely understands how to communicate it to employees and retain the best of them. They also know what basic operations should be outsourced and what core operations must be kept in house. Given these market drivers, interim executive search firms claim they're enjoying a growth spurt. "It's coming back," Powers says. "People are willing to spend money on the top line." Says Ben Cass, managing partner at the Interlochen Group, an Atlanta-based firm that places C-level financial professionals: "I would say we have seen a pickup at our firm. For us, it's been since the second half of last year."

Not everyone, though, agrees the market is growing. Forrester's Cecere, who has been tracking the market for interim CIOs, says he hasn't seen much pickup lately. That's probably because today's permanent CIOs have become savvy about major technology transformations like IT outsourcing and enterprise software projects, he says. Cecere though, believes the interim CIO model won't go away anytime soon. "It has made steady background noise for a long time, thanks to what I call the 'Two CIO Rule,"' he says. This rule comes into play whenever a CIO advises a comp any to undergo a sweeping IT change. The controversial proposal stirs political waters, resulting in the CIO's firing and the hiring of an interim CIO. "If the new CIO recommends the same thing, then the change gets put into place," Cecere says, adding, "You generally bring in a temporary CIO in difficult circumstances."

C-Level Shortage

Another market driver is the brewing shortage of C-level talent in companies' second-tier managerial ranks, or "bench strength." According to a 2004 Executive Development Associates' Trends survey, companies lack the quality and depth of executive talent needed to grow and compete in the future. More than 70% of respondents said that a lack of bench strength will be a major influence on their efforts over the next two to three years. Simply put, C-level executives are retiring or heading to greener pastures, leaving second-tier managers too junior to take over right away. Often, these managers started out in very tactical positions, rising through the ranks on their operational abilities. Many have never honed heir strategic thinking skills. Meanwhile, companies have only started to create systems hat develop executive-level talent.

Only 40% of respondents in the survey aid they currently have a well-integrated, alent-management system. Clearly, a disconnect exists between out-going executives and the training of next -generation executives - and interim executives can bridge the gap. Moreover, the gap widens for smaller firms that didn't have much bench strength to begin with. "Small and medium-sized companies, which held back in the past, need individuals at that level," says Cyndi McDermott, regional vice president at Saddle Brook NJ-based Ajilon Finance, which offers interim and permanent placements.