'Company doctor', 'turnaround professional', and 'interim CEO' – different connotations, but the same job. Nigel Ash writes about the people who fix sick companies.
The company doctor may be appointed by administrators. The turnaround specialist is probably parachuted in by nervous investors or very possibly these days by apparently nerveless venture capitalists. 'Interim CEO', however, has a slightly gentler ring, which probably encourages boards to make the hire and underestimate the difficulties into which they have watched their company drift. "After all," they may tell each other comfortingly, "if the CEO is only an interim appointment, doesn't it prove that the problem is merely interim as well?"
That said, there are ad hoc projects, such as the complex absorption of an acquisition or the implementation of a new IT system, where a business will turn to interim help, either by bringing in a specialist manager on a short-term contract or a senior non-executive director with experience of the particular challenge.
In a market driven by ever more merciless measures of performance, the tenure for a CEO has fallen to around three years.
A new man at the top is now reckoned to have just 100 days to show what he is made of. Even so, the analytical vultures start circling the day he first turns the key in the door of the executive loo. Some research suggests that 40% of new external CEO hires fail to deliver anything above par in their first 18 months.
By contrast, executives promoted from within the organisation tend to produce more solid results, perhaps because they have seen at first hand what is going wrong with a company. However, it is worth remembering that they may have been part of the original problem.
When CEOs fall these days, they fall quickly, and some of them appear to go happily.
A recent study, 'Building CEO Capital' by Leslie Gaines-Ross, chief knowledge and research officer at Burston-Marsteller in New York shows that of over 1,000 chief executives interviewed, 73% had thought seriously of quitting, citing among other pressures, new SOX-type accounting rules, uninterrupted media and institutional scrutiny, and the fact that they are on the road for an average of 250 days a year.
It can, however, take nine to 12 months to find a suitable external replacement, even if he or she is bought out of their existing employment contract. While even a faltering business may be able to survive without leadership for a month or two, someone soon needs to be in place running the show. Chairmen doubling as chief executives are no longer seen as a healthy option and a non-executive director is unlikely to do anything more than maintain the status quo, even though the company is in trouble. Cometh the hour, cometh the man (or, as it happens, increasingly the woman) - the interim executive.
The oddity about the interim CEO is that although he or she is engaged to fight a fire, there is often far less pressure on them than if they were permanent hires. This enhances the chances of success. Interim tenure rarely exceeds nine months. Maybe the markets agree tacitly to judge the interim toward the end of the job. He's 'the fireman', assumed to know the job. This may be felt to be even more the case if the interim has been produced by a member of a professional association such as the UK's 27-member Interim Management Association.
Nick Robeson, the association's chairman, and chief executive of Boyden, agrees that the interim does start with greater latitude. This can include the attitude of staff, who at worst may naively imagine that he represents a problem of limited duration.
The reality, explains Robeson, quickly turns out to be somewhat different. 'We reckon that an interim executive will deliver in five to ten days what a permanent executive will normally deliver in 100. By the time the first coffee break comes on day one, people in the company will be in absolutely no doubt as to why this individual is there.'
In Robeson's view, the speed with which interims work goes with the type of people they are – typically late thirties or early forties, they have a constant thirst for information and an unremitting work ethic. He cites the case of the interim leader of a nuclear company who had so steeped himself in nuclear technology in the days before he took up his assignment that after a detailed meeting with one of his professional nuclear engineers the scientist asked him where he had done his degree.
"By their very nature," says Robeson, "new permanent CEOs tend not to seek advice and counsel when they are under pressure, particularly if they are a high-profile hire. This is largely because they are supposed to know all the answers. By contrast, interims ask daft and open questions continually, to make sure that they are learning all the time about the organisation, about the issues and where the problems are."
Interims appear able to establish credibility and build relationships faster, because staff can easily buy in to their exceptional mission. Those who do not swiftly come to the attention of the new leader. By contrast the priorities and behaviour of a new full-time chief will be examined and embraced more slowly and carefully, delaying the moment when the machine will really start to work on his behalf.
NO TIME FOR FAKING
While the interim will probably to some extent be playing to the gallery within the new company, if only to make sure that he and his mission cannot be ignored, he nevertheless needs to be authentic and self-aware. Loyalty quickly gained is just as quickly lost.
A study Boyden has just undertaken with management psychologist Anton Fishman of Corporate Insights involved interviews with successful interim executives about the way handed the crucial early days.
"I had everyone together (in this department of 40 people) within an hour of being in the building," said one executive, "because I didn't want them talking me down. I didn't want them speculating, not knowing about me."
Equally, another leading practitioner warned, "You should aim to switch very quickly from data-gathering and relationship modes to operational mode."
ONE STEP AHEAD
"You can work out what it takes to make a good interim executive," says Robeson, "but it is a lot harder to see how these individuals got what it takes. They all seem to have read a book that has not yet been written, on how to act on a client site for that first key period of time, how to ensure that they get enough credibility to do the job and how to effect change rapidly in a way that would be impossible for a permanent chief executive."
Though there is a minority of interims who focus purely on the agreed objectives and then aim to move on with their success fee, it is Robeson's belief that most interim executives are also natural trainers because they need to carry puzzled or fearful people with them. This adds an extra value to their function.
"The most desirable outcome is that these people do not just fix the balance sheet or whatever the target is, but that they also leave a legacy," adds Robeson.
"When they have gone on to their next assignment, people should remember the actions they took, the way they behaved, the things they changed, the speed at which they operated." Another important legacy, he says, lies in the choice of the executive who will replace the interim on a permanent basis.
"If I find that a company has already initiated an executive search before one of our interims is about to go in, I strongly recommend that they put the process on hold. The job criteria are likely to be just an update of the last search specification. It seems important, however, that the interim plays an active role in hiring the new person. He not only knows the sort of job that will need to be done when his own tenure ends, he also has an objective pair of eyes that has probably seen half a dozen or more similar situations. To ignore that huge wealth of best practice from other jobs would be commercial suicide."