When 35-year-old Tone Software recently acquired a competitor, it had one of those "good problems" in business—a flood of global interest in its software programs, which underpin communications and network infrastructure. "We didn't know how to handle the influx and how to take advantage of it" with current sales staff, says Shirley Balarezo, who was promoted to president 18 months ago after 13 years at the 50-employee Anaheim (Calif.)-based company.
Balarezo contemplated hiring a sales consultant to help her staff put together a global sales message. Then she attended a regional technology workshop hosted last September by Irvine (Calif.)-based Cerius Interim Executive Solutions.
She was persuaded to bring on one of Cerius' interim executives to act as vice-president of sales at Tone Software. Alhough the cost was high—$1,500 a day—gaining an outsider's perspective has been invaluable, Balarezo says. "He is a very experienced sales executive who has no biases about our company or product, no favorites, and no political gamesmanship. He's able to just give pure, top-notch strategic advice on how to sell our products."
Unlike consultants, interim executives work within a company, filling a position that has gone vacant due to an employee leaving, dying, or being dismissed. They can fulfill as many as three functions: Stepping into a job that needs doing, helping to interview and choose a permanent replacement, and diagnosing and implementing important internal changes.
"an inherently stressful environment"
James Phelps, who offers interim executive services through his Minneapolis-based SeaChange Consulting, says small- and medium-size businesses get the most out of the arrangement when they are open to all three. "They get the biggest benefit if they look at it as an opportunity to not just bring in a caretaker but also to solve nagging, inherent problems they have faced over the years," he says.
It takes a certain kind of interim to listen effectively, quickly diagnose problems, and implement solutions, as well as an entrepreneur who is particularly open to suggestions to make the liaison work. "You're going into an inherently stressful environment when a position is vacant. If you present yourself as an industry expert who knows it all, that could be problematic," Phelps says. "The management staff is typically already apprehensive and they may resist even great ideas."
That kind of resistance—particularly to an outsider who's brought in to shake things up—can doom the potential of an interim executive's stint, which typically lasts six to nine months. "It's generally a good idea to bring in an interim executive because it can solve a lot of problems that small and midsized businesses have, but most companies are not equipped to use them appropriately," says Kerry Brock, a retired serial entrepreneur and principal at Brock International in Santa Fe, N.M. He has been an interim executive and now consults with and serves on advisory boards for small businesses.
The barriers often hinge on a lack of trust that CEOs of small, privately-owned companies have in outsiders, as well as the chief executives' inability to admit they need help. "There may be lots of good reasons for that mistrust because the entrepreneur typically has fought very hard to get where they are and they've been misused by people along the way. But it makes it difficult to allow an unknown top-level person to enter and change things," Brock says.
Less-expensive, but is the fit right?
Another bump in the road is cost. Cerius quotes a $1,200-to-$2,000 daily rate for its interims, who typically work part-time from home after an initial stint on-site. Other interim executive firms may charge less, but it can still be expensive, even though the small company does not have to pay for recruiting, benefits, and executive bonuses or perks.
A couple of years ago, Ken Noland, president of CFO To Go, hired two interim executives for his six-employee, Tustin (Calif.)-based provider of accounting, tax, and consulting services. The former CPAs he brought on to fill open executive slots had been laid off from high-powered CFO jobs at large companies. "They had been making $250,000 a year but had been out of work for months and months. I offered them $50 an hour but they really wanted $80 to $120," Noland recalls.
The arrangement didn't last long. Apart from dissatisfaction with pay, the interims had gotten away from the nitty-gritty accounting that Noland's staffers must master for their clients. "They'd been doing the bigger-picture stuff and they'd forgotten some of the details and couldn't keep up," he says.
When it works, however, the interim executive model can do wonders.
saved: $1 million in operations costs
Marc Koehler, a former U.S. Navy nuclear engineer and strategic manager for several large corporations, works as an interim executive for Cerius. "The typical company I go into started out of a garage and now has 100 employees and $75 million in revenue," says Koehler, who lives in San Diego.
He recently did a gig with Creative Teaching Press, a 40-year-old educational publisher that brought him in as senior vice-president of supply chain management. During his nine-month assignment, Koehler says, he saved the business $1 million in operations costs and replaced himself with a $60,000 a year executive. The position had previously paid $160,000—far too much for the job's demands, Koehler says. "The CEO was so close to the business that he couldn't see certain things. I helped redefine the business in a more cost-effective format."
The concept can also work for startups and fast-growing small companies that need a boost in their expertise level. Vincent Huang is CEO of VHA, a prepaid wireless phone-service provider in Industry, Calif., that is currently using three interim executives to ramp up its operations.
"Our business grew so fast that for many years we just added head count. We're a group of young people working hard, but I realized about a year ago that I didn't have a clue how to run a company at the level we'd gotten to," Huang says. "I had around 75 employees and really needed a controller."
assurances to permanent staff
With all the growing pains at his business, Huang had used a series of consultants who charged a lot to make recommendations but weren't there to implement the needed changes. The interim CFO he hired to come in one day a month was well-versed in the telecommunications industry and was able to brief him on what he was lacking in financial operations. An interim controller worked in the office two days a week with Huang's accounting team. He recently brought in an interim human resources director.
"Our team was receptive, once I assured them these people were not here to replace them or take away their jobs. I'm very impressed with these seasoned executives who come in, plug themselves into the operation within two or three weeks, and they're off and running," Huang says.
Working as an interim is a nice lifestyle for a high-level, semi-retired entrepreneur or executive who wants to keep a hand in but isn't interested in working full-time. Koehler uses the down time between assignments to run an international beach-soccer festival in Oceanside, Calif.
Gerard Bocaccio, a former TV producer and media consultant now working as a creative and strategic executive for hire in Hollywood, says he thinks the interim model is the wave of the future. "The concept is what the future will look like for companies that know they need the expertise but don't have the resources to ramp up full divisions and infrastructure. It's already taking root for the long-term," he says.