Interim Management: Seven Key Trends

A. INTRODUCTION

This is Alf’s fourth blog related to interim management.  It’s a sequel to three earlier connected blogs entitled:

As explained in the first blog, Alf has over twenty years experience as an Independent Interim Executive and is often asked for some tips by new entrants to the industry.
Alf planned to run a series of related blogs on and around this theme. So to make it easier to read, Alf adopted three actors:

  • “Virtually” – Virtually is an old sage of an Interim Manager, with lots of scars, war-stories, anecdotes, and knows absolutely everybody in the industry.
  • “Friendly” – Friendly is our aspiring Interim Manager. Friendly is serious about becoming an Interim Manager but does not want to make too many mistakes in learning the ropes. Friendly is looking to Virtually as a virtual Mentor.
  • “Helpful” – Helpful is our “Quality” Interim Management Provider (sometimes called intermediary or agency). “Quality” interim providers typically reached senior management/board level in their primary career, either in the Private or Public Sectors. The other model of provider is the “High Street” model which generates lots of replica consultants, typically with a career in recruitment, often trained in an organization like Michael Page. “High Street” interim providers often see interim management as an extension of the volume recruitment contract market but with more sector specialization – historically they were typically attracted by the higher margins in interim management.

B. BACKGROUND

“Virtually” ( the old-hand) and “Friendly” (the novice) have had two previous meetings. “Friendly” took “Virually’s”  advice and went off to the Association of Professional Interims’ induction course for new interims. After the course “Friendly” phoned “Virtually”  and asked for a third meeting to clarify some points.

C. CATCH-UP COVERSATION

Virtually the Old-Hand

Hi “Friendly”, come on in and sit down, how have you been?

Friendly the Novice

Good thanks, I finished my induction course last week and am still keen on interim management as a career

Virtually the Old-Hand

Great! So how can I help you?

Friendly the Novice

Well, I am a bit worried about the future of the broader interim industry given the impact of the recession and the Government’s cutbacks. “Virtually”, given your knowledge and experience, I would really be interested in your views on major emerging trends in the interim industry?

Virtually the Old-Hand

Sure friendly – no problem! It’s a subject on which I have dwelling in recent months.

For me, there are probably seven key trends. Let me summarize them and then I shall explain a little:

  • Framework agreements increasingly deployed
  • Volume/high-street providers have chased rates and margins down to contract levels
  • Selling by recruitment professionals
  • Industry consolidation
  • Social media and viral marketing
  • Contingency workers
  • Professional organizations have lost focus

1. Framework agreements increasingly deployed

Framework agreements have been extremely widely deployed in the Public Sector and are now getting more common in the Private Sector, especially in Financial Services. Framework agreements have tended to commoditize interim management and treat it like office temporaries or specialist contractors, like IT project managers, for example. Framework agreements have driven down rates and the selection process for the interim has become a tick-box process. In the old days, the interim was suitably over qualified and sold as having more than enough experience to complete the role. Under framework agreements quality is essentially subordinated – this is to be contrasted with “traditional interim” where the provider often acted as the project manager, as well.

2. Volume/high-street providers have chased rates and margins down to contract levels

High street/volume providers were initially attracted by the higher margins in interim management. Over time, the selling ethos of the high street providers chased business aggressively and this resulted in an erosion of margins in the industry. Recession and Public Sector cut-backs also put serious pressure on interims’ rates. For example, Public Sector roles that were commanding rates of circa £700 per day two years ago are now only commanding £250-£300 per day. For many years, the traditional entry point to interim was £500 per day. Unfortunately, these days roles are being described as interim management but are often commanding rates of circa £250.  The consequence is that interim management and contracting have essentially converged, especially in the Public Sector.

3. Selling by recruitment professionals

The traditional interim selling model was adopted from the executive search industry. Indeed in the early days, many of the most successful top-end interim businesses were also established executive search businesses. The search industry typically deployed experienced executives, who had reached board level in leading organizations and they were recruited for their contacts in specific sectors. Traditional interim providers used the same profile for sales consultants for their interim businesses – certainly in the early days. The traditional interim sales consultant would be prepared to stand his/her ground with the client and use his/her experience to advise the client of the ideal profile of the interim. When the high street providers arrived, they brought a completely different selling ethos to interim. The high street providers brought selling professionals from the recruitment industry – generally, they had no business experience outside selling recruitment. The high street sales professionals were generally organized by sector and picked up the language of the industry by talking to their clients. High street sales professionals were trained to please the client and brought a much more regimented recruitment style to interim, deploying powerful systems that were able to search CVs for a series of key words etc. In essence, the high street providers brought technical sales professionals to the interim industry – they were also heavily incentivized by commissions which strongly influenced individual behaviour.

4. Industry consolidation

The interim industry has seen a series of waves of consolidation. Cash flow is vitally important and a number of providers ran into financial difficulty over the years. Many of the more successful traditional interim providers were sold to search or broad line recruitment businesses. There is huge pressure on margins and reducing transaction costs, with marketing also becoming increasingly challenging. The internet, social media and viral marketing have revolutionized the business operating model. Broad line recruitment and consulting businesses are able to carry weak financial results from their interim businesses – so there is a special pressure on pure interim businesses. Overall, there is a strategic convergence towards the low-cost, broad line providers, e.g. Capita/Veredus on the one hand and the boutique or specialist providers at the other end.  The specialist providers include top-end providers, like BIE and Odgers, plus the large number of one man bands – many of which are excellent. Mid ranking, non-specialist providers’ are being increasingly squeezed and marginalized, especially if they are chasing framework business. In the Public Sector, the Cabinet Office is overhauling the framework agreements and it is expected that this will lead to Tier 1 and Tier 2 providers. Tier 1 providers will probably be restricted to the likes of Capita or Hays. Tier 2 providers will tend to be specialists and only cut in if the Tier 1 providers are unsuccessful. This model is also already available in Private Sector. Over the last two years, the interim industry has downsized staff, losing both traditional sales professionals and the high street sales professionals.

5. Social media and viral marketing

Social media has revolutionized recruitment over the last five years. Many organizations in both the Public and Private Sectors turn to LinkedIn or specialized networking groups before they turn to a traditional third-party recruitment firm. Leading recruitment firms, like Spring for example, have developed internet based business models and are very comfortable with margins in single figures. The same is emerging in interim. I hear stories of interim providers ready to accept margins of circa 5% and tied to results provisions, as well. This is all a far cry from the heady early days when margins were typically 30% plus – but in those early days, the provider was offering a value-added service and not selling a commodity. LinkedIn has also meant that many enterprising interims are able to develop and enhance their own networks, securing business without the need of the provider. However, it is Viral Marketing that promises to totally revolutionize interim management. Viral Marketing essentially gives the smaller player enormous marketing leverage. So far, few interims and interim providers have effectively deployed Viral Marketing. It is expected that there will be a “first-mover” strategic advantage for the player who is most successful with Viral Marketing. A good proxy of maturity in Viral Marketing is the effective deployment of Twitter. So far, for the providers, BIE and Odgers are showing the most promise.

6. Contingency workers

The value-added of the traditional interim is being eroded by the commoditization of interim (as a product/service). The Public Sector is now referring to interim as “contingency workers”, in essence lumping executive interim and contractors in one class of procurement. There is a trend for day rates to be the same as a pro-rata permanent salary expressed in days – in essence, this ignores the fact that the interim operates his/her own business with risk plus marketing, professional and administration costs. Increased deployment of the term “contingency workers” is in essence bad news for the interim industry, as it ignores the interim’s value-added proposition.

7. Professional organizations have lost focus

There are three UK professional organizations: (1) Interim Management Association (IMA); (2) the Institute of Interim Management (IIM); and (3) the Association of Professional Interims (API). Most leading interim providers are members of the IMA which is essence has evolved to become a recruitment industry organization  – there are some notable exceptions of successful interim providers who have declined to join the IMA. These days, the IMA is strongly represented by volume recruiters and there seems to be little appetite for funding the marketing of interim management – presumably, each provider has their unique marketing approach?  The IIM and the API are professional organizations for individual interims, both having associate and member status – in these difficult economic times, both the IIM and API are struggling to capture/retain members. Both the IIM and API have limited budgets to explore public relations and marketing interim management. The three organizations (IMA, IIM and the API) often present divergent views – each is focused on membership and funding. Many observers have traditionally regarded interim management as a “cottage industry”. Unfortunately, “traditional interim management” is being marginalized with the industry’s concentration on growing/preserving volume in more junior contracting roles. Candidly, many traditional interim managers are either retiring or doing other things. The Golden Age of Interim was probably the 1990s.

Friendly the Novice

Wow, Virtually – that was really helpful and I did not want to stop you in full flow! It’s a bit sad that the industry has lost its way and it must have been fantatistic in the  Golden Age of Interim – the 1990s. However, I am not discouraged – I have a very strong CV, a good network, and current experience in industries that are buoyant right now – also I am personable with good client handling skills. I am deterimined to make a career of interim. I have two last questions:

  1. Can you introduce me to a good traditional interim provider?
  2. What are your own plans?

Virtually the Old Hand

Sure, I shall recommend you to “Helpful” – Helpful is very much a traditional/quality interim provider.

As for me, I shall probably retire or dabble in few other activities! I have places to see and things to do…. I’ve had some truly great assignments and some wonderful memories of the Golden Age of Interim. It’s time for me to make way for “newbies” like you “Friendly”!

Let’s speak again after you meet “Helpful – the provider”.

8 responses

  1. Pingback: Reflections on my top 20 blogs in nearly three years of blogging « Dr Alf's Blog

  2. Hi Alf,

    Nicely summed up. The market has changed dramatically. As a result an Interim’s wealth of experience has been devalued by the organisations that are in desperate need of it. To the point where it no longer appears to make sense.

    I had a call from a IM provider last week. A client of theirs required an interim manager, specifically a specialist in project recovery and turnaround. The client has serious challenges to a regulatory compliance project and require a hardened project manager to get it back on track. Obviously this is a major issue for them and project delays or non-delivery will impact them financially. Sounded ideal.

    I was quite shocked to discover that they are only willing to pay £250 per day for the necessary expertise. Very different to the market rates of two or three years ago.

    Neil

    • Neil,

      Many thanks for your kind feedback.

      I tend to agree with you that the interim management proposition has somewhat lost its way in recent years. In a way, that’s what has prompted this blog.

      You will see from my latest blog that I am questioning whether the whole supply chain needs improvement, in particular, the role of intermediaries (agencies/providers). I have identified five archetypes:

      1. Service Providers, e.g. Capita
      2. Recruiters, e.g. Hays
      3. Search Based, e.g. Odgers
      4. Specialist, e.g. Purcon, Alpine
      5. One-man band, e.g. Burdondare

      Thanks

      Alf

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  6. Hi Alf, commoditization, contingency working and interim agency margins of more than 30% are alive and well ! And social media is the way forward for me. Thank you for your very helpful summary and recommendations..

    • Patrick,

      Many thanks for your supportive response.

      I agree that 30% margins are still around for the top-end, truly value-added interim assignments. However, my point was that the market was polarizing towards ultra-low-cost commodity solutions at one extreme and traditional 30% plus solutions at the other.

      The 30% plus sector of the market is becoming rarified and the volume growth is coming from the the commodity-end.

      I strongly believe that many middle-ranking providers will be squeezed out of business.

      Thanks

      Alf

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