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Even before the pandemic forced businesses to be more nimble and forward-thinking than ever before, the need for interim executives had been growing. In 2020, we asked 600+ execs to shed light on interim roles, a comprehensive survey that covered the who, what and why behind the growth of this category. And now as the world is finally defeating COVID-19, businesses are continuing to adapt and re-strategize with a new set of challenges, only amplifying the need for experienced, “make it happen” interim executives even more.
To better understand how the current marketplace is dictating the need, we conducted a follow-up survey, asking 125 executives to answer the same question: “What trends do you anticipate having the greatest effect on the interim specialty in the year ahead?”
Across both surveys, the conclusion was clear: interim executives are needed now more than ever. 71% of respondents see opportunities for interim management trending up and another 21% seeing they will remain stable throughout the coming year. Here, we break down the five reasons why more organizations are drawing on interim executive leadership:
1. Increased digitization requires experienced leaders
The shift towards technology-driven everything was already underway, but the pandemic pushed it to a non-negotiable. Employees are still working from home, clients can’t accommodate in-person meetings and organizations need the tools to facilitate remote transactions and effectively manage remote teams. That means a greater reliance on web-based platforms, data science, artificial intelligence and digital marketing initiatives. Organizations will also have to modernize and transform to use data as a corporate asset.
For many businesses a massive overhaul is needed, one that requires an expert executive who can be brought in to update business processes and implement new strategies and operations efficiently and nimbly. (In particular, the technological makeover has created a pressing need for CISO roles, as cyber security becomes a top priority in light of continuing hacks like the Columbia pipeline.) Those surveyed emphasized how new interim leadership can drive that change and ease the transition by hiring the right talent.
2. Businesses are struggling
It’s no secret that many mid-size and lower middle market companies suffered due to the pandemic, the ensuing recession, and global supply chain challenges. Add that to a laundry list of pre-existing challenges — such as disruptive technology, global dynamics, fierce competition and changing consumer preferences — and most thinly capitalized and poorly managed businesses felt the heat.
But the market waits for no one. It demands growth, and growth with value requires the right strategy, a clear and actionable plan and sufficient resources. To find this, leaders are looking to interim executives with a proven track record who can reverse distress, navigate potential bankruptcy, drive exponential growth and create contingency plans for worst-case-scenario crises. And as businesses continue to scale back on expenses, hiring an interim role also offers expertise without the long-term cost and added benefits and severance that come with a permanent hire.
One executive surveyed cited an increasing need for leaders who have “experience navigating through crisis, finding new and creative ways to revenue when the status quo went out the window.” Banks, investors, and private equity funds may be at the forefront of this push as they address concerns about companies in their portfolios that did not meet performance objectives in 2020 or 2021, or where urgent transformation and growth strategy help is needed post-pandemic.
“Interim executives will play an increasing role in ‘disruption’ industries as entities try to determine how they’re going to get ahead,” said one executive. “Entities with a business model more adaptive to change and receptive to external inputs will not likely require the same intervention as those with inflexible models that now find themselves struggling to keep up.”
3. M&A Activity is on the Rise
Despite an early 2020 downturn, M&A deals didn’t just recover and bounce back, but are expected to keep growing throughout 2021 and into 2022. Executives pointed to private equity acquiring distressed businesses, an increase in private debt and direct lending in the middle market, and an ability for banks to provide liquidity as major factors in the continued growth of the interim specialty where expert talent is needed to lead M&A and acquisition efforts.
Businesses with an adaptable, future-proof infrastructure weathered the storm and have been able to buy smaller companies, thanks in large part to continued low interest rates, access to capital, and an effective vaccine that, despite some hiccups, is rolling out across the globe.
Deal activity has also been complemented by specific industries that are booming with opportunity. E-commerce, cyber security, and online education — boosted by the pandemic-spurred digital revolution — as well as healthcare and cleantech have all seen major boosts.
Healthcare, particularly in the provider space, has been ready for an upswing, says one executive. “They are often looking for people who can bring in more sophisticated leadership practices than what is currently found in typical healthcare organizations. However, that individual also needs to understand how healthcare works in order to be successful, especially if that healthcare organization is PE-Backed.”
Cleantech is also expected to thrive, owing to a new administration that’s addressing climate change head-on and major industry shifts. In late January, GM made the game-changing announcement that it would pivot to only zero-emission cars and trucks by 2035. Paired with the growth of solar and wind installations last year, cleantech is poised for meteoric growth that will hinge on finding placeholder executives who can operate quickly and effectively.
4. CEOs are retiring
As more CEOs and senior executives plan their exits — think baby boomers and leaders behind family-run businesses — owners need help with strategy and growth to prepare for successful transitions, whether that’s replacing those who have left, augmenting senior management teams with experienced executives, or selling the company.
A lack of succession planning and failure to provide leadership training for less experienced executives will also affect the market and the demand for seasoned executives. As baby boomers retire and new skills are required, interim leadership will increasingly be called on to coach and develop next-generation leaders while bridging the transition to the full-time hire. It’s about bringing a fresh perspective and deep operating experience from a trusted source.
5. The gig economy is gaining acceptance
Many executives surveyed cited the rise of non-traditional employment in everything from technology to financial services to marketing. The interim specialty has followed suit, thanks to greater acceptance of outsourced C-suite roles, increased ability to work remotely and the need for flexibility within an organization. More CEOs and business owners have become comfortable with key personnel working virtually, which has led them to focus more on the specific skillset and expertise required in a role versus the location of a hire.
Long permanent search cycles and increasing costs of full-time employees also fuel the need for interim and fractional C-suite executives who can rapidly jump into a company with a laser focus on results. As organizations try to navigate through digital disruption, global competition, and economic unpredictability, project-based executives with flexible contracts and time commitments are an appealing option. In an executive-as-a-service model, companies can easily access extra bandwidth and expertise to tackle initiatives that have been sitting on the laundry list of to-dos.
Put simply, one executive said: “I’ve received many offers. All opportunities increased.”
InterimExecs RED Team is an elite group of CEOs, CFOs, CIOs, and CISOs who help organizations through turnaround, growth (merger, acquisitions, ERP/CRM implementation, process improvement), or absence of leadership. Learn more about InterimExecs RED Team at www.interimexecs.com/red-team or call +1 (847) 849-2800.
More Resources:
*8 Key Insights from the 2020 Interim Executive Survey
*What are the Benefits of Interim Managers?