One of the hottest trends in the hot market for interim executives is structuring interim engagements as a “statement of work” contract. Here, we take a deep dive into this trend and look at when it makes the most sense for a company to negotiate a statement of work contract, when it makes the most sense for an interim, and when it simply doesn’t make sense for either.

Defining the SOW in the Interim Context

But first, let’s define terms. An SOW is a legally binding document that clearly outlines the scope of work, deliverables, timelines, and payment terms for a specific project or set of tasks. SOW contracts are commonly used to set clear expectations for project-based assignments for freelance workers in the gig economy.

While interim executives are gig workers, they are not your average freelancer. Rather, they are highly skilled, success-driven leaders with a proven track record of success across the C-suite.

Most often, interim executives negotiate contracts that lay out the terms of the engagement, the expected outcomes, and the pricing. How does that differ from an SOW contract? It allows the flexibility that’s needed in an interim executive assignment. By definition, RED Team interim executives take on the toughest challenges an organization faces — turnarounds, exit strategies, IPOs, market disruption. They deal with the unpredictable and unforeseen. Then that happens, an SOW focused on project scope simply won’t cut it.

 

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When is an SOW Contract the Ideal Fit for an Organization?

In these unpredictable times, it’s comforting to have a budget item you can trust will not change. A statement of work contract that lays out the project deliverables and sets invoicing for the determined amount upon project completion is just such a concrete budget item.

Here re 5 times when an SOW contract can work best for an organization:

• When the Projects and Deliverables Are Clearly Defined: This approach works best as a performance-based SOW. Think of scenarios like leading a critical system implementation, managing a product launch, or driving a specific turnaround initiative. The SOW defines exactly what needs to be accomplished and the metrics of a successful project.
• When the Timeline is Compressedl: Interim roles, by definition, are temporary. However, some assignments have a more clearly defined endpoint tied to the completion of a specific project. An SOW aligns perfectly with these engagements, outlining the project duration and milestones that trigger payment at the conclusion of the contract. This provides clarity for both the executive and the hiring organization.
• When the Organization Needs Specific Expertise for a Targeted Outcome: When a company needs a leader with a specific skillset to address a specific task, an SOW allows the organization to precisely tailor the contract to fit those needs.
• When Measurable Progress is Critical: By outlining specific deliverables and timelines, an SOW is particularly valuable for organizations that need to demonstrate a clear return on investment for the interim hire.
• When the Organization is Comfortable with Project Management: Companies that already use project management methodologies and are accustomed to working with SOWs will find this contractual approach a natural fit for interim executive engagements. It integrates seamlessly with their existing processes and provides a familiar framework for managing the assignment.

When an SOW Agreement Works Best for Interims

Sometimes, open-ended interim contracts are the right approach. They allow the flexibility to expand the scope of work and stay on until the job is finished to everyone’s satisfaction.

These are some situations when a statement of work approach can work better for interims:

• When Internal Politics Threaten to Derail the Project: Because the focus of an SOW is on deliverables, it can help insulate an interim executive from organizational politics that can bog down permanent hires and interims with less well-defined assignments. Their tenure is tied to the project, allowing them to remain focused on the task at hand.
• When the Interim is Adept at Solving that Particular Problem: An interim executive who has been there and done that — many times over — will know exactly what’s required to achieve the desired project objectives. In that case, the interim has a solid idea of just how much time the engagement will require and can negotiate an SOW agreement accordingly..
• To Avoid Scope Creep: Because SOW documents provide a well-defined roadmap of key elements, such as due dates and the goals of the project, the chances of scope creep are much less. The interim executive can more easily stay focused on the purpose of the project and avoid being pulled into unrelated tasks. Plus, knowing definitively when one assignment will end makes it easier to plan for the next engagement.
• The Ability to Command Higher Project Fees: Given the focused nature of the work and the expectation of delivering specific, high-impact results within a defined timeframe, interim executives working under an SOW can often command higher day rates or project fees compared to time-and-materials-based agreements. The company is paying for a specific outcome, and the executive’s specialized skills to achieve that outcome justify a premium.
• A Faster Way to Build a Portfolio of Success: For executives just starting an interim career, each completed SOW acts as a case study of project success that can be leveraged for future engagements.

When a Traditional Interim Engagement Contract is the Right Approach

Sometimes, a statement of work document doesn’t cut it. That’s when a traditional interim contract is the right answer.

• When the Project Timeline and Deliverables are Less Concrete: When the interim executive assignment is open-ended with a broad-based mandate that makes it difficult to define specific deliverables upfront.
• When the Team Needs a Strong Leader: Sometimes, an SOW-based contract can make the interim feel more like a temporary employee than the team leader.
• When the Engagement Focuses on Providing Ongoing Strategic Guidance: This type of work is not easily quantifiable.

Crafting an Effective SOW for Interim Executives

When opting for an SOW, it’s crucial to ensure the document is comprehensive and clearly articulates:

• Specific Objectives and Goals: This needs to lay out all of the project requirements, deliverables, and metrics for measuring success, along with any special requirements.
• Clear Timelines and Milestones: What is the project schedule, and when are specific deliverables due?

• Reporting Structure and Communication Plan: Who will the interim executive report to, who is on the project team, and how will progress be communicated? What, exactly, is the work breakdown structure?
• Payment Terms and Schedule: How will the interim executive be compensated, and when will payments be made?
• Acceptance Criteria: How will the deliverables be deemed complete and satisfactory?
• Termination Clauses: What are the conditions for ending the agreement?

Read More:

11 Things to Expect from an Interim in the First 30 Days on the Job

What is a statement of work?

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Whatever contracting option is best for your organization, the most important consideration in hiring an interim executive is to find the right interim for your needs. Reach out to us for a confidential chat about how a member of the InterimExecs RED Team can solve your organization’s problems.

True call, came in just now:

Caller: “I’m a lawyer in California with a client in XW (redacting state name so goons don’t come after us). We need a manager for an LLC. Do you have a COO who could sign a member LLC agreement?

InterimExecs: “You mean an interim COO? Do you have existing operations?”

Caller: “No, it’s a startup.”

InterimExecs: “Ok, well, what kind of operations are planned, how many employees, what kind of funding?”

Caller: “We need someone to sign because the state requires a member signature and they’d have to sign in all the places. In the construction industry.”

InterimExecs: “But this is an operational role?”

Caller: “No, The CEO does not want to disclose his identity.”

So your Chief Financial Officer just announced plans to leave. If you’re lucky, it’s a planned retirement several months in the future, giving you the time and space you need to conduct a thorough search for exactly the right new CFO. The stock market will have time to digest the news, the finance department staff and leadership team will get comfortable with the idea of a pending transition, and the bankers will remain calm.

But, what if the CFO leaves unexpectedly? It happens. Perhaps the departing CFO is leaving for health reasons. Or has taken a new position. Or is simply burned out after guiding the company through a pandemic, inflation, global uncertainty, and political upheaval.

Whatever the reason, you’re in a bind. You need to act fast to keep everyone calm — investors, stockholders, bankers, employees, the financial watchdogs who oversee public companies.