When Business Improvement and Transformation Is Needed, Look to Interims

Today companies operate in a complex global economy which is more diverse, connected by the Internet, and not very predictable. Many companies still pursue classic business approaches (inside-the-box thinking) with a focus on short-term results. Failure to focus on business improvement and adapting to the new business environment can cause many issues and eventually lead to delisting from a stock exchange, bankruptcy, or liquidation. How many of 1960’s “Fortune 500” companies still exist today?

All companies, business divisions, and subsidiaries contain deep resources of specialist knowledge (domain knowledge). Without this a business would lack the human capital required to generate a profit. This expertise keeps everything functioning at a basic level.

Institutional knowledge (domain knowledge) is not required from an interim executive. It is the experience, expertise, and outside perspective that most benefits companies when they look to hire an interim CEO/CFO for business improvement.

Interims provide an assessment of the health of an organization. Much like a doctor, the interim can only know what he sees and what he is told prior to arriving inside the company–which is usually not very accurate. If you go to a doctor and do not tell him what “hurts” you will get very little value or be sent to very expensive consultants for “tests”. This is just the beginning.

What do Interims do?
Interims arrive in a “listening” mode. They do not sit in their office. Change comes from the middle management of a company and this is where interims focus on “Active Listening”. Active listening is defined by Wikipedia as repeating back what you have heard in your own words to confirm that your understanding is correct and that you and the person you are listening to are on the same page.

There is usually some fear on the part middle management that if they tell anyone what is wrong there will be blame. But once they determine that 1) it is safe to have these discussions, 2) that someone is actually listening, and 3) that there are rewards for a job well done (recognition in particular), many more people will contribute. This is even more effective when they see some of their suggested, easy-to-implement fixes put in place quickly.

The Vice Presidents have earned their positions via hard-work, education, and functional expertise, and they have reached a position where they do not want to have their judgment questioned. Interims understand this and therefore do not ask the VP’s what they believe needs to be done. (The VP’s generally want to respond with “what you want to hear” and, by the way, they were the guys running the company when it got in trouble.)

McKinsey research says that 50% of all efforts to transform organizational performance fail because senior management does not act as role models or because senior people in the organization defend the status quo!

Interim executives carry “change” in their briefcases!

Focus on Implementation and Results
The VP’s do play an important role! Their experience, domain knowledge, organizational knowledge, and expertise position them well to review all proposed actions as an “elder counsel”. They have earned this through hard work.

Business improvement and organizational health changes over time. Focus on short-term results, failure to adapt to change, and rapid technology and market changes increase the speed of organizational health changes today.

We still have our annual employee physicals. Why would we let an organization go for years without an assessment? In fact, one of the “leave behinds” of an interim is a continuous assessment process. Much like continuous process improvement this process institutionalizes the ability to recognize and adapt to change. This is a critical skill for solid performance in today’s markets.

The interim leader brings to bear skills that lead to timely adaption and change because he/she does not have the legacy baggage to slow them down. We have all heard “we tried that and it did not work” or “we don’t do things that way”. The interim exec quickly identifies (through active listening) and institutes the kinds of behaviors that are required to move the company from its current base to a much stronger and healthier one with the “buy in” from middle management and the leadership of the VP’s.

Quick, easy-to-implement changes based on middle management suggestions are the starting point. Major strategic changes take time and deliberation. There are no interim decisions!

Team Effort
There is no magic! An interim exec forms a team (more often teams) within the organization to focus on issues, solutions, and transformation. He/she forges their own impressions and they make their own judgment calls based on their broad experience. They know when someone is not being completely above board (intentionally or not) and rather than ignoring the idea or information they “explore” this further with other individuals/teams. Ideas and directions that come from these teams give them ownership of the process and positive results. Recognition of these efforts is key.

Interim execs focus across company operations, accounting, marketing, operations, customer/product line analysis, inventory analysis, receivables, critical vendors, quality control, and customer support. There is no time for “warming a CEO seat”! The interim is visible throughout the company (including very large organizations using Skype and other tech tools). You do not need domain experience, but you do need a clear sense of how an organization functions.

BAIN provided a study that determined 60%+ of all mergers and acquisitions fail to achieve the integration and synergies expected. They also pointed out that the CEO often leaves within two years! (The CEO departure is not a surprise).

CEO’s do not acquire, merge, and integrate companies every day! Why should we expect everyone to have this capability? Merging two businesses is not like running one larger business. There is no post-merger integration. If you do not start integration planning at the beginning of the deal stage you just increased the risk for failure.

I use the anecdote where the mountain man (CEO) says to his buddy, “you get the bear and I’ll cook it”! The scene then shows the buddy running through the snow with a bear close behind. He runs through the cabin jumps out the window and as the bear enters he yells to the CEO “cook it”!

Interim execs with CEO and CFO backgrounds can lead the integration to success working directly with the Board and C-level management.

Results, results, results…whether the objective is to fill a CEO/CFO vacancy, develop an assessment, provide corporate business improvement/transformation, manage high growth, or integrate an acquisition an interim provides immediate results with minimum support and keeps a clear organizational focus on permanent value creation.

About the Author

Richard Lindenmuth

Richard Lindenmuth is a founder and Managing Partner of Verto Partners, and the architect and driver behind the gross margin improvement and return to growth and profitability for many companies. He is also responsible for the successful integration of mergers and acquisitions inside and outside of the United States. He has served on public and private company Boards of Directors in the USA as well as in several other countries. Richard is a hands-on CEO with a strong background in domestic and international operations.