Recruiting new C-suite executives is a necessity for many turnarounds.
These people will be required to effect necessary change in an organisation and will hopefully bring new skills, enthusiasm and ideas to a management team. Some of the new recruits will be turnaround professionals while others are employed for their specialist expertise, for example a CIO with knowledge of a new operating system to be installed integrating the accounting, supply chain and warehouse processes. Depending on the expected length of their tenure, broadly these people can be classified as either:
Permanent – replacing existing staff or moving into new/expanded roles.
Interim – working to fill a temporary requirement of (say) up to 6 months.
Interim appointments work best on specific projects and tasks such as improving cash flow, managing a refinance, supporting a sale process and shutting down an operation. Although permanent and interim turnaround appointments may both be required to effect the turnaround, how a board/directors engage, remunerate and direct these executives is very different.
Here are some other thoughts on how to get the best out of interim appointees:
Do not allow the business to become dependent upon them unless a firm decision is made to make their appointment permanent as this has downsides such as:
o Creating an unsustainable management cost structure.
o Putting offside other senior executives whose roles are impacted/changed by the interim appointee.
o Causes risk and management issues if/when the interim executive moves on to the next role.
Drive continual accountability with ongoing reporting, deliverables and performance reviews. A good way to keep an interim appointee operating effectively for instance is to require (say) fortnightly updates as to the progress of their work.
Establish a finite period for the appointment which sets a timeframe to finish the project and establishes a “burning platform” for the appointee to complete their work.
Do not allow interim staff to be heavily involved in processes which will continue beyond their appointment period. It is very difficult to transition complex processes such as asset sales and cash flow management once the interim appointees move on.
Have the ability to terminate the interim appointee’s contract at any time. Unfortunately for an executive in these situations you don’t get much time to find your feet in a new role, there is an expectation that they will be able to hit the ground running. If they aren’t delivering then perhaps a company needs to find another person particularly as many issues in a turnaround need to be urgently addressed.
Financial incentives can be a good way to drive the required results. For instance, a company could incentivise an executive improving cash flow by having their remuneration pegged to a reduction in working capital with their pay ratcheting up as the working capital comes down. This is a win-win while there is nothing like money to drive people to work harder and more innovatively.
Lastly, communicate the role and tenure of the interim appointee to relevant staff and stakeholders. A good interim appointee will also recognise the above issues by hopefully “managing” themselves and discussing any concerns with a company. At some stage the ongoing/permanent management team needs to operate without interim support and this is indicative of a successful turnaround process.
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