Top Directors Offer Struggling Companies Short Sharp Shock

The number of struggling firms calling in skilled top directors to deliver fast, targeted results has risen dramatically since the credit crunch hit.

STRUGGLING businesses are turning to the UK’s top directors to help turn them round quickly as the credit crunch tightens its grip.

The number of companies bringing interims into the boardroom as short-term trouble-shooters rose dramatically in the second quarter of the year according to executive and non-executive recruitment specialist Directorbank.

Requests for interims have soared by 50 per cent in recent months as businesses acknowledge that running a company in a tightening market requires very different skills from those needed in a growing economy.

John Pearce, interim specialist at Directorbank, said that industry sectors are looking for directors with experience of dealing with businesses in crisis.

“Our phones have been ringing since January with retail owners looking for directors to take over leadership of struggling retail companies,” said Pearce. “They want a leader who can be objective and is not afraid to act quickly, who can make cuts and change direction if needed.”

“These are tough, high-calibre men and women who are unlikely to have come out of a large, slow conglomerate.”

Pearce said interim candidates often went in on a day rate basis and would have a window of around four to six weeks to decide if a business could make it.

Typically, half will not. For the other half there is often a long-term private equity opportunity and the possibility of a prime career move for the director involved.

“The appeal of going into a private-equity backed business is enormous, offering increased autonomy, the chance to pursue an ambitious strategy for fast growth and, of course, the opportunity to build wealth.”

According to the Institute of Interim Management the total interim market is now worth around £1 billion in the UK.

Mark Owen, director at NBGI Private Equity, regularly uses interims including those from Directorbank.

Owen believes interims need to be over skilled for the job to make an immediate impact.

“You want skilled, senior people who have worked in a number of environments relevant to the business they will be joining. They’ve seen the problems before and have the experience to take immediate action,” he said.

Tony Evans, chairman of the Institute of Interim Management said there had been a major shift in the way organisations used interims since the credit crunch hit.

“Five years ago it was more often in a passive way for ‘gap management’ – to cover for maternity leave, or when a director has left at short notice. Interims are still used to cover gaps but they are now used very proactively for their specific skills in delivering major change.”

The Directorbank Interim

Dodds was looking to buy into Tangerine Confectionary in Blackpool, but the MBI process with two colleagues fell apart. When the deal was at stalemate, Directorbank approached Dodds to take on a project with Morrisons.

He said: “I’d never been an interim before in my life. Being an interim was a voyage of discovery but equally I was handling issues that I’d done dozens of times before.”

“The main thing to remember is that as an interim you are not there to pull up the trees. You only make the changes that are ‘no brainers’ or can easily be unwound. Yes, you are overskilled for the job, but that means you can work out what needs doing quickly and get things done.”

Dodds took the job because, “going into a place and stabilising it is very satisfying. Seeing things that need doing and knowing your experience can make a real difference.”

Dodds admits there are frustrations: “The temptation is to do more than your brief. And my deal came back on when I was just two weeks into the six-month contract. But I’d made a commitment and honoured it, I stayed the full time.”

He was able to let his colleagues handle the detail of the buy-in deal and he is now Managing Director of Tangerine Confectionery.

The professional interim

David Moore was appointed by Directorbank as an interim to Morrisons. A professional interim Finance Director he was named the ‘Interim Finance Manager of the Year 2004’ for his part in turning around the German office suppliers, Spicers.

His role at Morrisons, a year after they acquired Safeway, was very specific – to integrate part and close down another part of the finance function operating in South Shields. This was against a backdrop of a changing culture within Morrisons, going from a ‘family’ business to a more traditional large corporate structure.

David Moore was one of three interim FDs appointed by the new full-time Finance Director Richard Pennycook (through Directorbank), in order to give Richard time to step back and look at the long term structure and functions of the finance team.

David recognised the sensitivity of his job. With 300 people in the finance and support functions, Safeway was one of the largest employers in South Shields. People had worked in the business, ‘mother and daughter’, through a number of different owners – the average length of service was some 17 years.

David Moore said: “One of the benefits of using an interim is that they can be objective about what needs doing and doesn’t have the baggage of history and politics. But equally you cannot be a bull in a china shop. For the Morrison role, great sensitivity was required combined with the need to achieve financial and operational targets. It was important not to be seen as just some ‘smooth southerner in a suit’.”

“Most interim roles are demanding but this one was particularly stressful and emotional.”

David Moore went into interim management almost by chance. He started in a traditional career, qualifying with Deloittes and then working internationally in a broad range of businesses including spending ten years with Anglo American, the international mining group, where he was a Finance Director of one of their operating divisions. He left the group, when it restructured, with some money behind him and, as a German and French speaker, stumbled on an assignment in Switzerland

Since then he has worked end to end in interim management for the last seven years. He said: “The theory is you work intensively for six months and then take six months off. But for me it has never quite worked out like that.”

“There is enormous satisfaction in this job. There is constant variety, you are always working at the edge of your comfort zone and you achieve very measurable results. It is a job where your contribution is really appreciated.”

Moore explains that any interim should try to have a very tight brief before starting an assignment (but expect it to alter once in situ!). He adds: “The minute you arrive, you must aim to work yourself out of the job. As a professional interim, it’s important to recognise when you have completed the task and be prepared to move on. Long term directors will have a different skill set and motivation.”

He believes that for an interim FD to be effective, they need potentially to be over-qualified for the job in hand: “You have to hit the ground running. To be effective quickly, you need a great deal more experience, especially people skills, than the job might seem to need at face value.”

Interims vs. management consultants

One professional interim manager, who works in senior positions in FTSE 250 companies, cannot be named because of the sensitivities of his current work. He said:

“Corporates have been operating in relatively easy times for many years now. As banks tighten their credit, they need skills that won’t come naturally to most of their senior people. None of it is fundamentally difficult on paper, but you need to know what a situation smells and feels like and have the courage to take quick action. There is often a reluctance to call a spade a spade.”

“Management consultants are usually uncomfortable to put their neck on the line to take a management decision. Interims – particularly those who have ‘scar tissue’ and have managed through challenging situations – are prepared to be hands-on and implement their recommendations.”

He adds that as the market tightens, the demand for interim skills will increase: “A company is better to over-recruit, in terms of calibre and experience, than to look for the cheapest option. The better calibre of person will make the quickest impact.”