| Article Index |
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| Overview |
In the first article in this Interim Management series I looked at when and why to engage an interim manager. The second article looked at how to find the right interim manager. The third article focussed on why interviewing an interim manager is different. I now look at how interim performance can be measured.
One of the big advantages of engaging an interim manager is that in many instances it is possible to directly quantify the ROI (Return on Investment) of engaging an interim. This is because interim assignments are normally project based and have: a start date, a projected finish date, and measurable deliverables.
But how is ROI actually calculated for an interim assignment? I believe in keeping things simple so my definition is as follows:
- All the directly attributable net cash flow benefit arising from the interim assignment = A
- Cost of the interim management assignment (i.e. the ‘investment’) = B
- ROI = A/B expressed as the number of times the ‘investment’ is recovered or as a percentage.
The key to a successful outcome to an interim assignment is that the expected rate of return should be estimated before engaging the interim manager to see whether the project justifies the investment. During the assignment, actual outcomes can be measured and compared with the original estimate. Not all interim assignments lend themselves easily to a strict ROI calculation as set out below.
Interim management assignments fall broadly into two categories:
1. Covering management gaps
In terms of the ROI the overriding driver for the appointment would tend to be the recognition that without someone in post the business will suffer. An ROI could be calculated but normally that overriding need to have the position covered is sufficient to justify the appointment. Some examples of interim ‘gap covering’ in this category are as follows:
- Sudden departure of a head of function leaving for another role, or unsatisfactory performance, etc. with a lead time of several months before a permanent appointment can be made
- Long-term sickness
- Maternity leave
- Where redundancy has taken place but an experienced interim resource is required to wind down the function
- Uncertainty in the future, e.g. merger, acquisition or restructuring meaning it is not appropriate to appoint a permanent person
2. Bringing about and managing change
These are the majority of interim assignments. Some real life examples from introductions made by us are as follows:
- Major food company. Appointed an Interim Production Director to bring about enduring change that led to more production and a reduction in unit costs. Result: production yield was improved resulting in measurable annualised savings against KPIs. ROI was 420%.
- Large events and exhibitions organisation. An interim Chief Executive is brought in to bring in more events and exhibitions and restore profitability. Result: within a period of 6 months the profitable events pipe line was improved by 10% and profitability restored. ROI not yet finalised as assignment is ongoing.
- City-based financial services company. The company decided to outsource one of its functions. An Interim Project Manager was brought in to manage the whole outsourcing project. Result: the interim project manager completed the project on time and on budget. The alternative option was to engage consultants from the “Big 4”. ROI calculated on the basis of cost against “Big 4” option was 350%.
- SME company in pharmaceutical-related products. Recognised that the performance of its operations were hindering them achieving further growth. It was decided to appoint an Interim Operations Manager to make recommendations for improvements and then implement those changes. Result: the interim manager identified improvements that are now being implemented which have boosted production. Expected ROI is 200%.
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