SI Review: May 2012

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Interim executive staffing is a fast-growing niche

By Greg Palmer

Having a seasoned professional step into a leadership role to guide a company while it seeks a full- time, traditional executive offers businesses many options. Companies in trouble can use these executives to usher in difficult changes and alter their course. Others use the interim executive to clean house and get rid of the old guard. Regardless of why they are brought in, they play an important role.

Apart from allowing companies to test the waters, these interim executives can spend several months at the helm of the company, diagnosing problems, implementing important initiatives, and influencing the culture as if they were the company’s full-time executive.

This concept first originated in Europe but is now widespread in the United States and other parts of the world. Today the trend is increasingly popular and has started reaching critical mass. Here’s why. Global competition and the need to continue to excel even when a vacancy occurs have been the central drivers. Companies realize critical tasks and decisions can’t be allowed to linger while an executive search is going on. Using an experienced interim executive enables the company to move ahead.

Many interim executives like the arrangement due to the experience they receive, as well as the variety, challenge and flexibility of the assignments. They also benefit by building their résumé and becoming more valuable over time in the marketplace.

Interim executive staffing services play an important role in stepping in to meet the marketplace challenges by matching the needs of both the clients and candidates in a unique and highly customized manner. Positions commonly filled by interim executives are the entire C-suite, plus executives in engineering, marketing, sales, accounting, human resources, legal and information technology. Often, they aid in the search for their permanent replacement. Once no longer needed, they step aside and move on to other companies that need their leadership and expertise.

Client Profile

Companies of all sizes can benefit from an interim executive’s experience. Companies in the Fortune 500 to small- and midsize-companies have used them. Interim executives can benefit new or struggling companies as well; private equity firms view these professionals as serving a critical role in startups, turnarounds and divestitures.

The benefits go beyond filling a hole. Clients see interim executive staffing services as a great means to tap into top experienced talent for specific periods of time. Take Tone Software, for example. CEO Shirley Balarezo hired an interim sales executive for her firm through Cerius Interim Executive Solutions. “Although the cost was high — $1,500 a day — gaining an outsider’s perspective has been invaluable,” she says. “He is a very experienced sales executive who has no biases about our company or product, no favorites and no political gamesmanship. He’s able to just give pure, top-notch strategic advice on how to sell our products.”

Companies that have used interim executives also like the fact that work can still get done while a search takes place for the full-time executive. It’s also a benefit that the interim executive staffing service can fill the job faster than a company can on their own, resulting in a minimal loss of productivity for the client.

The Executive Profile

Most assignments last four to nine months and usually require 12 or more years’ experience. Interim executives range in age from 35 to their 60s with the average age being 47. Typically, the 35- to 40-year-olds serving in this capacity are entrepreneurs who have sold their companies to a large company like Google or Microsoft. Due to the profile, interim executives are by definition, a very small subset of the workforce. They typically are experienced, project-oriented executives, who love the challenge of ramping up or turning around companies and have chosen not to work full-time for a single employer.

While some at the top of the age spectrum turn to interim work because they want to stay active and keep their skills sharp, the downturn in the economy also played a role, causing workers to delay retirement due to shrinking retirement accounts. Interim executive staffing serves as a bridge for these unique work arrangements these managers seek.

Some interim executives perform their own searches and market themselves directly to prospective clients and bill themselves out as independent contractors.

The Players

The interim executive staffing market is highly fragmented and specific statistics are currently unavailable. Some large companies such as Robert Half, Resources Global Professionals and Jefferson Wells dabble in the category, but it is not their core business. Some specialists have emerged to fill the void. Here are a few of the larger players:

  • Cerius Interim Executive Solutions is one of the largest providers of interim executive manage- ment services in the U.S. Founder and CEO Pamela Wasley says she saw the concept growing in the EU and decided U.S. businesses needed a similar solution here. “Our focus is helping small to medium-sized enterprises achieve their stra- tegic and tactical business objectives,” Wasley says. Cerius operates three offices across the country and has done business in almost every state. Its deep resource pool is comprised of more than 800 executives representing all states and a full service offering of all functional areas.
  • Tatum Partners specializes in accounting and finance executives. Tatum reported revenue of approximately $40 million before Spherion purchased it in 2009. With Spherion now being part of Randstad, it will be interesting to watch how Tatum develops as the integration of Spherion and Randstad continues.
  • Mike Harris, former CEO of Jefferson Wells, waited out his non-compete and recently opened Patina Solutions. This time around he is reaching out beyond the accounting and finance arena and offering a full menu of interim executive positions in a half a dozen markets primarily in the Midwest. Patina differentiates itself by the deep domain expertise of its executives and focus on candidate satisfaction.
  • Your Encore places interim executives primarily in the engineering, IT and innovation-related areas. “We pride ourselves in solving customer problems at an accelerated pace” claims CEO Brad Lawson. “Often by having a deep bench of proven talent, we have had success taking people from one industry and applying their skills to an entirely new industry with excellent results.”

Should You Join?

Can traditional staffing agencies participate in interim executive staffing? There are some factors you should consider before taking the plunge.

  • High maintenance. The candidate and client care processes are much more intimate and confidential than professional staffing. Top-level executives can be high maintenance, and because these executives come at a much higher price tag, the client expects a superior level of service and results. A staffing firm considering entering this field needs to understand the level of care required before jumping in.
  • Determine direction. Next, you’ll need to determine your level of focus. Do you want to take a segment focus or generalist position? Once you have determined your direction, you can move on to the branding. I’d recommend a separate brand from your current staffing line unless you are already beginning to service the niche.
  • Leading the charge. Who will lead the group is also a vital consideration. The leadership needs to under- stand how both the candidates and clients wish to be served. It is a much higher touch proposition than tradi- tional staffing. Sensitive information is shared so confidentiality and trusting relationships play a central theme due to the mission critical nature of the assignments.
  • Quick ROI, but risky. High bill rates and generous profit margins in this sector mean it doesn’t take long for a startup to break even. Bill rates are often between $150 and $250 per hour — and sometimes much greater. The gross profit percentages range from a low of 20 percent to as high as 35 percent. While these numbers make the niche especially attractive, any startup venture carries a certain level of risk.

The nice thing about this space is that in order to begin, you do not need a large network of offices and a lot of overhead. Conversely, most of the firms mentioned in this article are located in major metro areas where cost of doing business is generally high. However, the primary costs will be found in bringing on the leadership talent, sales team, and building client and candidate relation- ships. The key to sustained success will be if you adequately serve this specialized niche from both the candidate and client’s unique perspectives.

Big Picture

As flexible work arrangements at all levels continue to grow in the U.S., both clients and candidates of interim executive staffing will benefit from the trend. In any business you need to have not only demand for services but also a supply to meet the demand. With the fastest-growing portion of the U.S. work- force being employees aged 55 and older, the supply of talent should be available to meet the demanding challenges that are ahead.

Greg Palmer is the former CEO of Remedy Temp Inc. and founder of GPalmer and Associates, a management-consulting firm focused on the staffing industry. You can find the recently published GPalmer temp labor forecasts and related material at www.GPalmerandassociates.com.

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