The use of interim managers – a cost or an investment?
What does it mean for a company to appoint an interim manager? Is there a high cost that exceeds that which would arise if the position were a permanent one? Or is it an investment that gives value for money? These are legitimate questions that many are asking. We've looked a bit at the numbers and the answers might well surprise you
The situation for companies that hire interim managers can vary a great deal. Nevertheless, we can group them into three categories: Turnaround, gap management and project management. Here, we will deal with the first two.
This is where the company is in a serious situation where the development trends need to be turned around. In such a case, getting the right person to do the job is vital. An interim manager who has done this before reduces the risk of the turnaround operation being a failure and will therefore represent a modest investment compared to the importance of having turned the company or department around.
One problem that we at InterimLeder are often witness to is that the Board of Directors wait too long before comprehending the seriousness of the situation and getting a grip on it. The advantage of an interim manager is that he or she can be in place within a few days, is external, is without ties to the company, and does not have to manoeuvre in terms of a future career within the company. The focus is on finding a solution to the problem, namely getting the company back on track and then passing on the baton to a new, permanent management
Sometimes, companies and organisations need extra skills or additional capacity for a period. Typical situations include waiting to put in place a permanent leader, long-term periods of sick leave, or when there is a need for extra capacity in connection with acquisitions, mergers or the like.
In such cases, we often compare the interim manager’s fee to the salary of a permanent employee in the same position. However, this is like comparing apples and pears. Firstly, an interim manager is always positively overqualified for the job, and with his or her relevant background could provide the company with valuable new skills and knowledge. Secondly, one often "forgets" what an employee really costs when one includes all taxes and social security costs, severance pay etc. Not least when looking at effective working hours when all absences have been deducted.
Let us illustrate:
If we take as our starting point that the salary of a permanent employee is one million kroner and add social expenses, mandatory occupational pension, company car, etc., the real payroll cost is often at least NOK 1.5 million. Looking then at the number of effective days/hours an employee works, having deducted vacations, public holidays, etc. these aggregate approximately 1,600 hours. The hourly rate, therefore, is just under NOK 1,000 and the company then bears full employer responsibility, which often entails large costs in the event of the employment being terminated.
An interim manager gets paid for the days/hours he or she works. Full stop. From a cost and efficiency viewpoint, an interim manager will, in such cases, be extremely competitive for the company, purely cost wise.
An interim manager will always be very competitive when you consider what you get for what you pay, seen in an ROI perspective. In addition, it is important to note that the interim manager comes from the operational side. He or she is an implementer who will do an operational job and not assume the role of a consultant who simply analyses and presents reports.