Today, what does European interim management look like? How does it vary by country? What are the forces and drivers shaping interim management for the future? In this Executives Online blog post, we’ll profile a few selected countries, representing different stages of market development, with commentary and insights from the Executives Online managing partners there. We’ll bolster those readings of the market with statistics from our research.
The modern practice of interim management – the provision of a mature, professional manager, well qualified by relevant skills, practical experience and attitude, either to deliver a specific business result within a limited time period, or to fill a gap in permanent staffing – started in the mid- to late-1970s in The Netherlands. Permanent employees there were protected by long notice periods and companies faced high costs for terminating employees, so engaging managers on a temporary basis presented itself as an ideal solution.
Forty years on, the practice has grown. Tens of thousands of interim managers operate across Europe. Professional services firms – interim management providers – now exist to help companies and organisations find the right interim manager for a particular situation.
In The Netherlands, where it all started, the market is mature and established. However, it’s sometimes still necessary to explain the benefits of having a senior interim manager who is “overqualified” for an engagement that requires transformation, as compared to just a quick interim solution for gap filling. We’re also seeing that there are many more interims available during recession times, people who are forced into it when they can’t find a permanent role. The challenge is to explain this to clients and candidates. On a positive note, the times for cost cutting and consolidation are over. In the future, the need for flexibility and expertise and knowledge will increase as organisations need to focus now on driving innovations to survive and grow. Organisations need more specialists to deal with the increasing complexity of their problems, and more opportunity for interim management exists in this specialisation than in more general requirements.
Another relatively mature market, Belgium, has seen the number of interim providers who are members of the country’s trade body Federgon almost double since the crisis in 2007. This is primarily due to recruitment agencies now also offering interim management services to compensate for a sharp decrease in executive search. The dominant type of assignment has been shifting over the years from “crisis management” towards cross-functional operational improvement and development (start-up) projects.
Interim management in Belgium is almost exclusively a private sector phenomenon. Its penetration in the public sector is smaller than in the UK and The Netherlands, a result of the legal constraints imposed on public sector procurement. (Indeed, public tendering and RFP processes are not well suited for the sourcing of interim management services even in markets where they’re used.)
A 2013 market research study commissioned by Federgon among a representative sample (300) of companies with more than 20 employees revealed: although about 65% are familiar with interim management (after reading the definition), only 7% have used it in the last two years; of the 93% non-users, some 34% have used other forms of external expertise, for example consultants; and the type of projects for which interim is typically used occur significantly more often within the users (who tend to be large) than the non-users.
Companies that use interim management are convinced and will use it again; they experience that they are getting value for their money and will recommend interim management. However, the future potential with the non-users is very limited as interim is not a topic on the management agenda. Arguments against using interim management tend to be more of an emotional nature than the result of a negative perception. The most frequent reason given for not using interim management is “not having a tradition to use external people in management positions.” There is still a lot educating of the market required, to improve the familiarity with interim and to reduce the confusion with “temps”. Besides a healthy economic growth and continued efforts to raise awareness of interim management, these drivers could have a positive impact: easing of the legal constraints to procure interim services in the public sector, significant uptake in M&A activity, loss of expertise through baby-boomers taking retirement, and any increased tendency to replace fixed costs by variable costs.
In France, most companies using interim management are in a reactionary, contingency mode, trying to solve an urgent issue. The project has not usually been anticipated nor budgeted. More and more use interim management as a replacement to the trial period for a permanent contract. Interim managers are very rarely independent as the social cost for this status is very high; they are either employed by an umbrella company (when they have a project from a client) or by an interim agency which selects them for a project. There are broadly two sorts of interim agencies operating in France: some that are in fact groups of independent people with different specialities, working under the same banner, who pay fees to the group when they achieve a project; and others like Executives Online having a state agreement and a financial guarantee that allow them to hire people when they get a project from a client and let the interim manager work at the client premises for the time of the project. The provider (Executives Online) invoices the client monthly and pays the interim manager. The legal structure is that providers actually hire the selected candidate into the provider company – with social costs and legal constraints, including the obligation to pay the interim until the end of the project regardless of whether the client keeps them. This isn’t all bad; one benefit of this constraint is the fact that the clients understand and appreciate the risks providers take on their behalf. The cost of employment in France is one of the highest in Europe. The working laws are so restrictive, it makes companies very careful about employing people in a permanent contract. Many companies are also operating on a project mode, expecting quick returns. They adopt the “now management”, go international, and are always looking for more flexibility: interim management allows them to move forward quickly in this situation without taking risk with binding employment contracts.
In Italy, interim management is younger than in other European countries and not yet so widespread. One challenge to interim management’s development is that Italy has comparatively fewer large, complex enterprises than other countries. The business landscape is more dominated by the many Small & Medium-Sized Enteprises (SMEs) whose owners are generally less used to working with interim managers. Interim management fees are generally lower than in other countries. The Italian market and the many SMEs are gradually getting used to the idea of using interim managers to deal with either temporary gaps in their organisation or in the skill set available to them. If the SMEs – the type of companies that really need an injection of experience and skills – are increasingly convinced that IM can be a viable solution for them, the Italian market could become quite interesting.
Executives Online’s “European Interim Report” was published in February 2014 and draws upon research conducted via a detailed online questionnaire completed by 1,687 Europe-based interim managers. We asked them about themselves and their most recent assignment (its rate, reason for being, how they sourced it), and how they view the future.
“In work” status – Interim managers in Europe (or anywhere) who move seamlessly from one assignment to the next are rare – they must be especially good at business development to create such a controlled pipeline of work, or maybe they’re just lucky. More typical is a pattern of “utilisation” that has some downtime. At any given time, some interim managers – about 60% – will be in work, and others between assignments. In response to our question “Are you on assignment now?”, nearly a third of European interim managers were working in full-time assignments, with a further 12% applied full-time via a combination of part-time assignments, a work pattern often referred to as a “portfolio career”. Another fifth was engaged part-time, almost 40% were not on assignment. These figures are virtually unchanged from 2011, but they’re considerably stronger than in 2009 when overall utilisation was lower with almost half of interim managers not on assignment.
There are variations in interim manager utilisation by country, but they are minor. Interim managers in France are less utilised than their European colleagues; interim managers in Belgium and The Netherlands are slightly better utilised. Compared to 2011, virtually every country has seen an improvement in the percentage of its interim managers who are engaged in full-time assignments.
Length of assignment – European interim management assignments last, on average, 9.5 months, slightly up from 9.3 months in 2011. Average lengths vary by country from a low of 7 months in Ireland to a high of almost 11 months in Belgium.
Remuneration – Day rates also vary by country, with certain markets for interim management such as Belgium, The Netherlands and the UK showing stronger daily rates of €806 per day, €891 and €760 respectively. These markets are widely regarded as the most mature for interim management – the concept is better-known and -understood, and there is a longer history of it. An exception to this is France, a relatively newer market for interim management, and which nevertheless shows a very strong average daily rate of €859, and Germany having the highest at €927.
Channels for work – The interim management provider industry is stronger in Belgium, France, The Netherlands, UK and Germany, contributing 30-40% of assignments, with the remainder sourced by the interim manager him/herself. In Italy and Ireland, providers have only about 20% of the market.
Client drivers for engagements – Primary drivers of clients’ engagement of interim managers are quite similar by country. Change management is the leading reason clients engage interim managers in every country, accounting for between 24% and 44% of assignments. In Belgium, Germany and Italy, crisis management is the second most important driver of interim assignments. Skills shortages drive strong shares of assignments in France, Germany and the UK at 16%, 17% and 35% respectively.
Flexibility in career path – Many in the interim management industry speak of interim managers who, once they begin to practice, would never consider permanent employment again. Such interim managers definitely exist – who enjoy the freedom, flexibility and rewards of interim management and who have strong distaste for what they see as corporate politics. However, the labour market and interim managers within it have become more nuanced in recent years, too varied to be described by just two states, interim manager and permanent employee. Still it’s interesting to note that most European interim managers – 80% to be precise – say they could be tempted to rejoin corporate life, for the right opportunity. Only 20% are “entrenched” interim managers who will never go perm again. By country, the responses are similar, with outliers being Belgium and the UK where only 68% and 62%, respectively, of interim managers could possibly see a permanent role in their future.
Views of the future – Interim management can act as a bellwether, signalling changes in the economic climate. Requirements for change management are driven by shifts in the broader economic environment, as companies equip themselves to weather a recession or capitalise on an emergent trend. As the front-line practitioners leading these special projects, European interim managers have a unique vantage point from which to assess the direction of the economy and business cycle. We asked the interim managers in our survey when they thought Europe would return to normal economic growth/stability: this year, by the end of 2015, 2016 or later, or whether the economy is already in a sustainable recovery. Their answers show that they believe there is still some ways to go before something resembling normality is achieved. More than three-quarters (76%) felt the economy wouldn’t be in a normal/steady growth state until the end of 2015 or later. Only 7% felt the economy is already back to normal.
We are wary of drawing too many conclusions; our intention was rather to simply paint a picture of the landscape for European interim management and to illuminate it with detail. It would be facile to simply conclude from this, for example, that interim managers in Germany have it best, for the day rates, lengths of assignment, provider support, and utilisation they enjoy. This overlooks local and individual factors which may be more powerful in predicting success in interim management. Maturity of market does seem to be important contextually, as the more established interim management markets such as The Netherlands, Belgium and the UK tend to score more strongly on most average performance measures. Still, interim managers and providers in less-developed markets, who face the dual task of educating clients about the service as well as selling themselves personally, may enjoy certain advantages than in more crowded markets: Mightn’t a message shouted into a sparse landscape reach receptive ears better than one shouted amid numerous others?
Whatever the context, the most successful interim management assignments happen when the interim manager’s experience is most relevant for the task at hand. To find an interim manager, carefully selected for whatever situation your business or organisation is facing, contact us.
Thanks to Othmar Sanin, Patrick Valent-Falandry, Edwin Glas, Jan Piet van der Plank and Pierre Melis for their contributions to this blog post.