Part 1: Interim Management: Life at the Sharp End of the Business
Part 2: Interim Management: The First Week

Interim Management, is there a Recipe?

Ideally, what you would like to have is sort of a recipe, telling you what your ingredients are, how to stir them and finally at what temperature the oven should be set. Well, I cannot offer you quite that much and some readers might argue that we are not discussing a Jamie Oliver show but rather a more serious subject. But on the other hand, who dares to pretend cooking shows are not serious cooking? As a practitioner of interim management in financially distressed companies you do not want to spend a lot of time reading the learned opinions of academic experts on the subject.

Besides, there is a plethora of books. Nevertheless, we need to spend a moment on the question “is there a generally applicable way to approach things?” Let me add a word of caution: There cannot be a universally applicable manual because legal systems are different from country to country.

Hence, you will have to find the right manual for your country and in your language. Helpful is a manual with lots of check-lists and practical advice, meaning feasible and doable. The good news is that there are such manuals but you will have to unearth them. For a short English introduction into the subject and a compilation of case studies see the books by Stuart Slatter.

I for my part rely on Urs Leupin’s book although he is retired now. He is a lawyer and gradu-ated from the Army General Staff School and was later head of the credit recovery department of a large full service bank. This means he knows all the aspects of the subject and writes in no uncertain terms. And most importantly, the book does not stop at “which measures” but includes “how to implement things”. The following is drawn from his book.

The Four F’s – a Battle Plan

General Norman Schwartzkopf’s summary of any campaign is straight-forward: Find – Fix – Flank – Fight. Translated into the situation of a business turnaround this reads:

Find: Find the trouble spots (causes and reasons) to be able to react systematically.

1. First measure: Acquaint the board and the existing management team with the task
2. Second measure: Timely identification of the acute crisis to guard against surprises
3. Third measure: Know the risk assessment situation of the company’s banks and their first reactions to the emerging crisis

Fix: Fixate the crisis situation (stabilise the situation so it does not get worse)

1. Fourth measure: Stabilise the starting position
2. Fifth measure: Implement the crisis management to guarantee the stabilisation and as a preparation for the handling of the crisis
3. Sixth measure: Get the principle decision by the banks to grant a moratorium based on your plan despite the breach of financial covenants (with or without a bridge loan, depending on the situation)

Filter: Identify the parts of the company worth keeping

1. Seventh measure: Implement the restructuring measures in the areas of management, products & services, finances and organisation
2. Eight measure: Identify and decide on the new strategic focusing
3. Ninth measure: Preparation of the financial restoration as the final step to overcome the crisis

Force: Push the areas of business within the new strategic focus

1. Tenth measure: Get the banks’ o.k. to the plan of financial recovery
2. Eleventh measure: Steer the course of the turnaround either alone or with a partner
3. Twelfth measure: Finalise the turnaround either in a cooperation with a partner, a merger or alone, depending on the situation.

Naturally, this is only the skeleton of the course of action and there is much more to it if you go into the details. Adaptations have to be made in specific circumstances and adjustments have to be made to cover the unpredictable happening quite often.

Company Myths

To conclude let me account for some of my favorite company myths which are also the most frequently encountered. In fact there are two legends in the first one, a special industry culture and a unique way of operating. The story goes like this. In conversations with many staff in your new company you are inevitably asked “Have you worked in our (branch of) industry before?” “Not exactly, but in similar companies and situations” “Well, you’ll see this industry is quite different from anything else and our company is unique in the way we do things.”

Now, in this situation you do not l.o.l. or give the tacky answer “Yes and that is exactly the reason why you are in trouble”. After all you are a pro and keep a stiff upper lip. The ones asking do not only think their industry is special in itself but that their company is even more special because they do things their own way. From there it is only a small step to believing that general business rules do not apply to your own company.

Another frequently encountered myth is the “niche market legend”. It usually unearths when you are probing market opportunities, competitive situations and either sales expansion or con-traction, the latter due to competitors’ action.

The killer argument to any serious analysis and discussion is the assertion “We operate in a niche market and hence are much less vulnerable to competition than the competitors’ products.” People tend to forget that niches may dry up or alternatively, grow and therefore attract new players; who recalls British watches or Swiss cars?

Do not be distracted by beliefs, you are the expert investigator, just plough through the thicket and dig out the facts. Interestingly, in most instances there was a reason that the company introduced the way they operate today. It is just that circumstances have changed, the reasons vanished years ago and nobody questioned the situation.

It is one of the most important duties of an interim manager to question all the aspects of the business. Sadly, more often than not it is be-cause the management have not asked themselves frequently enough fundamental questions about the business they’re in and how they operate. The end of the story is then the quagmire you will find. Remember, Nokia was a little known Finnish pulp and rubber company before turning into one of the leading global communication groups.

This concludes the mini-series on interim management.

Notes:
1. Corporate Turnaround by Stuart Slatter, Penguin Books, 1999
2. Leading Corporate Turnaround by Stuart Slatter et al., Wiley, 2005
3. Turnaround von Unternehmen by Urs Leupin, Haupt, 1998

About the author: Peter Wolf is an interim manager, management consultant and entrepreneur. After an international career in life sciences industry working for Swiss and US multinational groups he started his own company, Management Support, in 1996 in Basel/Switzerland. Since then he had consulted with numerous clients in industry, the health care sector and services. As an interim manager he helped change organisations in difficult circumstances, optimised business processes as a project manager and consultant and co-founded companies in the biotech and service sector, with successful trade exits and an IPO. He holds a PhD in physical chemistry from the University of Berne and an MSc in Business Studies from Warwick University. This blog post has first been published on www.management-sushi.com

Part 1: Interim Management: Life at the Sharp End of the Business
Part 3: Interim Management: Turnaround

Interim Management – The First Week

Never is the saying more true to the letter “There is no second chance for a first impression” than when you first enter your new company as an interim general manager. You prepared yourself well, you have your script and you have the necessary authorisation by the board.

So you feel well prepared for the task. At this point, let me say a word about the dress code and I do not mean white tennis socks. You will have to fit in which means that if your client is a manufacturing SME in a more rural area of the country it is a bad idea to show up in Oxford shirt and pin-stripe suit. Do not overdress nor underdress.

The First Week – Day One and beyond

Most importantly, do not enter the company on your own, having to explain to the receptionist who you are. The chairperson of the company or his/her deputy is at the reception to meet you and introduce you to whoever they deem necessary on your way to the boardroom.

There, the first meeting of the executive committee (on the continent, the executive management members usually are not members of the board but members of the executive committee or Vorstand as it is called in Germany) will start immediately. The situation is different if massive lay-offs are necessary.

These have to be prepared before the first day and the executive meeting serves as a last briefing about the script for the information meeting with the entire staff. So let’s assume that the following is a company without the need for mass-layoffs to balance the situation.

After the introduction round which has to be broad to give you a feeling about the character of every person present in the room you start with the first meeting, after having explained a few ground rules some of which may seem like trivia but you will need to establish yourself as the new boss immediately.

• All personnel hirings and redundancies go over your desk. Replacements need your authorisation.
• There is an investment moratorium until you have a full grasp of the situation.
• You want daily sales reports and liquidity statements plus weekly financial key figures until further notice.
• By the end of day three you want a list of all the products listed in order of their mar-gins and yearly sales (sorely enough, many SMEs do not know on which products they earn money and on which they loose it). If it is such a company, the demand usually sends shock-waves through the finance department.
• You want resumes of all key employees by the evening of the following day.
• Each attending executive has to list the three top priorities/problems of his/her department right in the meeting.
• Executive meetings have a structured agenda along the functional lines. Quality assurance and quality control are standing items on the agenda as are investments.
• Last but not least, minutes: You let the person write the minutes who usually did so in the past and you decide who will do so in the future after you have seen the draft. The minutes have to give the key arguments in the discussion of every agenda item and the decisions taken, without dwelling on the subject. In my last blog I mentioned the importance of hedging your legal exposure. Minutes are a cornerstone in doing so; consider them to be a legal document.

After the executive meeting it is time to go round the company starting with the shop-floor, then HR, marketing and sales, finance and finally IT. A meeting with your immediate direct reports (e.g. PA, secretary etc.) concludes the day. Not for you; you will have to revise your script, complete action lists and fill your work schedule which will help you for your own re-porting to the board as well as the invoicing.

Numbers, Numbers – People, People

The priorities of the remains of the first week are numbers and people. This is because you will need all possible accounting and statistical information to get the full picture of the situation and to be able to identify the problems. Your foremost priority is to confirm the diagnosis or to modify it. This means a lot of number crunching in cost accounting and balance sheet analysis. Which are the problems? Where are they hidden?

Remember, the therapy starts only after the diagnosis has been corroborated. Once you have established the A-list of problems, you will have to think about the next steps. And, in doing so it is helpful if you have a structured approach with check-lists. We will expand on this next time. Whatever structure you choose, always watch out for quick wins.

Why people? Apart from establishing which problem you have to tackle your other uppermost priority is to man the bridge of the ship with the right crew and therefore the call for resumes of key people earlier on. The question here is “skill and will”. This you can only find out in individual discussions.

You will have to decide who is not up to the task and who is but has reservations about change. Interim-management jobs after all are invariably about change. You need a crew who want and who can. Don’t take me wrong, I do not advocate hiring and firing but the steering crew has to be top or as we say here, the fish starts to stink at the head. This you want to rectify.

Next time we will talk about the structured approach and company myths.

About the author: Peter is an interim manager, management consultant and entrepreneur. After an international career in life sciences industry working for Swiss and US multinational groups he started his own company, Management Support, in 1996 in Basel/Switzerland. Since then he had consulted with numerous clients in industry, the health care sector and services. As an interim manager he helped change organisations in difficult circumstances, optimised business processes as a project manager and consultant and co-founded companies in the biotech and service sector, with successful trade exits and an IPO. He holds a PhD in physical chemistry from the University of Bern and an MSc in Business Studies from Warwick University. This blog on interim management has first been published on www.managementsushi.com

One of our vetted iCEOs shares his experiences as interim manager. This article gives you interesting and helpful tips as to the expectations of the client company and how to prepare an interim management assignment.

Interim Management – Not for the fainthearted

For the past thirteen years I had been working as a management consultant and interim manager in Switzerland, France, Germany and the UK. Therefore, this is a practitioner’s view about change management under aggravated conditions typical in interim management situations.

When you work as an interim manager you inevitably end up working for companies which have a problem or two, either their profit and liquidity had gone south – sometimes over years, sometimes quite rapidly – they have a blatant leadership problem or in the best case scenario, there is a vacancy due to illness or accident which has to be filled immediately for a limited period of time. In any case, it is bit like parachuting into the jungle, not knowing which of the swamps and wild beasts you read about will expect you.

A union lady once asked me: “Now that you have been flown in here, what are you going to do about it?” and a manufacturing director in France, with French eloquence: “Eh bien, monsieur, est-ce que les choses vont changer du brut au brutal?” In both instances a mixture of fear and reservation was tangible.

With ample experience in the health care sector and pharmaceutical industry I compare the company’s situation with a patient sitting in a consultant’s hospital surgery, waiting to be diagnosed and treated. The difference of course is that the company speaks with many voices and what’s more, most of those voices have their own hidden agenda. A patient has usually seen a GP before being referred to the specialised doctor for his disease.

Hence, there is already a diagnosis albeit sometimes the wrong one. The company has its bunch of GPs, too, namely the auditors, the banks and sometimes a strategy consultant who needs a guy implementing the strategy change by applying some surgery. And, the quality of the initial diagnosis differs widely. Whichever metaphor you use to describe the situation, you need to be a quick adapter and to have a keen survival instinct.

Before the First Day

Preparation is paramount. Apart from information gathering about the situation there are a number of issues which have to be clarified:

1. Set-up of the assignment. This is important not only because it defines how the employees view you and the clout you will have but also because of your legal exposure. Not surprising, the higher up the hierarchy, the riskier the situation for the interim manager. You will need to build in some safeguards in your contract (financial authority and type of decisions which need board approval) and the company needs to cover you in their D&O insurance policy. To your dismay you will sometimes discover they do not have one, but that is another story.
2. Know the expectations of the stakeholders. Banks, shareholders and management can have quite different views about what should be done depending on their particular stake in the company.
3. You need to get a picture of the situation as detailed as possible. So, speak to as many parties beforehand as possible to know the expectations and more important, the motives behind them.
4. Layoffs: Careful about employment law regulations and procedures. Your case has to be watertight.
5. Communication! I cannot stress enough the fact of a communication strategy with clear statements and an unambiguous language about the situation of the company, the objectives to be achieved with the interim manager. Part of this strategy is a script which details at length the actions of the days immediately before and after your start in the company. If the funds of the company permit it, the help of a communication consultant is recommended.
6. As everybody can imagine, time is of the essence. It’s always critical, but never more so than if a company is in financial distress or utter disarray. So you have to get your facts together real quick and the pace has to be fast all the way through.

Part 2: Interim Management: The First Week
Part 3: Interim Management: Turnaround

About the author: Peter is an interim manager, management consultant and entrepreneur. After an international career in life sciences industry working for Swiss and US multinational groups he started his own company, Management Support, in 1996 in Basel/Switzerland. Since then he had consulted with numerous clients in industry, the health care sector and services. As an interim manager he helped change organisations in difficult circumstances, optimised business processes as a project manager and consultant and co-founded companies in the biotech and service sector, with successful trade exits and an IPO. He holds a PhD in physical chemistry from the University of Bern and an MSc in Business Studies from Warwick University. This blog on Interim Management has first been published on www.managementsushi.com