Executives for Hire: Are You in the Market?

by Laurel Hyatt               Print Version (PDF)

Your vice president of operations is away on maternity leave for six months. Your chief information officer is on stress leave indefinitely. Your director of engineering is moving to another city because her husband got transferred.

What are you going to do? An executive search can take months and cost thousands of dollars. You don’t have the time or money.

More Canadian organizations are turning to contract executives to fill those gaps due to illness, death, resignations, mergers, expansions—you name it. Whether available through a firm or as individuals, executives for hire are seen as a smart staffing option.

At least a half dozen Canadian firms offer interim executive services, while that number is estimated at around 80 in Britain, and more than 200 in the United States.

If you haven’t considered it before, now may be the time to examine whether using the services of a contract executive is for you.

Why hire contract executives
The most obvious use for a contract executive is to temporarily fill in for permanent executives who might be ill, away on a sabbatical or another assignment, or who resigned suddenly. It’s hard for an organization to function without leadership at that level for even a short period of time. Yet it’s too impractical to conduct a job search in just a couple of days.

Organizations should do succession planning to determine who may take over executive positions on a long-term basis. But no amount of planning can prepare for unexpected departures or illnesses.

Saving money
Another reason to use a contract executive is to save money if the position is on a project basis. You may need a director in charge of finding a suitable location for a branch office in Calgary, but once it’s up and running, that position is no longer needed. Instead of hiring someone full-time and then having to find work for them elsewhere when the project is done, you can pay a contract manager for the three months it takes to acquire the land.

Interim executives can also help organizations save money if they don’t have the budget or need to hire a full-time executive. They may only need someone one day a week, or even one day a month, to help strategize, plan, and set direction. Try offering that kind of work to a seasoned individual looking for a permanent job and see how far you get. Yet contract executives build their whole careers out of juggling multiple assignments for clients, and thrive on the challenge of helping guide small businesses. They are especially valuable to non-profit groups, which notoriously lack the budgets to be able to attract top-calibre professionals with business savvy.

Pitching in
You may also need help during a growth phase. With economic cycles fluctuating widely, it’s very difficult to predict staffing needs, even at the executive level. If you’re not sure how long you’ll need an executive, rather than commit to a huge severance package in the event of a layoff, a contract executive can give you the same bang for fewer bucks. Contractors can help ramp up new product lines, recruit hundreds of staff, and develop new markets in no time flat. Are you automating your customer service function because your client base is growing by leaps and bounds? Why not hire a contract information technology professional to manage that huge project? If raising venture capital gives you the chills, a contract executive can provide instant expertise.

Full-time executives can also get swamped with work to the point where they would appreciate some temporary help to take over a few of their duties, and interim executives can be a solution there, too.

Contract executives can also be brought on board to help mentor your existing executives. If the organization is not large, it may not have anyone on staff with the experience, patience, time, and knowledge to help someone grow into an executive role. Maybe your CEO is too busy to train senior managers. Or perhaps you went too far with downsizing and need to bring in some expertise to guide those managers who remain. “For a president of a company, the worst thing in life is to be alone and when we come in as a member of his team, often we become a kind of a mentor, somebody they can talk to,” says Jacques Caussignac, managing principal of the Montreal office of The Osborne Group, which lays claim to being the only firm in Canada dedicated exclusively to providing executives on a contract basis.

Start-up companies can also benefit from contract executives to help get up and running quickly and share their expertise. During the high-tech boom, when 20-somethings were the CEOs of their own firms, interim executives proved invaluable in giving business guidance and expertise.

Solving HR issues
Hiring an interim executive can also make sense if there’s a shortage of qualified candidates to work permanently. You can’t leave your head of manufacturing position open for six months; better to have a contractor in place while you take the time to search for a perfect, permanent fit.

Creating a new position on a temporary basis is also a way to avoid the morale issues that would accompany such a move if it were permanent. If your organizational structure’s highest level is a director position, and you wanted to create a vice president of finance role, it would be hard to justify doing that for one department and not others. By making it a temporary move, you can get the job done and not threaten your existing executives and senior managers.

And you can even use an interim executive to help with the hiring process to fill a full-time executive role. They can develop job criteria, evaluate candidates, and then provide orientation for that new person.

In today’s uncertain economy, more organizations are cautious about hiring permanent staff, including executives. An interim executive makes sense. If for whatever reason a contract executive doesn’t work out, you can cut them loose with a minimal amount of notice or money. Most work on a per diem rate and you pay for what you get—no performance bonuses, stock options, company cars, or severance package. They have to be productive or you’ll say goodbye. Don’t try that with a full-time executive or you’d get slapped with a six-figure wrongful dismissal suit. “When you hire somebody from the sidewalk, you have to sign a contract with him and if after one year you don’t need his services anymore, you have to respect your contract and pay out,” says Caussignac. “But with us, it’s a variable cost.”

However, if an executive knocks your socks off, in many cases you can extend an offer to permanently bring them on board if they’re willing to give up the freelance life. Now that’s the ultimate probationary period. Talk about no-risk hiring.

Interim executives can tackle assignments that others wouldn’t be interested in. “If a company has a new young president, he might need from time to time—one day a week or one day a month—somebody who will help him to run the business,” says Caussignac. “You wouldn’t be able to find anybody to accept a job like that.”

There are probably more uses for interim executives—all you have to do is ask them if they can do it. “Our imagination is really the single greatest limitation that we have,” says Ron Newnham, one of the principals in The Osborne Group’s Montreal office who contracts his services to clients.

When not to hire an interim executive
Those in the business of providing interim executives say there are few times when you would not want to do it, but there are some important considerations.

If the position is highly specialized and requires a long learning curve, there’s no sense paying someone to get up to speed and then have them leave shortly. Better to hire a permanent employee instead. Contracts are better suited to positions that are generic—such as a director of communications—or specific to an industry.

Even though interim executives can save you money in the short term, their per diem rates are not cost-effective if you’re looking for someone beyond a few months. “If you are convinced that the only way that your organization can be properly served is by having somebody there on a permanent, full-time basis,” then interim executives are not for you, Newnham says.

Many large organizations can find the expertise in-house among someone willing to take a short assignment to fill a gap or work on a project, Caussignac says. “In that sense, they don’t need us.”

Also, in a large organization, if someone were passed over for an executive assignment in favour of an outsider, it could hurt morale. But “in small to medium-sized companies, they are so busy that the employees will understand that for two, three, or four months it doesn’t pay to shift all the organization to fill one seat for that period of time,” Caussignac says.

It may also not be advisable to a large organization, say one that’s publicly traded, to bring in a temporary outsider for a high-profile job such as the CEO’s position unless there was a real power vacuum or crisis. Shareholders could look askance at such a move, although Newnham argues that investors could in fact applaud any effort to get good value from a contract executive.

It’s not outsourcing
Perhaps some of the stigma that may have been felt around contract executives in the past was the notion that an organization was outsourcing a core function: management. But hiring temporary executives is not outsourcing.

Outsourcing usually involves handing over holus-bolus an entire area such as payroll or facilities management to a third party firm. It’s done by firms in their own offices, with occasional meetings with their clients.

But contract executives work on site as part of your team. Often, staff can’t tell the difference between an interim executive and a permanent one. Contract executives work alongside other personnel to achieve the same goals. They sign confidentiality agreements so they won’t give away any trade secrets.

And perhaps most importantly of all, the contract executives pass on their knowledge to your staff before they leave—something that outsourcers wouldn’t necessarily do or they’d be out of work.

Contract executives are sometimes confused with consultants, but they’re different. Not to knock consultants, but they freely admit that they are usually brought in to study a problem and advise how it should be fixed—not to fix it themselves. But contract executives roll up their sleeves and do what needs to be done within their mandate.

That’s another advantage to hiring interim executives: if you don’t have in-house expertise to carry out a mission, then hiring a consultant to tell you what to do is not going to get you very far.

Interim executives are sometimes hired by organizations looking for a fresh perspective on a problem. If you hire a contract executive through a firm, chances are you can draw on the expertise of many others in the firm who have gone through a similar problem. Let’s say your potato chip sales are down 27% from last year and your director of marketing is stumped. If you hired a marketing executive on contract, he or she could call on their colleagues in the firm with marketing expertise in the food industry to get their ideas on what to do to boost sales.

The Osborne Group, for example, has roughly 75 principals in its offices across Canada. If Newnham needs to bounce an idea or problem off a colleague, “there’s a wealth of knowledge there and talent and expertise that I can tap into.”

Interim executives can also bring objectivity because they’re not steeped in office politics. “We don’t have any background with that company and we don’t have any future with that company,” says Caussignac. “The president of the company can rely on us to ask questions and get real answers that are not disguised by any background, any things you’ve done in the past with that company.”

Executive staffing firms are also not temporary agencies. “We’re not in the temp business. We’re not in the consulting business. We are in the contract executive services business. We become a part of our clients’ organization when we go in to execute a mandate,” Newnham stresses.

Interim executives not only have senior management experience, but they have experience doing it on a contract basis, and know what they can accomplish in two weeks or two months, and have a process in place for organizing their work.

How it works
Contract executives basically come from two sources: firms that specialize in executive staffing, or individuals who freelance independently—often senior managers who are retired from a company and return on a contract basis.

Choosing an executive
An executive staffing firm may send a shortlist of two or three candidates to meet with you to discuss your needs and see if there’s a cultural and personality fit, especially if the assignment will last a few months. “You’ve got a small window of opportunity to make an impact and if you get off on the wrong foot, if you’re having trouble making eye contact with each other in an initial meeting or you really don’t share the same values that the respective organization espouses, then you’re not a good fit,” Newnham says.

If the assignment is short, take the time to hire a candidate who can hit the ground running, Newnham recommends. “You don’t want to have a revolving door at your front door. You don’t want to have people coming in and out of there every week,” he says.

Check out the executives’ resumes and credentials. You should be able to veto any candidate you don’t feel would be suitable.

You can choose an executive based on their experience in a particular role (such as chief financial officer) or in your industry. Many contract executives have no fewer than 20 years of management experience and do not take assignments in an area they feel they are not qualified for.

Negotiating a contract
Most firms and individuals charge a per diem rate, which you may be able to negotiate. A typical assignment lasts from three to six months but can usually be cancelled at a moment’s notice. “We’re a variable cost for clients. When they need us, we’re there. When they don’t, we’re not, and they only pay for the service that they need,” Newnham says.

Both sides sign a contract with the chosen executive but the terms may be flexible, allowing for changes of duties or length of time as the work progresses. The client is more or less in the driver’s seat with the working relationship. “They’re not signing a blank contract that’s difficult for them to get out of,” Newnham says.

Nor do clients have to pay the headhunting fees associated with hiring a full-time executive, which can often run between 20% and 25% of the individual’s first 6 or 12 months of salary, Newnham points out.

Up and running
The executive can often start within two weeks of the initial meeting and already knows what work needs to be done. “We hit the ground running,” Newnham says. “It’s not like dealing with a traditional consulting firm, for example, where you may deal with a senior partner at the outset to negotiate a business deal with them and then find out when the time comes to execute the actual work to be done, a junior person is assigned.”

Before the executive starts, send a memo to employees to let them know what the person’s mandate and tenure will be. “That in itself is an excellent form of introduction and it also allays fears that people could have seeing somebody come in. We’re not there as hatchet people, we have a function to do,” Newnham says.

At the start of an assignment, make sure you set objectives and timelines with the executive and hold him or her accountable for it, Newnham suggests. Even though interim executives work independently, you should still monitor their progress to confirm they’re on track.

Within roughly a month, most executives are comfortable in their interim role, Newnham says.

Clients may wonder how much attention a contract executive can devote to a job if they’re only working a couple of days a week, or for a few months. But the executives themselves say the work is much more intense than in a permanent, full-time position.

“Even if it’s only one day a week, our mind always works for that customer, 7 days a week, 24 hours a day, so the client gets more than one day a week,” says Caussignac.

Laurel Hyatt is Managing Editor of Workplace Today®