Interim CEO – To save your sinking ship

Interim CEO – A Necessity to save your sinking ship

India Incorporated is in the middle of mega investments, global expansion, heavy recruitments, massive fundraising, strategic alliances, mergers and acquisitions. During this critical phase a new job profile has been created in the Indian industry - an ‘Interim CEO’. An interim executive is a person who gets appointed for an interim term period, when a present executive leaves the company and a search is on to find out a new executive. Generally, an Interim Executive has a specific task to handle with-in a short time period and a hefty fee is charged by him to accomplish the task. Finding out appropriate people for top positions in a company is a critical decision and can take a lot of time. Sometimes it takes more than six months to find an appropriate person for the position of a CEO. But in a highly competitive, dynamically changing environment and ultra fast-paced high tech start-ups, companies cannot afford to waste months looking for a CEO. In between top-level shake-ups Global Incorporated appoints Interim CEOs. They hire an extremely experienced executive to handle the immediate tasks at hand. The term of an interim CEO is generally between two months to two years. In some cases the Interim CEO gets appointed permanently also. Internationally there have been various examples of an Interim CEO being appointed in the hour of crisis. At the time of sudden departure of Carly Fiorina, the head of Hewlett Packard the chief financial officer Robert Wayman was appointed as an Interim CEO with a cash bonus of $ 3 million for 57 days of service.

A famous story is that of Enron when Steven Cooper was brought in as an Interim CEO at the troubled energy giant. Enron employed 20000 people and had 2500 active legal entities. The task at hand was a complete restructuring of Enron. There were a mountain of problems to deal with and Steven Cooper with his no-nonsense style found exactly the right formula to lead the work out at Enron. In India also, there have been some examples of appointing Interim CEOs. One of the first few cases was that of Pramod Saxena’s appointment at eFunds in late 90s. Rajiv Tandon was hired from Syntel as Interim CEO at Technosoft. Ajey Singh was appointed as an Interim CEO at Credit Suisse First Boston to get the Indian operations off the ground and get all the regulatory clearances. Although these instances are few right now however, there is a good probability that these instances will increase in future.

In the Indian corporate environment there are good reasons why instances of employing an Interim CEO would increase. The challenges before the Indian companies today is to improve sales, expand into new markets, launch new products or become more competitive. Many Indian companies are in the transitional phase in connection with business mergers, acquisitions, spin-offs, divestures or corporate restructuring. Introducing new technologies, processes, reengineering, or other corporate-wide initiatives are also common. Small Indian companies have to compete with multinationals and thus technological up-gradations are imperative. In the midst of these challenges the attrition rate at the top level is also high as competent top executives move from one job to another in- search of greener pastures. The new breed of corporate samurai does not always want to make a long-term commitment to one corporate master. Moreover, they often take one or two other top executives also along with them when they leave. In most of the Indian companies internal succession planning is not done and thus the owner or the founder finds it very difficult to find out an alternative in case of a sudden resignation coming from a CEO.

In the Indian industry, in case of venturing into a new business, there is neither a lack of capital nor ideas. What Indian companies look for is qualified management teams, international expertise and an able leader. An experienced and qualified Interim Chief Executive Officer who has had an experience of already launching a similar business can help these companies avoid common startup pitfalls. Leveraging experience can help in lowering risk and avoiding potentially lethal mistakes. An interim CEO requirement for startups may arise in industries and types of businesses, like: Banking, Financial Services, Insurance, Software, eCommerce, Retail, Stock Brokerage, Credit Cards, Telecoms, Call Centers and Governmental-Private Sector Joint Ventures. There is a buzz that Ravi Deol of Barista fame has been brought in as an interim CEO at Bharti’s agri-business Field Fresh. More Indian companies are likely to follow the Bharti’s example.

Another reason for the Indian companies to appoint an Interim CEO is to revive and rejuvenate an existing business. A dynamically changing environment poses various challenges to an existing business. Turnarounds are the ultimate test of crisis management. In such cases, the stakes are very high since the mere existence of the firm can be threatened. Negative cash flow, declining profits, declining sales, eroding customer base, high attrition rate are all readily identifiable symptoms indicating that there is a serious problem within a business. However, even though the symptoms may be obvious, many companies realize that do not have a proper prescription to attack these problems unless they have a very clear idea of the root cause. A prescription can be provided by an independent consultant who can quickly evaluate and diagnose even the most complex business performance issues because of his experience in handling similar situation and his proven capacity to find out a cure for the disorder. A veteran is hired on a project flat fee basis or on an hourly basis. He is engaged to evaluate specific portions of the business, identify opportunities for improvement and then be tasked with executing specific changes aimed at achieving measurable performance benefits.

Interim Executive Leadership can be appointed for a definite period of time to achieve specific business objectives, including the training and mentoring of executives recruited to permanently fill those roles. The "Science" applied to turnarounds is all about making an in-depth financial and operational analysis to understand the firm's cash flows, where the money comes from (revenues) and where it goes (costs) and operational procedures. An experienced turnaround promoter often yields "quick-hit" immediate solutions aimed at reducing unnecessary expenses and maximizing revenues. The "Art" of turnarounds involves people as well as their emotions and motivations. Everyone reacts to crisis situation in a different way. An experienced executive leadership supplies a willpower and capability to make the difficult decisions required to be made. At the same time he also remains focused on the impact that changes and restructuring may have on the team, since business improvement cannot occur without the full support of people.

Globally, providing interim management is a big business. Global Executive search firms like Heidrick and Struggles or Christian and Timbers announce openings in this area and help companies recruit interim executives. They charge hefty fees for providing these kinds of services. In India no HR consulting firm provides these kinds of services as yet. At present there have been very few instances when the interim executives have been appointed. Most of the positions are filled up on the basis of personal contacts. However, there is a latent demand in the market for interim positions.

In order to venture into this area, the HR consulting firms or Executive search firms will have to make a pool of veteran executives who are willing to work as Interim Executives. There is no dearth of talent in India. Star CEOs of yester years generally lead a peaceful retired life in India. Many of them become honorary members of Advisory Boards or does some consultancy work. Some of them might be interested in taking Interim CEO Positions for a short duration if the demand comes up. Indian Recruitment Firms will have to develop teams which can understand and estimate the requirement of a client and suggest an appropriate solution. These teams can study clients' management structures, business cultures, and immediate business objectives. Understanding these variables, then, these firms can set out to identify the type of person and experiences needed to fulfill a client's requirement. The job positions can vary, from CEO, to COO or CFO or Managing Director or Business Unit Manager. These companies can also advertise these job positions all over the world and can find the best possible person.

The demand for Interim CEOs is more likely to come from multinational companies operating in India. One reason is that they are already aware of the concept and have made appointments on an interim basis in other parts of the world. Another reason is that in order to understand the Indian market, the economy and the regulatory framework, they need an experienced person who will not only help them for their start-up businesses but also train their executives. The training and experience thus attained under a seasoned executive will also be helpful for their executives when they enter into other Asian Markets. These companies may hire services of Indian veteran executives for their offshore positions. MNCs today know that a Business Model Innovation done in India will have wide applications in the rest of the world since India, with its contradictions and challenges is one of the foremost emerging markets. Indian executives have to often provide innovative solutions to complex business problems. An ability to provide leadership in the dynamic emerging market scenario makes a successful Indian Executive an extremely valuable person for a MNC. Leading Indian companies Wipro, Infosys, the Tata Group, Dr. Reddys, ICICI Bank etc. have already been termed as Corporate Classrooms for executives from the rest of the world. Thus Indian Executives may look for Interim job assignments elsewhere in the world in the years to come. Interim CEO jobs will be in plenty in the years to come.