Interim executives are becoming a popular alternative to using a consultant or leaving a position vacant while a search for the right person is conducted. An interim executive also brings a fresh, unbiased review of factors driving organizational health and operational results. The interim executive does not waste time or company resources trying to secure a full time job, but is driven by the opportunity to make changes which lead to a sustainable value increase for all the stakeholders of the business. The client and their customers can expect immediate improvement in delivery, quality, and cost while a search is conducted to fill the permanent position.
By achieving rapid improvement, the interim executive creates momentum for the recruited executive to build on. However, to create the momentum, the interim needs to hit the ground running, assessing organizational health and identifying the critical issues needing immediate attention. The following are six key areas to focus on within the first week.
Follow the Money
Cash is the lifeblood of a business. A detailed analysis of the sources of income and expense is the first step in determining the urgency of many decisions. If there is more than one product line or business unit, a pro-forma summary of each will be useful. It is important to look at all fixed costs, contract payments, salary, benefits, and legal obligations. Look at receivables, payables, and inventory for opportunities to conserve cash. If a lifeboat exercise is needed to reduce the cash burn rate, all of this information must be available to be brought into the discussion.
Does the business have a clear and focused strategy? Too often companies are in trouble not because they lack motivated, skilled, and dedicated employees, but because they are not focused and are trying to do too much. Sometimes a new product launch into an adjacent market is draining cash, staff, and mindshare from a profitable one. Perhaps the newly released product does not meet all the customer’s requirements resulting in lower sales than expected. It is often worth putting the major revenue generating products through the same level of scrutiny as a startup investor. Ask whether it makes sense to keep funding a product that cannot meet the needed hurdle rates.
Sales and Operations Planning
Too often the sales team forecasts twice as much as they need because they believe operations will only build half of what they ask for. Operations will sometimes build less than forecast because they are under the gun to control inventory. Or, to meet unexpected demand, they both agree to hold extra inventory which puts a strain on the cash flow. These issues must be reviewed at a recurring monthly meeting. Ideally, the teams will review the planned sales and production for the next twelve rolling months. This plan can then be dollarized to understand the short term cash flow.
Key Performance Indicators
Is there a dashboard which shows all the key indicators of how the business is tracking against the plan? Is it available to all the decision makers and do they each know which of them is accountable for what result? Are there appropriate daily, weekly, and monthly reviews in place where the responsible person reports on the progress, problems, and plans for each of their results? If the answer to any of these questions is not a resounding yes, put the dashboard in place immediately and call a meeting to review it.
A review of any open corporate issues should be conducted. Are there any current lawsuits or threatened litigation? Are there any open human resource, regulatory, or safety agency issues? Look at the management report for the auditors to see if they have any concerns. Sit down with the managing partner from both the corporate legal and accounting firms to get their perspective. The objective here is to not be blindsided by an open or potential issue, which could have a significant negative effect on future organizational health.
At the end of the day, the interim executive’s success will be determined by the effectiveness of the supporting organizational team. A critical review of the staff must be made on their ability to drive change, develop world class systems, take initiative, and participate effectively on a team. An effective method is to measure them on two scales:
- Knowledge and Experience
• Degree in their work domain
• Masters or PhD
• Professional society member/speaker
• Published author
• 15+ years in the product domain
• 4+ companies in the product domain
• Turn around, startup and/or change agent
• Sought out by peers for answers
- Bias for Action
• First to arrive, last to leave
• Admit mistakes, no finger pointing
• No pocket vetoes
• Bring solutions, not problems
• Always meets or beats deadlines
• Work is always perfect
• Volunteers for crisis issues
• Assists other team members
• Company first over department
This is admittedly a very tough grading scale and someone who scores high on both axes is truly rare. However, the interim executive needs to know who in the organization can be counted on to help drive results with minimal supervision, and who needs to be replaced. The company usually does not bring in an interim executive to maintain the status quo. The truth is that no successful interim executive would take that assignment. They are wired to get results. Quickly!
This is an ambitious list of tasks to get done in the first week. The value of asking for this in the first meeting with the staff on Monday morning is immense. During the course of the first week, the interim will gain insight into the knowledge, experience, and bias for action of the staff. This is essential for determining which team members will accept the challenge to improve and who will not.
The purpose of this first “To Do” list is to get a quick understanding of the current status of the business and the team. Once this data is compiled, the interim can prepare a report to the Board with high confidence that the baseline for improvement has been established. This will serve as confirmation of the perceived problem and the spring board for immediate actions to be taken to optimize organizational health.