From The Sunday Times
February 20, 2005
Rescuers climb to the top of the tree
The interim managers’ star may be waning but big-hitting turnaround professionals are in increasing demand.
Roger Eglin reports
PETER CALLAGHAN has just started his new assignment, running a north London company that makes machinery. It is not a particularly attractive job because things have not been going too well. The business is making money but not enough, and its parent, a quoted company, is becoming impatient.
Quality and delivery, vitally important, are not of a high enough standard. Callaghan’s predecessor had been battling away for several years without making much impression on performance. Callaghan, an outgoing Australian, has no illusions: “It’s a £100m turnover company and there are high risks. But if I stiff it up, that’s my fault.”
In fact, his chances of failure are slim. He was picked by Richard Ball, a consultant who specialises in recruiting top executives who relish a challenge. Ball knew Callaghan had the track record for the job and that in anything from six to nine months, he could make it work — earning a high bonus before he moved on to the next assignment.
A couple of years ago Callaghan, 54, might have being described as an interim manager, but not now. He is a member of the Society of Turnaround Professionals and his status is high, often matching that of a chairman or chief executive. Interim managers have slipped down the pecking order.
Ball was a pioneer in interim management in the early 1990s, when there were only a handful of agencies suplying such people. Today, he said, there are about 300 suppliers. Callaghan believes the growth in interim managers has been so great that about one in five of the people in business are employed on contracts.
Ball said there was a seemingly endless supply of people. “You have the long-term interims who have been in the market for many years. Others are between jobs and want to get back into what they call a proper job. Then there are the people who have taken early retirement.”
This has brought changes for the agencies that supply interim managers. “It used to be more about taking time to get the right person for a job. Now a quick response is becoming more important. So we have an increasingly commoditised marketplace.”
The quality of the typical interim manager is falling and because there are so many pursuing work, their pay has gone down. The attraction of such work is fading. Ball said a friend told him recently: “The name interim is a badge I no longer want to wear.”
Callaghan believes the rapid expansion has left “a trail of destruction in its wake. People thought they could do it. They saw the rates interims were getting and said, ‘That’s a good story.’ But although daily rates of £1,800 to £2,000 were being earned by experienced interims two years ago, the downturn has knocked this back to £1,500.”
The other big change has been the emphasis on performance. “Though pay rates are less, you can make a 100% bonus,” said Callaghan.
In response to these pressures, Ball, founder and director of Ballantyne, a division of the headhunting firm Highland Partners, has gone upmarket, avoiding cutting corners and taking time to find the right executives. Talent and good people skills are essential ingredients in the make-up of what he calls transition executives: “I like to use a medical analogy to describe the business,” he said. “If you need a heart surgeon, you would not go to a GP.”
People such as Callaghan occupy their own special niche. They have had careers at the level of chief executive and acted frequently in an advisory role, or as investment bankers. Often they have discovered a taste for working alone, free of office politics and bureaucracy. They are a small group: the turnaround society has only about 100 members.
Anthony Holmes, a client of Ball, is typical of the people operating at the top end of the business. He gets involved with large companies that have a problem, such as making sure a merger works out. The existing management team may not have the time to handle the extra workload without help from someone senior. Another typical client is an American company that has a problem in its European operations.
Holmes got into the rescue business after being approached by the Bank of England. It had a small licensed deposit-taking business and the Bank, as regulator, was worried. It wanted to stabilise the company, but then the executive it was concerned about left. Holmes asked his employer for leave of absence and took over. His intervention was a success and he found the work so interesting that he never went back to his old job.
Finding work is not a problem: Holmes accepts about one in five job offers. It is not a case of being snooty, he said. During a downturn when these sorts of problems crop up more frequently, he does not want people to start looking on him as “some sort of economic Lazarus”.
Of the 12 projects he has carried out in the past 14 years he has lost only one. The company in question was in financial trouble and owed a lot of advanced corporation tax to the Inland Revenue. The investor willing to refinance the company did not want to see its money going in only to flow straight out again to the taxman. Finding a solution that did not create an unacceptable precedent for the tax people proved impossible.
When moving into a company, Holmes believes the most important thing is to agree the objectives with shareholders. Too often the executives are operating in some form of denial, leaving the rescuer to discover how bad things really are. The need to have the authority to uncover the problems is why Holmes always insists on going in as chairman or chief executive.
“You can’t do it by whispering from behind the curtains,” he said. “People on the inside often deny that the problems exist. Management frequently goes through a process of denial and concealment.”