Companies that need an executive for a special purpose—to launch a project, to fill in during an absence—are hiring temps for the job.
John Ahlrich knows what it’s like to move from job to job, never staying longer than a year or so. He does it for a living—and he does it at the C-suite level.
Ahlrich, a certified public accountant, is often hired to serve as a company’s chief financial officer for a limited time, typically until the post can be filled permanently. He is part of the corps of professionals known as temporary corporate executives. They’re enlisted for short terms and special purposes, such as to get a new program up and running or to fill in until a permanent executive is hired and brought up to speed, and demand for such temps’ skills is on the increase.
The U.S. Bureau of Labor Statistics says executive and professional temps now account for 11 percent of the temp workforce, up from 7 percent in 1998. Eric Archer, president of Spherion Professional Services, a part of the Spherion Corp. staffing and recruiting company in Fort Lauderdale, Fla., says, “The number of executives we have ready to move into engagements has increased almost 40 percent from 2001 to the end of 2003, and in the past year our total engagements have increased 12 percent.”
Driving much of the growth in the temporary-executive sector is the Sarbanes-Oxley Act of 2002. Many companies have been hiring experienced executives to help them comply with the law’s strict corporate accountability requirements, and Archer reports more requests for financial experts than for any other executive role. (For more on how the Sarbanes-Oxley Act has affected top-level staffing decisions, see “Corporate Compasses”)
Executive temps are sought for positions in areas such as marketing, human resources and project management, as well as large-scale systems implementations, Archer says. He says demand is also high for executives who can manage general projects and plant start-ups and shutdowns. The average engagement is about six months, he says.
Mike Braun, chief executive of The Interim CEO Network in Palo Alto, Calif., supplies temporary CEOs for companies, mainly in high technology, for an average of six months, typically at the behest of boards of directors and venture capital firms during an executive search. “The CEO decision is so important that the normal selection process—the retained search model—can take six months to a year to play out,” he says. “But we can have a seasoned interim CEO in place within four or five weeks.”
HR in the Process
In deciding whether to fill a post with a temporary executive, there are questions to be answered, with HR participating as it does when a permanent executive is being hired. Is there someone waiting in the wings who can step into the role with a reasonable amount of training and orientation? If not, what will be the effect—a productivity gap, perhaps?—of leaving the post open while searching for the right hire?
If it’s decided to go the temporary route, “HR is commonly involved more on the front end than the back end, bringing in qualified individuals, conducting initial assessments, and checking credentials and references,” says Archer. “Then the C-level executives continue the process and make the ultimate decision,” while HR handles bringing the temp on board. This is generally the process for orienting any senior-level hire, he adds.
Scott Testa, chief operating officer and director of HR for Mindbridge, an intranet software company in Norristown, Pa., says orientation for interim executives is similar to that for a permanent hire, “but accelerated. They have to hit the ground running, without a lot of handholding. We try to clear out key people’s schedules to make sure they get to meet with the interim hire right away. It’s HR’s responsibility to make sure that goes relatively smoothly.”
Interim executives are paid either by the agency that supplied them or, if independent, by the hiring company itself, and are almost always compensated at higher rates than full-time executives in the same position—usually 15 percent to 20 percent more, according to data collected by Spherion.
Although temp executives do not collect benefits, bonuses or other incentives, Archer notes, some clients do offer a final bonus payment to ensure the temp stays on until the work is complete. “These are at-will employees,” he says, “so it may make sense to give them a retention reward as another reason to hang in there.”
Companies hiring temporary workers for high-level positions must bear in mind that there are tax requirements and liability concerns. Says Archer: “HR needs to make sure the correct 1099 paperwork is in place, as with any contractor. Temporary hires should also be covered for professional general liability.”
Archer says his agency and others often carry the coverage—general liability and professional liability, including errors and omissions coverage—for the people they place, as well as workers’ compensation and unemployment insurance. In some situations, however, a company may be required to add the temporary executive to its indemnity policy. Braun’s firm requires that the hiring company indemnify the temporary CEO as it would a permanent CEO.
Experts say the parties should sign a contract outlining the goals of the assignment, cash and equity compensation, confidentiality and noncompete requirements, and other standard provisions of the independent contractor agreement.
The Temp Pool
Interim executives often are former senior executives who were swept away in high-level layoffs or took attractive early retirement packages. Many sign on with temp executive agencies to keep their skills fresh while searching for a place to land.
A concern that often crops up when a company is deciding whether to hire an executive temp, Braun says, “is fear that the person won’t be committed or serious, acting only as caretaker when a real leader and driver is needed.” But Braun says he hasn’t found temporary executives to be lackadaisical about their assignments. “People who hold these jobs are intensely committed to doing good work,” he says. “They are just wired this way.”
Although a temp executive would be free to walk away from an assignment, such breakups are very rare, says Braun. “I think companies stand a greater chance of losing a permanent executive than an interim one. They are committed for a relatively limited period of time, which makes it easier to stay the course. And more important, these are senior professionals who understand the impact of both their arrival and departure. If they value their reputation, they won’t make any sudden moves, as it will reflect badly on them.”
Another concern is whether a temporary leader will command the authority and collegial respect that the position requires. Says Braun: “Our CEOs walk in with the attitude that this is their company, and people pick up on that. Respect comes from the way you approach the job.” Short-term executives, with their deep reserves of experience, he says, “come into the company understanding that part of their job is setting the tone and acting as a mentor.”
Not Moving on but Moving In
In many instances, interim assignments become a “try-before-you-buy” exercise for both the executive temp and the company. Braun says his client arrangement “always includes a management transition strategy. Sometimes our interim CEO is in place while a traditional retained search is under way for a permanent CEO. Sometimes the plan is for the interim CEO to help determine the long-term strategy for the business and then convert to permanent [status]. The company pays my firm a fee during the interim assignment and a conversion fee if the interim CEO [becomes] permanent.”
Braun says about 40 percent of his placements become permanent hires. Archer says the figure for his firm is about 25 percent, and he adds that any finders’ fees connected with a temp signing on full time “are usually much less than the cost of conducting a retained search for these positions.”
John Hughes, CFO for Radiac Abrasives, an industrial abrasives manufacturer in Salem, Ill., was once a temp-to-hire executive who wanted to testdrive a company before committing. He found a post he liked at Radiac and went on to bring another interim financial executive on board.
“My philosophy,” Hughes says, “is that the interim role gives both the individual and the employer an opportunity to understand each other beyond simply what the skills of the job require. There are talented people out there with undoubtedly good experiences, but in an interim role, what becomes most obvious is how they interact with others and whether there is chemistry. This is especially important at the upper levels of management, where relationships are so key. Ninety days in an interim role can give you a pretty good read on whether the individual will be a good fit.”
Interim executives can be located through traditional temporary agencies, such as Manpower and Net-Temps, and through specialty firms, such as Spherion and The Interim CEO Network. Agencies field a panel of candidates for the position, just as they would for a permanent hire.
Ahlrich’s temporary CFO assignments are arranged through his Atlanta-based company, Intech Financial Services, which also supplies temporary CEOs and HR executives. He receives a support staff, and he’s expected to carry out the duties of a permanent CFO. If a question arises later, he says, “I feel a responsibility to deal with it. I have developed a relationship with these people, and I will never burn a bridge.”
Interim executive Stephen McElfresh is the former president and CEO of the Saratoga Institute, a leading HR benchmarking organization in Santa Clara, Calif., that was acquired last year by the New York-based accounting and HR consulting giant PricewaterhouseCoopers. Today, under the auspices of his Palo Alto firm, HR Futures, McElfresh takes his place within companies’ HR operations for stints ranging from two to 18 months.
In day-to-day staffing matters such as hiring and firing, the interim executive has the same latitude as a permanent member of the management team, McElfresh says. But he says there are limits to what an interim executive can be expected to undertake if a company wants the person to do some corporate “shaking up.” He says, “Some transformations make sense for a temp, like opening a new office or bringing a new product to market, but any fundamental cultural change involving people should be led by an insider.”
Says McElfresh: “I have 15 years [of experience] inside corporate HR, but I find there is more opportunity to make a real difference in an interim role, because I am touching people and organizations at the moment of change.”
Martha Frase-Blunt is a freelance writer in Shepherdstown, W.Va.