Why interim management is much less costly than you think


Many companies still have a mythological fear about choosing interim management professionals for their big change programmes.

It is partly a concern about using an outsider on a temporary basis, i.e. are they invested in my organisation, do they care if we succeed or fail? And it’s equally about the face-value cost of an interim’s day rate versus a permanent or FTC salary.

As a result, company career sites often post vacancies for permanent project and change management roles. The mentality is that the initiative is too important to go external, even if it’s only on the interim market that they’ll find the experience, confidence and skills they need. Companies who are restructuring, acquiring or merging would be classic examples for this. Their recruiters are geared up to sell benefits and long-term career prospects for a role that is time-limited by its very nature.

So are interim’s the kind of transient fly-by-nights that many fear? And is the cost really higher than a permanent employee?

A convenient truth

We speak to many clients or recruiters hiring permanent people for time-bound projects and ask them if they would be open to offer interim assignments for these roles on a day rate. We explain that interim’s’ have seen the movie play out several times before with similar organisations. Many are seasoned experts in organisational redesign, process re-engineering, new systems implementation, mergers and acquisitions. And they have a good track record of seeing the project through to completion, offering sound and objective advice throughout the whole change journey – it’s what interims do. They’re driven to leave a strong legacy behind them, as they depend on that legacy to secure future work. Track record is everything if you want to make a career out of interim management.

The cost argument is frequently tabled: ‘Permanent people are cheaper and interim management is very expensive’. Not so, we say, and here’s why (the below examples are not exhaustive and are open to variation and change).

The hidden costs

  • Total Rewards Compensation – A permanent employee for a senior level role isn’t just paid a salary. They also potentially gain pension benefits, car allowances and other provisions in line with their seniority. These kinds of benefit scale with the salary of the person, that is to say, they add a lot to the cost of hiring a senior person and shouldn’t just be lumped in with general workforce overheads.
  • Holiday pay – A permanent employee will receive paid holiday, an interim won’t. When comparing interim day rates with permanent costs, many need to consider the true cost of permanent more closely. There are a minimum of 28 days more a year that you’ll pay a permanent employee for which you won’t have to pay an interim. Also, permanent employees get paid for bank holidays and often qualify for sick pay. Interims don’t.
  • National insurance – A sizeable element of the cost of any employee is the employer’s national insurance, around 13.8% of salary at this level, and again that’s a significant cost to add on a permanent hire that you simply don’t have to pay for an interim professional.
  • Bonus – A senior employee is likely to have some element of performance-related pay or bonus of some kind linked to their role or possibly share options. Normally, this will amount to around 20-25% of salary. Again, no small fry cost-wise. You could argue that they may not succeed so you may not have to pay it – but then again you want them to succeed! That is  the whole point of having an incentive scheme. If they don’t, you’ll have wasted a lot more money overall and the bonus will pale into insignificance. In the interim management market, on the other hand, bonuses are not a normal expectation, they’re very rare and, if it’s not working out, the individual is a lot faster to exit and replace.
  • Exit costs – Interim’s are also a lot cheaper to exit than a permanent employee. A permanent employee at a senior level may have at least three months’ notice period. That’s three months’ worth of salary and a lot of time lost for your project. Interim notice periods vary but are virtually always within a month or less.

The net result is that interim’s on a day rate often end up costing an organisation less in real terms and in many other cases the cost difference is negligible.

You also have to factor in the reason why you are hiring. If it’s for an important programme, a merger or a transformation initiative, the costs of getting it wrong will often be many magnitudes greater than the cost of either an interim or a permanent employee. Interim managers are seasoned individuals who since becoming interim have worked in many different organisations to undertake similar assignments. They are a safe pair of hands compared to a permanent employee – who may well be a high potential individual but will likely have a lot less experience.

When a commercially savvy client or recruiter looks at these facts, why wouldn’t they consider hiring an interim? More so perhaps because an interim is expected to hit the ground running, using their experience to enact change fast while reducing the potential for rework and unforeseen problems.

So share the secret: interim day rates are in fact very reasonable once you look at the whole picture, do the comparison and consider all the advantages.

Written with insights from Simon Brown, Stephen Forrest, Trisha Hiley and Nicole Thompson, who have extensive experience both as interim managers and in hiring interims.

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