Business Management Articles
Interim Management 911:
Emergency Response for Business Crises
Uwe Manski
Enterprise Magazine
February 2010
Jen was taken completely off guard when she received a phone call one morning from Chris, the spouse of her chief financial officer. Chris told Jen that her CFO, Ricardo, had just undergone emergency surgery and would likely require two months of recuperation.
With only three people on the management team, none of whom had Ricardo’s expertise, Jen had a crisis. What to do next….?
When an unexpected situation threatens a business’s ability to operate effectively, it can be crippling — affecting the confidence of stakeholders and even threatening the survival of the enterprise. In Jen’s case, not having anyone in the organization with sufficient expertise to manage Ricardo’s responsibilities, she made numerous frantic phone calls to friends, advisors and colleagues. Jen requested recommendations for someone to fill in on an emergency basis for a few weeks. It ended up taking her a couple of weeks to find a person who had the credentials and available time to manage Ricardo’s responsibilities. Jen was unaware of an option that could have placed a capable professional in Ricardo’s office within days: interim management.
Traditionally, entrepreneurs have relied on interim management support during times of growth or transition. As the business landscape evolves, however, so has the focus of interim management. With intense competitive and time pressures facing many businesses today, interim management is increasingly being called upon to serve as an emergency response to management crises.
Like the situation with Jen and Ricardo, unanticipated health crises are more common as boomer business leaders age. Serious illness, disability or even death can create a critical void in a management team. What would happen to your business, for example, if you were in a serious automobile accident? Would your management team be able to manage the enterprise without you for an indefinite period of time?
For many small and mid-size businesses with lean infrastructure, the answer is “no.” Yet there are numerous challenges that can arise unexpectedly, precipitating a management crisis. Unexpected terminations for cause or even immediate resignations within the executive team, for example, can create an emergency. What would you do if you caught your controller stealing from the company? Or your general manager resigned tomorrow?
The recent recession also demonstrates how financial pressures can rapidly destabilize a business. If a company’s management team is unable to access needed financing or if cash flow suddenly plummets, an immediate intervention may be necessary to save the enterprise. In some cases this may require the protection of the Bankruptcy & Insolvency Act (BIA) or of the Companies Creditors Arrangement Act (CCAA). Determining the best restructuring alternative, implementing the necessary strategies and negotiating with lenders and creditors requires specialized knowledge and contacts that are beyond the scope of most corporate management teams.
In a related scenario, if a business is chronically underperforming or has experienced a serious loss of profitability, specialized expertise may be essential to effect a turnaround. The existing management team may not have the requisite objectivity or experience to identify the causes, and may not have the skills to develop appropriate solutions or to implement the necessary remedial measures to return an enterprise to profitability.
All of these are situations for which interim management can provide financial and operational leadership to guide an enterprise safely through a crisis. Interim management experts generally have years of specialized industry experience as well as professional expertise in such disciplines as:
- auditing and assurance
- financing and re-financing
- mergers and acquisitions
- operational efficiency
- tax planning
- restructuring and turnarounds
- business and insolvency law.
Interim managers do not just provide advice. They become part of an organization’s executive team, assisting not only with strategic and daily decisions but also performing hands-on implementation and assuming responsibility for results. Staff supervision, communication and coaching are often part of the role, which can reduce stress on organizational resources. This may free the members of the existing management team to discharge their regular day-to-day responsibilities, without being distracted by other urgencies.
In certain cases a business may require not only one interim manager, but a team of specialists in several disciplines, all of whom work together to identify complex operational and financial issues and challenges, advise on available alternatives, and implement effective solutions.
Interim management: it’s not just for change anymore. For businesses in a state of emergency, interim management can offer life-saving support.
Uwe Manski heads the interim management division of BDO Canada Limited (www.bdo.ca), which helps entrepreneurs manage through transitions and crises. Uwe is a Fellow of the Institute of Chartered Accountants of Ontario (FCA), a Fellow Chartered Insolvency & Restructuring Professional (FCIRP), a Certified Management Consultant (CMC) and the former president of BDO Canada Limited. You can reach him at umanski@bdo.ca or 416-369-3072.
