Hiring a Transitional or Interim CEO

An Interim CEO buys time for a permanent CEO to be identified.  When a business or a board finds itself in a “short fuse” situation, bringing in an Interim CEO can be the best option to protect the business while a more permanent solution is found.  Not every season executive is suited to jump into an Interim CEO role.  Typically, it requires an experienced executive who has a calm demeanor, can assess a situation, then develop key relationships very quickly in order to execute a plan.

Why is an Interim or Transitional CEO needed?

The need can be triggered by any number of factors.  Very poor or suddenly poor performance can be a cause for a change to be made. However, a personal situation or health event could be a cause as well.  A business or market could change substantially causing the investors or board to lack confidence in leadership.  Sometimes, in less pressure induced circumstances, an Interim CEO can be brought in as a transitional leader.  This can be particularly helpful in family owned businesses or any business where departure of the CEO will lead to a cultural shift.  The transitional leadership offers a board the opportunity to take the time to assess the key needs of the business and to find the right permanent leader.

How is the strategy formed?

Sometimes there isn’t a great amount of time for a strategy to form based upon the circumstances.  However, even if there is time for a strategy or plan to be developed, an Interim CEO typically has two to three weeks to gain the knowledge and develop the relationships in a ramp up period.  

A strong board will assess and understand the situation and develop a short term plan of 90-100 days.  They will want to develop what milestones they’re looking to accomplish and what a good outcome looks like.  The board must be transparent and give authority to interim CEO to avoid a “lame duck scenario” where there is a lack of support for the Interim CEO from the management team and key employees.  

The board and their Interim CEO need to be in lock-step on what has to happen in an interim, six month period, for example.  The board and Interim CEO need to be in alignment on reasonable goals and then lay out action plans that the management team buys into.

It is important for an effective Interim CEO to be able to adapt to the business strategy.  The competencies of the Interim CEO do not need to align perfectly with the strategy.  But the Interim CEO should be strong enough in overall competencies to adapt to the situation and the business.

What should you look for in an Interim CEO?

In addition to an experienced executive who can calmly and clearly assess a business, usually that Interim CEO needs to be process driven.  They need to have a formula for success and understand how to execute that formula.  They must be able to develop relationships very quickly and have a good network available if key relationships are not working.  They must be ready to lead and learn quickly by building relationship both internal and external.

Industry fit really depends upon the industry.   Private equity experience can be very valuable for an Interim CEO.  They will be process and data driven.  They will understand governance, risk, have worked with banks and lenders, knowing how to operate within covenants.  They will know how to work with a board of directors.

Turn around experience can be very helpful.  A turn around experienced exec will typically show a strong track record of delivering financial results in a very short period of time.

While start up experience isn’t necessarily helpful, the experience of being the top level decision maker is critical.  Sometimes a leader promoted from within will struggle when put in the role of “final decision maker”.  In a short transition period, the Interim CEO has be be a strong decision maker by assessing situations, gathering feedback & support, then executing.  

If there are operations to be integrated or merged, then an Interim CEO who has been through M&A or a due diligence process can be very helpful.  

A multi-location or distributed workforce can add additional challenge for an Interim CEO.  To assess the business and build relationships, an Interim CEO in this situation may have to travel to meet key members of the management team.  A combination of office and home offices can add to that challenge.  

It can be very important for an Interim CEO to have a healthy network of leaders that can be brought in if management team changes are needed.

How do you screen for an Interim CEO?

Normally for permanent CEO, a board might take two to three months to evaluate finalists and hire.  In an Interim CEO selection, the process is very abbreviated.  The board might have days to check references to learn about a candidate’s past experience.  Asking references about experiences, have them describe their network and who could be helpful coming in if a purge of the management team is needed.

Sometimes the outgoing CEO will have an opportunity to meet with the Interim CEO prior to hiring.  Other times there is no overlap.  There may be an opportunity for key employees to be introduced in the screening process, but this is typically not critical in hiring an Interim CEO.  

The board may have the opportunity to quickly evaluate 2-3 Interim CEO candidates.  Questions should be relevant to the goals, action plans, and performance KPIs for the interim period, typically a three to six month period.  After calling several references to validate past experiences, the Interim CEO can be hired as an employee of the company or as an independent consultant. 

What do Indiana based Interim CEOs look for from companies and boards when considering assignments?

Check back to see summaries of what several Indiana Interim CEOs say about opportunities they considered or taken on.