Interim managing director: when a company needs one — and when it doesn't

The managing director is gone — through resignation, illness, a dispute among shareholders, or because the owner is stepping down after thirty years. The succession is not settled, or it needs another year. In this situation the question arises whether an interim managing director should fill the gap. The answer is “yes” more often than many people think — and less often than some providers claim.

What an interim managing director is — and is not

An interim managing director is appointed as a corporate officer. He is entered in the commercial register, he is liable, he signs. That distinguishes him from the consultant, who hands over recommendations and leaves, and from the coach, who supports the existing management. The interim managing director makes the decisions himself and carries the consequences — for the duration of the mandate.

Nor is he a candidate for the permanent solution. A good interim manager arrives with an end date and works towards it from the first week. If the shareholder secretly hopes that “he will simply stay on”, the arrangement is skewed from the start.

Five situations in which he is the right choice

1. The sudden vacancy. The managing director is gone — suspended, ill, deceased, poached. A regular executive search at C-level takes, in my experience, six to twelve months before the successor is actually in the building. A company cannot go without leadership for that long. An interim managing director is there within days and keeps the business running while the search proceeds properly — without the pressure to take the first available candidate.

2. The crisis the existing management cannot resolve. Liquidity is tightening, the bank is demanding a restructuring plan, key customers are drifting away. Sometimes the existing management is part of the problem; sometimes it is simply exhausted or has never been through this before. An interim manager who has led several restructurings brings two things that are missing internally: experience with exactly this situation, and the freedom to make unpopular decisions because he has no career in the company to protect.

3. The transformation with an end date. A carve-out, a post-merger integration, a change of business model, a major system replacement. Tasks that need an executive’s full attention for twelve to eighteen months — and then cease to exist. Creating a permanent position for them is expensive and leaves a person without a job at the end.

4. The portfolio company. Private-equity investors regularly face the question of who runs an acquired company in the first months, until the target picture is clear and the right management has been found. An interim managing director who sets up reporting, governance and the 100-day agenda buys the investor time for a good hiring decision.

5. The bridge in a succession. Family businesses are the most common case. The outgoing owner wants or has to stop, the next generation is not yet ready or not willing, a sale is being prepared. According to estimates by IfM Bonn, several tens of thousands of family businesses in Germany face a handover every year; the Austrian Federal Economic Chamber paints a comparable picture for Austria. An interim managing director runs the company professionally through this phase, preserves its value and creates distance between the family and day-to-day business.

Three situations in which he is the wrong choice

When the problem is the structure, not the person. Two shareholders who have been blocking each other for years do not get peace from a third managing director — they get another participant who is ground down between the fronts. The shareholder conflict has to be resolved first, the leadership question second.

When what is really wanted is a consultant. Some enquiries amount to: “Take a look at this and tell us what we should do.” That is a legitimate task, but it is not managing a company. Anyone who does not want to delegate decision-making authority does not need an interim managing director — and should not pay for one.

When no end is planned. An interim mandate without a succession plan becomes an expensive permanent solution. If nobody owns the search for the regular managing director, the mandate gets extended every six months, and the organisation settles in with a leader who actually meant to leave. Before an interim managing director starts, it should be clear who is driving the permanent appointment, and by when.

How to tell that it is time

Three questions to ask yourself as an owner, board member or investor:

• Are there decisions that have been sitting for weeks because nobody can or will make them?
• Does the situation have a foreseeable end — succession, completion of the project, stabilisation of the numbers?
• Are you prepared to give an outsider real authority, including for the decisions you will not like?

Two yeses and a no on the third question: leave it. Three yeses: then an interim managing director is probably the fastest and, in the end, the cheapest solution.

Bottom line

An interim managing director is the answer to a time-limited leadership gap with a genuine need for decisions: vacancy, crisis, transformation, portfolio transition, succession. He is not the answer to unresolved shareholder conflicts, to the wish for a non-committal opinion, or to the absence of a succession plan. Those who clarify this honestly in advance get, within days, leadership that holds — and within months, a company that can do without it again.

What I take on as an interim managing director and how a mandate runs is set out under Interim CEO / managing director.