Interim Executives in Private Equity Firms

Over the years, interim management has become increasingly common in large and small businesses worldwide. Interim executives are being used as a cornerstone in business development within the United States and many European countries.

Interim Executives In Private Equity

It has been a proven and highly used model in Europe for decades. Most data on interim work comes from associations based in Europe. But given the shift in the on-demand economy in the US, we are seeing a rise with the increase in the contingent workforce.

Interim executives are an important part of firms and organizations today. Recognizing that, researchers have begun focusing on studying the dynamic of interim management in growing companies. Among them is a recent study by Dr. Jürgen Bruns on interim executives in private equity firms.

Interim Executives: A Role Model for Private Equity

Dr. Jürgen Bruns is one of the industry’s leading experts and practitioners interim management in Germany with several publications in this field, and successfully running his own CFO / CRO interim executive practice. In his research publication, under the name of Interim Executives: A role model for private equity, Dr. Bruns made some key findings relevant to organizations hiring interim talent.

Dr. Bruns chose to focus on private equity firms in his field study after observing “both private equity and interim executives are providing financial and human capital to companies over limited periods of time in order to maximize value.” He found that interim executive deployments are well received in private equity firms to add value. Private equity firms investing across various industries also provided a very good cross section sample for research rather than selecting and studying one sector only.

Decision-Making in Interim Executives

In his field study, he found that the decision-making process involving interim executives generally depends on two factors: The context of the private equity firm and the context of the portfolio company.

Context of the equity firm is made up of the size of the funds, the type of investor, and the operating model. Understanding the effect of the size of funds; the bigger they are the more capacity companies have to maintain their own operating teams on payroll. But small and medium cap firms would rather prefer to source interims on a flexible on-demand basis.

The context of the portfolio company matters heavily as well. Dr. Bruns says, “The company situation determines the amount of management challenges in terms of quantity and quality. Therefore any management gaps between deliverables and needed competencies can be referred with extra brain and man power for accelerating execution.”

Cases Dr. Bruns himself has served on as an executive include carve outs, post-merger integrations, valuation programs, divestment of portfolio companies and restructuring.

Successful Interim Executives Deployment                                                  

According to Dr. Bruns’ research, successful interim executive deployment almost always happens with there is a perfect match between the private equity deal team, the company’s situation, management and the interim talent.

Three core competencies of an interim executive are also key for them to adjust and perform well in their assigned role.

First, initial technical expertise can be useful. For example, a person considered at a CFO position will find a proven track record from former CFO roles highly useful. Second, methodological skills inherent in the talent is helpful. Dr. Bruns gives an example of a chief restructuring officer who must be knowledgeable about applying turn-around standards like the German IDW 6 and 11 correctly, in order to perform his job effectively.

Third and final, is social competency. In today’s globalized world being socially adept is very important. A successful interim executive will accomplish quicker change and results if they are able to communicate well on both ends. They should be able to understand and interpret their subordinates and colleagues, as well as, be able to respond and deliver in a way to achieve lasting results in the organization. Stakeholder management, dealing with communication issues, conflicts in the workspace, resistance to change by the staff are some common social issues faced by interim managers. Executives can be trained in an interim executive training program to equip them with the skills to achieve quick, yet long lasting results in the organization.

Recommendations for interim executives in private equity firms

Dr. Bruns intensive study led him to conclude that “this is not rocket science” for the seasoned and well trained interim executive. A large part of an interim’s duties consists of linking strategy to what needs to be done and when, and then executing and delivering upon it.

 

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