Director's guide: report on interim management; Given today's increased demands on directors and the challenge of finding the right CEO, it's not surprising that boards are turning to interim executive management.

• Author: Shaw, David
• Position: REPORT ON INTERIM MANAGEMENT

WHAT ARE THE KEYS to making the interim management option a successful solution to a leadership challenge? What about the pros and cons of hiring a single individual versus a firm specializing in crisis management? And just what is it that makes interim executives particularly well suited for a succession opportunity? DIRECTORS & BOARDS turned to five experts for their insights and advice.

When to use interim executive management

KEN HILTZ Managing Director, AlixPartners

A BOARD MOST OFTEN SEEKS interim management when its company faces a crisis and the directors conclude that present management is unable to handle the situation. The crises that lead boards to this conclusion commonly result from financial or legal pressures, including loss of confidence by the financial community due to underperformance, financial statement errors and restatements, or allegations of violations of laws, as well as pressures from lenders and key investors stemming from underperformance, poor communication, or failure to accurately communicate business issues.

The use of interim executives was well publicized earlier in this decade when a series of high-profile bankruptcies exposed criminal activities by company management. The trend of large bankruptcies involving corporate malfeasance has, we hope, passed, but the use of interim executive help is not limited to such high-profile crises. Corporate challenges, in fact, come in many forms. In addition to legal and financial issues, companies may face strategic, operational, marketing and sales, or regulatory problems, or crises may arise from natural disasters, communications, or public relations debacles. Ultimately, if the board feels that management is ill equipped to handle an escalating situation--whatever its cause--it may decide that an interim executive is needed.

The choice of an interim executive versus a permanent replacement is influenced by the company's current and unique situation. An interim executive will know what steps to take to reestablish a company's credibility and rebuild confidence, returning it to solid footing as quickly as possible. For example, if a board finds itself in a volatile situation--with the company's very survival in doubt--the directors will have a high sense of urgency to move quickly and restore stability, turning to an interim executive experienced in reorganization leadership. This kind of interim executive should have financial and operational expertise, be able to manage a variety of stakeholders, and know how to drive the reorganization process to a conclusion in a timely manner.

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Once the crisis has been resolved and the organization has returned to normal business operations, the board can place a permanent executive who focuses on managing and growing a healthy company.

Ken Hiltz is a managing director with AlixPartners, a firm dedicated to solving operational and financial problems for large and middle-market companies globally (www.alixpartners.com). The firm has over 450 employees in its Chicago...