The actual return on investment varies enormously, depending on the reason the interim manager was hired and the type of project. But as a guide we would say that for every €1 you invest in an interim manager you get between €3 and €20 back. See our case studies for examples.
Based on a €90,000 Management Position
- Four-month delay incurred finding a permanent employee = €90,000 lost contribution. Why?
- Speed of delivery (depending on project) = €200,000 to €1,300,000 in accelerated results. Why?
- Value of impartial advice = €25,000. Why?
- Value of having someone overqualified in place = €25,000. Why?
Cost of interim €900/day over four months = €72,000. More about pricing.
- Return = between €340,000 and €1,440,000
ROI = between 4 and 20
This notion of an interim manager being good value for money may surprise many. After all, at first glance interim managers are not cheap. Charge-out rates vary but are typically €800 to €1,200 for a middle or senior manager up to possibly €2,000 for a board-level senior executive.
For someone trying to temporarily fill a €90,000 a year role, this can look expensive. This is because they fail to realise the true way to value an interim manager's contribution.
Companies first need to realise that a permanent employee on €90,000 per annum is actually costing the business a lot more. Once you have added in bonuses, holiday pay, social security contributions, employers' national insurance contributions, pension, health and company car benefits, the real employment costs are nearer €160,000 per year.
You then need to factor in the advantages of quickly plugging that recruitment gap. In a typical recruitment scenario a company takes a month to find the right person. The executive being hired will then have to typically serve a three-month notice period. So it will be four months before the candidate is in place, and five months before you know whether they are really the right choice or not. If the decision has been a bad one, you start all over again.
A senior manager is, on average, worth at least three times their annual salary in terms of their contribution to a company. Looking at our executive earning €90,000 per annum, if you take four months to find the right person, the delay has cost your business €90,000 in terms of lost contribution – and that's excluding the recruitment fees which traditional agencies charge, and the unease and inertia which the recruitment delays have created.
Speed of delivery is another consideration. Unlike a permanent employee who can have several months of grace while they settle in, get to know their way around an organisation, meet people and so forth, interim managers are recruited with a clear set of deliverables and a fixed, often incredibly short time scale in which to deliver. They know how to quickly fit in and get things moving.
They will not get sidetracked with office politics. They are implementers who know they will be judged on their ability to hit the ground running and deliver from day one. Depending the importance of the deliverables the value of this speed can be enormous. For instance, interim managers from EO helped take a major energy supplier into a major new market and cut its cost base to the tune of €85 million, which is nearly 20% of its total cost base, in a matter of months.
You can add to the ROI formula the interim managers' value as an impartial sounding board. Remember interims do not expect to have a long-term career with you, so they are not going to tell you what you want to hear – they will tell it how it is. Their candour could save you a fortune. Also interim managers offer instant experience and a capability which is almost always one rank higher than the job requires.
Finally, when valuing the contribution of using interim management, one can always ask the question: "what is the cost or opportunity loss of not doing it".
Want to learn more about how cost-effective hiring an interim manager can be? Contact us now.
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