By Leigh Anderson, Managing Director, Bis Henderson Recruitment
When there is an urgent need for rapid and transformative change, interim management is a powerful tool for businesses.
The short term need to create a more resilient business that can adapt to the Covid-19 roller-coaster is just part of it. Other changes that a year ago were on some future planning horizon are upon us now and demand a response: the inexorable move to eCommerce, and the growing demand for ‘sustainability’, are just two of these. And there is, for many supply chains, Brexit – whatever that may turn out to mean. Even ‘normal’ activity – coping with Black Friday/ Christmas peaks, for example, may need a blast of fresh external thought in these challenging times.
Radical change, such as the adoption of new technologies, was already an imperative for UK businesses, given the abysmal record for productivity growth – and now, an evolutionary approach is no longer viable. Change is being forced upon business: Microsoft CEO, Satya Nadella, claimed recently that over 20% of British businesses had been forced to scrap their existing business model days after Britain entered lockdown earlier this year.
However, the requisite combinations of skills to devise, implement and manage fundamental change in quick time are in short supply, and few businesses can hope or afford to attract and retain such talent on a full-time, long-term basis. But an interim appointment, accessing that person’s unique and hard won set of skills, knowledge and experience to drive defined and transformative change management projects in a short time frame – that makes perfect sense.
Or it should. Unfortunately, a number of developments are conspiring against the effective use of interim management.
In July’s Interim Management Survey (IMS), 60% of interims reported that opportunities have sharply declined since the start of the COVID crisis. In part that is surely that firms are too busy fire fighting to contemplate radical change, however desirable. But the pernicious effects of IR35 are also bearing down.
‘IR35’ is the HMRC’s continuing drive to reclassify independent and self-employed contractors as employees, primarily to combat perceived tax avoidance. Certainly there have been abuses – but employed status is often quite inappropriate to the interim situation. In the IMS report, 44% say they are primarily involved in change/transformation management, a further 14% in management of specific projects: these are not disguises for long-term continued employment.
Not only are costs (not just taxes and NI) increased for both parties, but also employment contracts often come with rights, obligations and liabilities that neither party has any intention of exercising. HMRC definitions are unhelpful: a self-employed contractor can’t be an ‘officer’, often equated with ‘can’t have management authority’, although the exercise of that authority may be precisely why the interim has been brought in. HMRC rulings can be challenged, of course, but particularly in these times, most businesses (and from April the decision is for the client, not the interim), have better things to do than argue the toss with Revenue & Customs.
For some interims, and their potential clients, there is also the small matter of Brexit. Although much is still uncertain, it may be that there will be real difficulties deploying non-employee managers to work, for example, with subsidiaries or supply chain partners in EU countries or, vice-versa, to use EU nationals to bring relevant skills and expertise into the UK, although this type of skills transfer is surely an entirely predictable need if UK-EU supply chains are to survive and prosper.
So although the need for interim management has never been higher, this isn’t translating into appointments, threatening many interims’ own business models. There is little government support. The Job Support Scheme only applies to workers on PAYE before the end of September. Self- employed Income Support doesn’t apply to those with annual profits above £50,000, nor to those who are trading as a personal company and reward themselves out of dividends. This is bad news for individual interims but perhaps more importantly it threatens the easy supply of the skills and expertise that UK plc badly needs to deploy.
At Bis Henderson Recruitment, we firmly believe that, despite these difficulties, interim managers and executives continue to have a vital role to play in the reinvigoration of British businesses and their supply chains, now perhaps more than ever. We have been matching interim skills and client needs successfully for many years and will continue to do so.