What is the True Cost of Hiring an Interim?
Interim was started in Holland in the 1970’s as a way of injecting much needed flexibility into the market place. Canada is encountering similar issues in the employment market place that Holland saw. Slowly but surely the marketplace is transitioning from being run by the employers to being run by the employees. The main impact is Canada’s greying population. The average baby boom age is 55. They have raised their families and are thinking about retirement. Employers are seeing an average of twelve months and sometimes 18 months to find qualified senior executives. Manpower’s seventh annual “Talent Shortage Survey” found that 25% of Canadian employers are having trouble finding workers with the global average being 34%. The survey uses information from more than 38,000 employers around the world, including 1,000 in Canada. The first survey in 2006 found that 66% of Canadian employers had difficulty finding staff. This number was indicative of the high flying economic times in 2006 and 2007 which prompted companies to expand and compete for workers. All expectations are for the number of employers having trouble finding employees to continue to rise over the coming years as baby boomers enter into retirement. Productivity in Canada continues to be average. Canada ranks 14th on Wikipedia’s list of countries by GDP (PPP) per hour worked. All these indicators point to the need for greater flexibility in the market place similar to the situation in Holland in the 1970’s. Interim is one solution, but is it a costly solution?
Let’s start with a quantitative argument for the cost of interim. To build a quantitative argument, a number of assumptions are needed. The main assumptions will be the Canada productivity number of 47.2 and an annual salary of $200,000. The productivity number translates into for every hour worked there is only 28.32 minutes of productive time. Unfortunately, permanent employees are often busy with non-essential, nonproductive tasks. If companies are only getting productivity from 47.2%, let’s use 50% to make the math easy. Our second assumption is an average CFO salary of $200,000. At $200,000 per year – we add 50% to cover productivity gap and the annual salary becomes $300,000. Then the third assumption is 50% for benefits (health care, parking, gym memberships, executive health, etc) which brings the annual salary to $400,000. Our final assumption is 1,775 working hours in a year (net of vacation, statutory holidays, etc). If we divide the newly assumed annual salary of $400,000 by 1,775 hours per year an employee works, we can quantitatively calculate an hourly rate of $225. An interim assignment priced at less than $225 is therefore a bargain.
Now let’s turn our thoughts to the qualitative arguments. Interim placements can have an immense advantage in a variety of ways. They are not involved in office politics and can provide a “hard truth evaluation” of the situation. Years of experience give them an ability to quickly evaluate the situation, determine barriers and bring creative solutions forward. If you are engaged in a search for a full time CFO, they can prove to be a valuable asset in the selection process. If on the other hand, the organization feels that with proper mentorship, another member of the finance team could eventually assume CFO duties, the interim can be a key piece to that process. Finally, if the size of the organization dictates that it really only needs the oversight a senior CFO could provide a few days each month, interims can fill that fractional role on an ongoing basis.
As Canada’s labour landscape changes, senior and experienced executives will become a scare resource. Based on these quantitative and qualitative factors, an interim executive provides value in a unique way.