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Directors willing to cut base pay rates to work at SMEs

Directors willing to cut base pay rates to work at SMEs in return for performance related pay

Some managers will take just half their pay in cash for SMEs balance in performance related pay

Interim directors and senior interim managers are now willing to take a cut in their day rate to work at a small or medium sized enterprise (SME), says Interim Partners, the leading provider of interim management solutions.

According to research by Interim Partners, amongst interims, 39% of them were willing to have more than 20% of their fee performance-based.

Some senior managers are even prepared to cut their day rate from the 757 per day they average at FTSE-350 companies to 350 in cash per day (with the balance topped up with performance related pay) to work at an SME.

Doug Baird, Managing Director of Interim Partners, comments: Interims will accept a lower guaranteed day rate from an SME in exchange for a performance related bonus.

For an SME being able to stage payments to interims can be enormously beneficial even if they end up paying slightly more if the interim hits their performance target.

Interim Partners research* also found that interim managers saw SMEs as the number one choice for their next placement, with 31% of interims saying they would prefer their next role to be at an SME compared to 20% who would prefer it to be at a FTSE-100 company. (see table below)

Interims are senior managers and executives who are recruited on a short-term basis.

Doug Baird says: Most people assume that top managers prefer to work at large businesses so they might be surprised to hear that they would prefer working in a small business to a FTSE-100 company.

Since the late 1990s there has been a slow shift towards seeing fast growth start-up businesses as more satisfying to work at than major international corporations.

The prospect of joining a small business and helping it to grow rapidly is very tempting for many experienced managers.

The last recession has helped that trend as it became clear that working for a blue-chip is no protection from redundancy.

Says Doug Baird: Interims that have decided to work at an SME have already accepted that their pay will not be as high as it would at a large organization.

Smaller companies can be seen as less political, less bureaucratic and quicker to respond to changes in the market than big businesses. Interims also enjoy being able to see the direct impact they are making on the businesss success, which is often less clear-cut in larger businesses.

Lets not overplay this, but there is also a small element of altruism that attracts senior managers to SMEs. Small businesses do tend to be more embedded in the community and their growth is an important creator of local jobs.

SMEs can benefit hugely from the experience of senior managers of this calibre, who can make an enormous difference to profitability and growth prospects. Interims also leave a legacy in the business because the permanent staff can learn so much from them while they are there.

Interims are experienced at integrating into a new culture and quickly identifying low risk opportunities for enhancing profitability. Those skills are not always available from senior executives that spend 10 or 15 years at each job that they do.

Doug Baird says that SMEs can find ways of paying a low upfront cost for the benefits of an interim with heavy weight experience and knowledge by providing some of their pay as a performance-related bonus.

According to the survey by Interim Partners, 90% of interims would be willing to have part of their payment based on performance. Of those 82% of interims would be prepared to have over 10% of their fee performance based.

Doug Baird adds: Interims are confident that they deliver value to the businesses they work for so they are often happy to take some performance related pay.

In the case of a small business, using performance related pay could be a great way to get the high quality management expertise of an interim on board without frontloading the business with staffing costs it cannot afford. Paying someone out of increased profits has an obvious attraction.

Interim Partners survey results*

If you were to work in the private sector, in what kind of company would you prefer your next assignment to be?

SME

31%

FTSE 250

28%

FTSE 100 or equivalent

20%

SmallCap FTSE

11%

AIM-listed

5%

Other

4%

Would you be prepared to have part of your payment based on your performance?

Yes

90%

No

10%

If yes, what is the maximum percentage of your fee that you would be willing to have based on your performance?

0-5%

2%

5-10%

16%

10-20%

43%

20%

39%

* Based on responses from over 1500 interim managers

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