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Goodbye 2016. Hello 2017.

In contrast to some, I love every new year and always enjoy the opportunity to start afresh. I feel this even more this year.

 

Looking back

On a macro basis, as a Remain : Clinton : Tottenham supporter, 2016 wasn't kind to me and I'm probably happier to see the back of it than many a recent year. From talking to our community of interim managers and clients, many of them share the sentiment. Irrespective of where their judgements lay on the big questions, most interims would agree that 2016 wasn't a vintage year – for interims or the businesses which engage them.

The shock of the Leave vote led many businesses into a period of awe, as they stared at their tanking share prices and wondered what the future might hold. While it often the case that change, disruption and transformation result in an increase in the opportunities for interims, reflection and inaction do not. For many interims, particularly in the private sector, the summer was exceptionally quiet and I spoke to experienced and able interims who found themselves without a role for several months. Only in the last 6 weeks of the year did we see a return to more normal market conditions.

The Public Sector wasn't sheltered from inclement conditions either, in particular for those interim specialists in the NHS, where rate capping went from being an ugly rumour to short term reality to the future state. Demand is still very high in the NHS, but pay rates will never return to 2015 levels and there are further challenges to come.

Looking forward

So, what does this year hold? Well, on one level we now know what is going to happen next; Brexit and Trump. The reality is that what the effects of this will be on UK and world economies is anyone's guess, hence the last thing you need is mine. I'll reserve my predictions to what I know best – interim management – and give you a sense as to how I think 2017 will play out.

1. Continued challenges in the Public Sector

  • The NHS. More of the same. Most interims are aware that while demand continues for their services, the pay rates that they were used to in years past will not return. We do, very occasionally now, speak to an interim in a long assignment who believes that their current rate represents their future market value, but most understand the world as it is. At least we can look forward to fewer 'Interim Manager earns 6x as much as PM' headlines, but for many this will be cold comfort, especially given other winds of change blowing through the wider public sector.
  • IR35. We speak to an interim a day who asks us, in simple terms, "How do I make this go away?" The truth of the matter that it isn't going away and it will make a significant difference for some, less so for others. In essence, the true interim carrying out transformative work on a consultative basis has less to fear than a contractor covering a vacant substantive post, but I suspect the biggest effect it may have will be in client hiring behaviour. Will engaging an interim become too risky, difficult or complex in the mind of the hiring manager? Will hiring a permanent alternative seem less hassle? It's just too early to tell, but I suspect that after a period of mild panic, relatively normal market conditions will return for the more experienced interim community.
  • General election. Let's hope not, but the bookmakers think current odds are around 2-1 against a snap election this year. If this were to happen then it's bound to adversely affect hiring budgets in central government, with a knock on to the wider Public Sector. Not good news for the interim community driving change in the corridors of Whitehall, or those in the NHS, local government or education.
  • Demand still sky high. To finish on a more positive note, the necessity for great interims to drive change in the Public Sector has never been higher. The landscape is very unstable and many organisations will look to wise heads to guide through challenging times.

2. Bigco struggling to adopt technology change quickly enough

  • AI, disruption, predictive analytics, biotech make the headlines. If you want a positive business story, then technology is the place to look. In 2016 the media was full of stories about the positive impact disruptive and 'bleeding edge' technological innovation will have on the UK and its consumers. This is clearly good news for those who will be able to monetise or consume these products and innovative services, but lots of businesses are way back on the technological curve, struggling to make sure their legacy business model can survive the jump to future – or even current - reality.
  • Existential threat. For many large well known businesses, in banking, insurance, business services and manufacturing, the change in the way that customers want to engage and what they want to buy has shifted far faster than the mind-sets of those running the businesses. These businesses face an existential threat and many are looking to interims from more 'advanced' sectors to guide them on the way. The most significant trend has been for interim managers with IT and Digital transformation experience gained in the retail sector to segue into more traditional industries to help them drive the necessary change. This is interesting in itself. The high street has managed to adjust to the absence of Woolworths; wiped out by lither competition. Does it really need a bucket load of big retail banks?
  • Innovation brings its own challenges. Even those businesses who future state successfully, have major issues to worry about. Principal amongst these is cyber security. Many digital commentators have suggested that banks in particular could face hacking on an apocalyptic scale and recent ugly events at Tesco Bank have to be a concern. Perhaps of even more concern is that digital natives such as Yahoo and Google had well publicised problems in 2016, suggesting that more traditional businesses will have even more problems keeping those it wants to keep out, out. Concerning, unless you're an interim with security expertise, in which case you can expect some big pay cheques. Just be very sure where you deposit them.

3. Pressures on management consultancies to show value

  • Pricing and value increasing priorities for management consultancies. 2016 was a tough year for most of the consulting firms, with few reporting other than declining revenues. For some it was about orders, for others it was about pricing, for the majority it was both. We noticed that, in the NHS in particular, the customer's view of interim management and management consultancy started to align. Yes, we want it, but, no, we're not paying what you want to charge for it.
  • A number of the big boys have decided to pursue alternative strategies to keep busy. This typically is a desire to be able to deliver to projects on budget, but still at acceptable margins. This has been good news for interim managers, many who have been co-opted onto projects as associates, either directly or via interim providers such as ourselves. The benefit to the client has been clear; high quality resources without having to pay for the corporate machine. Most clients are aware that when they engage with a large firm they're paying for everything from the Partners' bonuses all the way through to the Christmas Party, and they don't like it. The use of interims helps consulting forms price commercially.
  • Opportunities for interims to work direct. Even allowing for some belt tightening and creative pricing, many projects which might have once attracted interest from the bigger consultancies will just not pay now. This is an opportunity for teams of interims to offer a cogent alternative supply. We see this as a trend which is likely to grow, as long as the offering looks unified, enduring and capable of delivering defined outcomes rather than man days and invoices. This would happen more regularly, but interims typically find it hard to negotiate this part of the gig economy, and it is often businesses such as mine which provide the glue to bind the proposition.
  • Providing 'comfort' that the interim option is credible alternative. This is vital, and it's the most significant blocker to those looking to pitch against more established management consultancy models. To oust an established provider, a team of interims needs to be able to trade on more than price. It has to be able to demonstrate it can work with the outcome in mind, define the road map to complete the project, signpost he key deliverables and then hit then. A track record is absolutely a pre-requisite, but so is the ability to demonstrate a methodology, as ROI does for us.

4. Cross border collaboration defying Brexit expectation

  • Growth of opportunities in Europe. Despite the perception that European business views our recent vote as a thumbed nose, my experience of the last six months has been that this isn't the case. Generally, many of our European customers seem to be able to tell the difference between reality and polemic – USA take note – and there has been no loss of appetite for UK based interims working in Europe. Whether the reality of Brexit will make this more difficult is anyone's guess, but I suspect that pragmatism may rule the day. Given the fact that the 'cradle of IM', the Netherlands, itself has a very ambivalent relationship with the EU means that commercial considerations are more likely to hold sway over political ones in my view.
  • Northern Europe has a sophisticated view of IM. The switch from using consultancies to interim managers to drive change and transformation has already happened in Northern Europe and, typically, many businesses in DACH, Scandinavia and the Netherlands have a much more sophisticated view of IM than we do in the UK. Imagine sitting down with a customer who already know what an interim manager is and feels more comfortable with them than they do with a Partner of a large consulting firm? Appealing? Not the reality in every case, but more case than happens in the UK.
  • Opportunities further afield. Interim management isn't only a European play anymore, and I believe demand will also grow elsewhere, particularly in Asia. Most businesses facing challenges, whether to grow, to change or to survive, can benefit from the skills interim managers bring, and as larger companies increasingly try to act globally there will be more opportunities to work internationally. Last year Skelmersdale, this year Stockholm, next year Shanghai.

So, an early call, but I think that 2017 could be a vintage one for interims, particularly those who can bring fresh thinking to those areas of the world economy who most need it.

Happy New Year,
Steve

 

Steve Rutherford is the Managing Partner of Interim Partners.