ROI of Interim Management (Return on Investment)

Measuring the ROI of an interim manager

One of the advantages of engaging an interim manager is that in many instances it is possible to directly quantify the ROI (Return on Investment) of an interim assignment.

This is because interim assignments are normally project based and have:

• A start date
• A projected finish date
• Measurable deliverables  

But how is ROI calculated for an interim assignment?

We believe in keeping things simple so our definition is as follows:

All the directly attributable net cash flow benefit arising from the interim assignment  = A

 Cost of the interim management assignment (i.e. the "investment") = B

 ROI = A/B expressed as the number of times the  "investment" is recovered or a %.   

Below we show illustrative ROI case studies of interim assignmentd by Interimconnect members:

Interim Management Case Study 1 – Fast Growing Premium Potato Chip Manufacturer – an SME company - Warehouse Management Improvements 

Mark N    Interim Supply Chain specialist

Background and the assignment 

The company had previously attempted to install a new warehouse management system (WMS) system, but were unable to culturally and operationally integrate it into the business.

This had resulted in removing the warehouse management system as it was adversely affecting customer service

The company wanted to re attempt the installation, and decided to bring in an Interim manager who was focused exclusively on the project and would ensure the installation worked to the benefit of the business rather than the software provider. 

Apart from the WMS installation I was asked to:

• Mentor the warehouse manager and her team to broaden their horizons in terms of what other warehouses were doing
• Introduce the use of Key Performance Indicators (KPI’s) and 
• Reduce stock errors caused by continual human interference with stock to maintain service levels

The company wanted a flexible arrangement so I was brought in on a part time basis of 3 days per week to manage the installation and mentor the management team. 

I made sure that the installation was the correct fit for the business and that sufficient time and energy was allocated to proper discussion and adaption. Time was allocated for full user and super user training to ensure the system was properly integrated into the day to day operation.

In addition to the actual WMS implementation, I introduced the KPI’s which both reported to senior management, plus were useful and effective to the management team in assessing performance. 

Finally, we introduced better stock control management to control the movement of stock which brought down stock discrepancies. I also arranged through my contacts to visit other warehouse operations to demonstrate how other organisations dealt with similar issues.

Outcomes and Return on Investment. 

My involvement in the management of the implementation and knowledge of the WMS market enabled me to ensure an effective implementation with full staff cooperation. The best buy for hardware scanners and printers which saved the company a further £50,000 and brought the project spend back to budget, plus a reduction in stock discrepancies of 40% per month (equivalent to £5,000 per month).

The first year benefit or return on investment of the assignment was a return 400% *.

(* Calculated by taking the net cash flow benefits arising divided by the interims fees paid , expressed as a %) “

Interim Management Case Study 2 - Procurement transformation – Automotive – 6 months

 Sean C  Interim Procurement Manager

 Background

The client was pleased with the outcome to the establishment of a European maintenance repair (MRO) operations purchasing operation wished to see similar improvements in its Production purchasing operation and ensure that all teams were performing to the same standard across the European region.

Agreed Brief:

• Profile existing procurement operation against known World Class practices.
• Identify cost reduction opportunities and save Euro 500K by the end of March.
• Identify procurement structure/process options and facilitate their implementation

Delivery Method:

• Developed and refined Procurement Proficiency Profiling tool and benchmarked 6 client sites
• Identified pan industry best practice, assessed suitability to client, bespoke and installed agreed processes.
• Identified saving options, introduced Supplier based co maker programme & implemented agreed programme.
• Identified range of structural options available with accompanying benefit analysis and made recommendation as to which option should be selected.

Outcome & return on Investment:

• Created and installed a Procurement Proficiency Profiling methodology that enabled Best Practice to be identified and rolled out speedily and efficiently.
• Improved Supplier service performance from 85% to 92% within 6 weeks of introduction – 2 months ahead of schedule
• Created a bespoke purchasing process framework under which the new function operated.
• New Roles devised and personnel recruited – A team of 10 within two months.
• Over delivered savings programme by Euro 1.6M delivered by January. – 3 times target & a Return on Investment of 1066% (1600000 saving/150000 fees & expenses).

 Interim Turnaround CEO, MD

Tony T     Interim Turnaround Manager

Interim management Case Study 3 – The turnaround of a UK manufacturing business as an interim MD

Background

• A large European group with a German HQ acquired four UK manufacturing plants as part of a takeover. 
• German parent decided that no further investment would be made into the UK plants 
• All the original directors had left when the sale had gone through and the business had lost its way.
• The remaining managers were struggling to cope with the significant changes needed to turn the business around. 
• Acquisition contract was poor, which left the UK business in a precarious position.
• Annual losses of over £7 million and a £3.5 million debt to suppliers. 
• On top of serious financial difficulties, employee morale was at an all-time low. 
• Unions had balloted for Industrial action, strikes due to take place within two weeks.
• Shortage of raw material threatened to halt production. 
• Production efficiency levels below 50% of German plants
• Quality control was non-functional, which resulted in poor customer satisfaction levels. 

Actions

• Clearing any outstanding debt was the first priority. 
• Mortgaging three freehold properties and committing to paying off all debts to the main raw materials supplier in just six months. 
• The sale of one plant for £3.4 m immediately improved the cash flow. 
• Surplus equipment sold – freeing up £2.2 million of assets.
• Specialist FD consultant was appointed, collecting outstanding monies owed, returning more than £2.5m. 
• Prices were increased by 10-20%.
• Department heads tasked with cost reduction initiatives; resulting in savings of 30% across the business.
• New production planning system implemented, plan agreed on a weekly basis, and monitored hourly. 
• Head count reduced by 250 

Conclusion

• Over a period of just seven months, the company was returned to profit. The net cash flow arising from the interim assignment for 12 months was > £10.5m.
• ROI for 12 months was 3344%. 
• (* Calculated by taking the net cash flow benefits arising divided by the interims fees paid , expressed as a %) “
• With a clear strategy in place, a full turnaround can be achieved. Too often businesses in trouble look at their balance sheets in isolation but as this example shows, operational issues must be addressed to ensure a viable business for the future. 

For more information about the ROI and interim managers do contact Interimconnect.

If you are an experienced interim and are interested in joining the network please follow this link.