Are Interim Management daily rates still justified in the current coronavirus crisis?

Demand determines supply. It is therefore not surprising that certain Interim Managers are currently offering their services at much lower prices than before the pandemic. Corona crisis. When capacity utilisation falls drastically due to the collapse in demand, the obvious thing to do is to throw your services onto the market at dumping prices. But does such behaviour make sense and, above all, is it sustainable?

When determining the daily rate, the rule of thumb is that it should be approx. 1/100 of the annual salary of the vacant position. For a gross annual salary of CHF 250,000 to bridge a vacancy in a COO role, this would be CHF 2,500 per day. This value is now often compared with the internal daily rate and the annual salary is divided by the number of working days (CHF 250,000 / 220 working days = CHF 1,136). If you now compare the two daily rates, the additional costs at first glance are CHF 1,364 / day (+120%).

However, a more in-depth analysis reveals a different picture:

• The daily rate of the Interim Manager includes acquisition costs that would also be incurred when filling a permanent position. Interim Manager providers charge up to 30% of the daily rate for the placement of a suitable candidate, for example. This corresponds to the commission of a headhunter for a permanent position.
• The Interim Manager is available immediately and the vacancy can be filled promptly. This eliminates uncertainty among the workforce and minimises the duration of the vacancy without a manager.
• Thanks to the uncomplicated hiring and firing arrangements, there are no additional costs at the end of the assignment.
• Interim Managers are used to delivering added value from day one. There is no familiarisation period or the Interim Manager provides this free of charge before the start of the assignment. This contrasts with the formal familiarisation period for a new, permanent employee. To ensure this quick start, Interim Managers usually bring more expertise to the table than the position actually requires.

Conclusion

The difference between the internal daily rate and the daily rate of an Interim Manager is therefore entirely justified.

If an Interim Manager sells his services below their value, this cannot be sustainable. Just as a company would not hire the COO (in the example above) at a massively reduced annual salary of CHF 125,000, an Interim Manager should not be hired at a massively reduced daily rate of CHF 1,250. Here, too, the premise applies: "You get what you pay for". Especially when filling strategic positions in a company on an interim basis, the focus must be on performance and not price.

A slight adjustment of the daily rates to the current crisis is certainly necessary and justified. However, a assignment should still be awarded on the basis of an Interim Manager's suitability for a specific requirement and not because of the "cheaper" daily rate.