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BECOMING AN INTERIM MANAGER

Institute of Interim Management in association with

Association of Chartered Certified Accountants London – 26 March 2009

© IIM 2009 All rights reserved

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Tony Evans Director

Tom Brass Chairman

Institute of Interim Management

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Agenda

• Taking The Decision • Setting Out Your Stall • The Regulatory Side • Protecting yourself

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Taking the Decision

•  What is Interim management? •  Why do clients use Interims? •  The pros and cons of being an

Interim •  What makes a successful Interim?

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•  A professionally qualified, independent practitioner

•  who deliberately chooses to work as a supplier of specific skills, knowledge & experience

•  applied with client-agreed, significant line decision making authority,

•  on a fixed-term fee basis, for a specific period & scope of work.

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•  A Consultant: contracts to provide expert analysis & advice involving skills & perspectives which would not normally be expected to reside within the client organisation & facilitates client decision making

•  A Temporary Worker: undertakes specific, usually straightforward tasks, for short periods, under supervision, & paid through payroll.

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•  Self Employed: A generic term used to refer to anyone not working for another organisation as an employee. They may or may not operate within a legal organisational framework eg Ltd or LLP

•  Contractor: A person or firm who contracts to build things, or provide services, performing a specific task where the client is not liable to others for acts or omissions

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•  Parasubordinate or “Economically Dependent Worker”:

•  Self-employed, working at their own risk

•  Not subordinate to an employer •  Yet is economically dependent – •  They are more or less reliant

exclusively on just one client enterprise.

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•  For Projects: 58% •  As a Locum: 58% •  For ‘Change’: 48% •  i.e: undertaking a lot of projects, to

restructure and re-engineer, add new technology and implement new systems, often related to the need for change within their organisations.

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Clients say the key benefits of interims are, in order:

•  Immediate availability: 80% •  Results focussed: 74% •  Introduce new skills & experience: 61% •  Hit ground running (overqualified): 56% •  Hands on approach to the role: 52%

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Clients say the key benefits of interims are, in order:

•  No Long Term Commitment: 39% •  Skills Transfer: 37% (cf 69% by IMs) •  Quantifiable Cost: 31% •  Cheaper than a Consultant(!): 15% •  Less Threatening cf a Consultant: 6%

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70%+ of assignments were concentrated into 8 sectors

•  Financial Services: 17% •  Public Sector: 15% •  Construction: 8% •  Rail/Aerospace/Defence: 7% •  IT/Technology: 7% •  Manufacturing: 6% •  Food/FMCG: 6% •  Transport/Logistics: 6%

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55%+ of assignments appear ‘Finance relevant’

•  General Management: 20% •  Finance: 11% •  Project Management: 11% •  HR: 11% •  Operations: 10% •  Commercial/Sales/Marketing: 10% •  Programme Management: 9% •  Distribution/Logistics: 6% •  Turnaround/re-engineering: 5% •  IT: 4% •  Other: 3%

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Boyden Market Research: end 2008

•  Earnings:   17% > £150k   30% £100 – 149k   31% £75 – 99k   22% < £75k

•  Average Fees: £742 per diem •  Average Contract Length:

  Initial period – 60 working days   Overall – 170 working days

•  NB: Top 8 providers delivered c.40% of UK intermediary market

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•  Projects with Specific Skills/experience: 75% •  Drive Change: 41% •  Gap Management: 33% •  Alternative to Consultancy(!): 31% •  Flexible Resource with Tight H/count: 22% •  Unique Experience/Skill: 3%

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Master of Your Own

Destiny

Market Understanding

Client Cost/Benefit

More Regulation

Corporate Outsourcing

Market Growth

Corporate Specialisation

Private Equity Funded M & A

Professional Support

Personal Freedom

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REGULATION

PERSONAL LIABILITY

NETWORKING WHILST ON

ASSIGNMENT

PROVIDERS: THE GOOD THE BAD THE UGLY

YOUR WORTH

CPD

WORK FLOW

EMPLOYED/ NOT EMPLOYED

TAX TREATMENT

TRIALS & TRIBULATIONS

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•  Limited Company •  VAT Registration •  Professional Indemnity Insurance •  Market Position •  Understand Relevant Regulation •  I.D. Your Company Service Providers •  Application for IIM Membership

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•  What You Trade On

•  CPD to Maintain Competence

•  Maintain Quality of Performance

•  Professional Body Membership

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•  Interims and Permanent Employees Use the Same Range of Attributes

•  So: What’s Different?

•  Relative Strengths of Key Attributes

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Successful Interims Require:

•  FLEXIBILITY & ADAPTABILITY •  INDEPENDENCE & INTEGRITY •  RISK TAKING & JUDGEMENT •  PERSONAL CREDIBILITY & RAPPORT BUILDING •  LARGE LEARNING CAPACITY & STRESS TOLERANCE •  EXCELLENT COMMUNICATION SKILLS &

PERSUASIVENESS •  VERY HIGH WORK RATE & OBJECTIVES DRIVEN •  BE AT EASE WITH ACCOUNTABILITY & RAPIDLY

BUILDING EFFECTIVE WORKING RELATIONSHIPS •  PRIORITISATION, PLANNING & ORGANISATION

IN VERY LARGE MEASURE

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Setting Out Your Stall

• Defining your value proposition

• Routes to market

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Marketing: Arrgh – The 4 P’s • Product (you) • Position • Promotion • Price

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• What are you offering?   FD/FC/Mgt A/C   Sector expertise?   Particular Experience?

• How do you keep/enhance your Product Value?

•  It must be clear for the client

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Position

• What market segment?   PLC; PE; SME; PS?

• What client Layer?   Board; one –off;

departmental; specialist?

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Promotion

•  How are you going to make yourself known to the client?   Last employer stakeholders   Own network: Personal; Electronic   Personal contact   Materials   Message   Format: electronic; hard copy   ‘Contracting out’?

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Price

•  What terms do you seek? NB Contractual terms crucial •  How flexible are you?

  Variables such as situation; contract length; days per week; sector; skill required; geography..

•  What are your MOPs & MAPs?

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Route To Market INTERIM

PRACTITIONER Co. Ltd.

PERSONAL NETWORKING

PROVIDERS “Outsourced”

S. & M.

CURRENT CONTACTS

NEW CONTACTS VIA

THIRD PARTIES

NEW CONTACTS VIA

COLD CALL IMA

PROVIDERS

OTHER QUALITY

PROVIDERS

MARKET CONFUSERS

SPECIALISTS

GENERALISTS

SPECIALISTS

GENERALISTS

c. 70% c. 30%

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The Typical Interim?

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Being A Professional Interim Practitioner

IF your priority for a career giving:

  Personal Freedom & Control   Work Situations Holding Most Job Satisfaction More

Frequently   Overt Sense of Value Added to Your Client   Increased Sense of Personal Worth   No Glass (or any other material) Ceilings   Independence of Company Politics (but not ignoring it)

Is clear to you:

See us, the IIM, and meet practising Interims for informal discussion and start networking today.

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The Regulatory Side

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The Regulatory Side

•  Setting up in business – company or sole trader

•  IR 35 •  Employment agency regulations

opt out •  Money Laundering Regulations •  Directors

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Company or Sole Trader? Company: •  Chosen by 90% of Interims •  Decision largely driven by Providers •  Providers prefer PSCs rather than MSCs •  Usually more tax efficient to take a mixture of salary

and dividend •  Some limitation of liability But •  Compliance cost •  IR35 •  Income shifting

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Company or Sole Trader? Sole Trader: •  Risk under Demibourne case removed by Income

Tax (PAYE)(Amendment) Regs 2008 :   Under Demibourne HMRC must assess client even where

someone else in contract chain has already paid tax, and no credit given for that tax payment

  Regs allow HMRC discretion – the norm unless deliberate collusion to avoid payment of PAYE and NI

But •  Employment Agency Regs opt out not available •  Unlimited liability •  Usually less tax efficient

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IR 35

CLIENT

JACK EMPLOYEE

JACK SELF-

EMPLOYED

PROVIDER

JACK LIMITED

JACK

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IR 35 •  Depends on employment status

•  ‘Badges’ of self-employment:   Undertake projects not roles   Carry risks (non payment of fees; rectification of

errors at own cost; liability for negligence)   Mutuality of obligation?   Determine what needs to be done, when and how   Supervision and control?   Right of substitution/sub-contractors   ‘Own tools’   No notice period

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Recent Cases (1)

•  Dacas v Brook Street  Can look across a three-sided

arrangement •  Cable & Wireless v Muscat

 Arrangement artificial •  James v Greenwich Council

 Control, but no mutuality of obligation

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Recent Cases (2)

•  Dragonfly Consultancy Limited v HMRC  Substitution  Control   Intention of parties  Worker status

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Lessons (1)

•  Get the right terms in the contract   Record statements of choice   Use the right language   Address mutuality of obligation   Address right of substitution   Address right to work for other clients in

parallel   New contract on extension/renewal, not

rollover   Try to ensure ‘upper’ contract (contract

between client & provider) mirrors your contract with provider

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Lessons (2)

•  Make sure reality = words  Ensure client operates the contract

terms in practice  Avoid integration – Interims to be

treated differently: supervision, presence/absence, holiday/sickness, discipline, canteen, staff events etc

 Carry employer’s liability insurance (to give reality to right of substitution)

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Employment Agency Regs 2003 Opt Out

•  Provider can only protect ‘Interim to Perm finders fees’ if the Interim operates through a limited company and opts out of the Regulations

•  If Interim does not opt out, his/her remuneration must be paid even if Client does not authenticate a timesheet or fails to pay the Provider

•  For the opt out to be effective, it must in place before work is offered to the Interim by the Provider. Therefore requires a document separate from any formal contract for services

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Money Laundering Regs

•  Effective 15 December 2007 •  All transitional periods for registration

with a regulator have now expired. So:   It is a criminal offence to start or carry on

regulated activities without a regulator already in place

 Regulator = ACCA or HMRC  Practising certificate required?

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Regulated Activities •  Providing accountancy services and/or tax advice •  Acting as a freelance director if:

  acting on nominee basis

  client operates in a high risk jurisdiction or a high risk sector and is not

•  already supervised under the MLR or •  a public authority anywhere in the EU or •  a firm authorised by an EU public authority to act on

their behalf where the only customers are also public authorities

•  Arranging for another person to act as a director

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Regulatory Requirements (1)

•  Maintain registration current •  Establish & communicate your risk-based

policies & procedures

•  Customer due diligence   Normally risk-based   Be reasonably satisfied that clients are who they

say they are = identity and verification   Know who they are acting on behalf of – eg

beneficial owners   Simplified due diligence   Enhanced due diligence

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Regulatory Requirements (2)

•  Ongoing monitoring of client’s transactions

•  Document / record   Policies and procedures   Customer due diligence

 Monitoring

•  Report suspicions to SOCA  Making reports  Obtaining consent

•  Beware “tipping off”

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Further Sources of MLR Help •  ACCA – Search for money laundering on

www.accaglobal.com/ •  CCAB – MLR Guidance for the Accountancy Sector

www.ccab.org.uk/. •  HMRC – www.hmrc.gov.uk/mlr/

 MLR 9 – Guide to registration (esp Chapters 3, 6, 7 & 8. See 6.1.14 & 6.1.15 for meanings of ‘high risk jurisdiction’ and ‘high risk sector’)

 MLR 8 – Guide to implementing the requirements of the MLR

•  SOCA – Report suspicions via www.soca.gov.uk/ CCAB and HMRC documents have force of law

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Directorship (1)

•  S 288 directors •  De facto directors

“any person occupying the position of director, by whatever name called”

•  Shadow directors “a person in accordance with whose

directions or instructions the directors of a company are accustomed to act”

(but professional advice exemption)

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Directorship (2)

Duties of directors:  General duties of directors – Part 10,

Companies Act 2006 (ss170 onwards)  Statutory duties (health & safety,

competition law, filing accounts, tax returns etc)

  Insolvency

Must exercise reasonable skill (measured by reference to peer group)

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Directorship (3)

Companies Act 2006 identifies seven duties: •  Act within powers (s171) •  Promote the success of the company (s172) •  Exercise independent judgment (s173) •  Exercise reasonable care, skill and diligence

(s174) •  Avoid conflicts of interest (s175) •  Not to accept benefits from third parties

(s176) •  Declare interest in proposed transaction or

arrangement (s177)

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Insolvency

•  Directors  Wrongful trading (IA 1986 s214)  Personal contribution to assets  Disqualification

•  Officers (directors and managers)  Misfeasance (IA 1986 s212)  Personal contribution to assets

Personal not collective

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Insolvency Act 1986  “…knew or ought to have concluded that

there was no reasonable prospect that the company would avoid going into insolvent liquidation…” (IA s214(2)(b))

 “…has misapplied or retained, or become accountable for, any money or other property of the company, or been guilty of any misfeasance or breach of any fiduciary or other duty in relation to the company…” (IA s212(1))

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Protecting Yourself

•  Professional Indemnity Insurance •  Directors’ & Officers’ Insurance •  Keep your own minutes - ICON •  Suspect all non-routine transactions •  Watch your back – and everywhere

else!

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A Final Thought!

“It's only when the tide goes out that you learn who's been

swimming naked”

Warren Buffett

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T: +44 (0) 800 030 4716 E: info@ioim.org.uk

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