Why Search Firms, and Their Clients, are Embracing Interim Talent

July 24, 2023 – Business trend studies come and go, but you can be certain that executive search firm leaders everywhere sat up a bit straighter when they came upon the findings of this spring’s Business Talent Group (BTG) report on “high-end independent talent,” also known as on-demand or interim talent. Since last year, said the study, the need for interim leadership rose 116 percent year over year at all levels throughout organizations, with the demand for such help in the C-suite rising by 78 percent. Calls for interim CEOs surged 220 percent year over year and climbed 100 percent for CHROs and chief transformation officers. Most wanted were CFOs, which represented nearly half of all interim C-suite leadership requests, said BTG, a company that Heidrick & Struggles acquired two years ago. Businesses asking for interim finance chiefs rose 103 percent year over year, while the demand for interim controllers skyrocketed 233 percent and rose 71 percent for all interim finance talent. Also up, by 20 percent, were interim talent requests for IT and tech transformation projects and skilled workers in tech and systems implementation, as organizations invested heavily to capitalize on rapid tech advancements.

“The dramatic increase in demand for interim leadership underscores the significant challenges companies are experiencing in today’s turbulent market,” said BTG CEO Amelia Warren Tyagi. “The uncertainty that organizations are facing emphasizes the importance of effective leaders to drive critical transformations and position companies for resilience in a world of constant change.” As business leaders are challenged to do more with less, she said, “they are acknowledging the full benefits offered by on-demand talent—in both interim leadership roles and project-based work—to deliver the expertise needed to fill skills gaps and navigate uncertainty while remaining flexible with capacity and cost.”

This week, to meet similar demands that it sees, The Tolan Group (TTG), a Hunt Scanlon Top 50 healthcare and life sciences executive search firm, is launching TTG Interim, a service specifically designed for private equity organizations and their portfolio companies in their search for senior finance and accounting talent, ranging from vice presidents to controllers and chief financial officers, for interim assignments. Although the St. Augustine, FL-based headhunter is healthcare focused, the new interim offering will be industry agnostic and serve all PE-backed sectors. TTG is also a Hunt Scanlon Top 60 financial recruitment provider, a designation it achieved based on the sheer volume of executive search work the firm executes for financial executives.

The Best of Both Worlds

Shifting demographics and the growth of PE-backed portfolio companies have helped to create a strong market demand for finance and accounting talent, said  Tolan Group founder Tim Tolan. With a track record of success in financial executive search, TTG specializes in executive-level recruiting including for finance and accounting professionals. “Clients now have the best of both worlds, permanent and interim solutions,” said  Mr. Tolan. “We understand the needs of private equity when it comes to hiring. They require high quality talent with an emphasis on speed which many search firms simply don’t understand.”

Related: The Pros and Cons of Hiring Interim Executives

Welcome to what a recent Korn Ferry report dubbed “the rise of interim and contract talent.” Said that study: “Contract work isn’t new, but it is here to stay.” Korn Ferry, the largest search firm globally and in the Americas as ranked by Hunt Scanlon Media, should know. In the last year or two alone, the Los Angeles-based recruiter has snapped up on-demand talent firms Infinity Consulting Solutions, Patina Solutions Group, and most recently, Salo LLC in Minneapolis, MN, a provider of finance, accounting, and HR interim talent. And earlier this year, rival Heidrick & Struggles closed on its acquisition of Atreus GmbH, a Munich, Germany-based firm that provides interim C-suite-level executives.

In 2021, Heidrick acquired BTG itself, a Los Angeles-based pioneer of the high-end independent talent marketplace. That other firms, big and small, are also jumping in and seeing success with interim offerings should be no surprise, given the needs of a post-pandemic business world. ZRG Partners, WittKieffer, McDermott & Bull, IIC Partners, The Christopher Group, and Wilton & Bain are just some of the firms embracing interim services.

The Tolan Group, for its part, is well positioned for its interim launch. Drawing upon a vast network, the firm has an extensive pool of finance and accounting executives with valuable private equity experience throughout the U.S. at the ready. Through regular and proactive communication, TTG maintains a strong rapport with these candidates, ensuring a steady and reliable pipeline of highly qualified professionals. This eliminates the need to initiate engagements without a robust candidate pool, while addressing the need for speed and efficiency demanded by its private equity clients.

To further streamline operations, TTG has partnered with Signature Back Office Solutions, relieving clients of payroll, benefits, and long-term commitments associated with salaried finance executives. Weekly or bi-weekly payments, healthcare coverage options, and paid time off are seamlessly managed through this collaboration. Furthermore, the firm offers short or long-term agreements with a conversion option that allows clients to hire contractors as full-time employees within their portfolio companies.

“The Tolan Group has developed a niche, state-of-the-art interim talent solution in short order based on increasingly heavy client demand,” said Scott A. Scanlon, CEO of Hunt Scanlon Ventures who has been advising the firm’s founder and management team on its launch. “This is a big win for The Tolan Group, but an even bigger win for its clients,” he noted.

Soaring Demand

The reasons behind TTG’s new finance and accounting service line are easy to grasp. For starters, as the BTG report shows, the demand for interim CFOs is soaring. “In addition, 2022 capped off a five-year high in CFOs resigning which might explain why CFOs are the most requested executive role at TTG,” said Mr. Tolan. “Years ago, the chief financial officer was strictly a senior accountant, usually with an MBA or CPA or both, always tasked with crunching numbers. Today, the CFO has evolved into a strategic business partner working with the CEO to help develop and scale the business. That requires a different skill set.”

Related: Answering the Growing Call for Interim Executive Talent

Also, PE firms have seen the need to upgrade financial leadership as a platform begins to scale and grow. “Leading finance for a $250 million platform is much more complex and requires more expertise than a $50 million platform,” said Mr. Tolan. “We find that many PE firms request a new CFO as the platform scales. That’s where TTG Interim comes into play as we can help bridge the gap while we start a new search for our PE partner.”

Recurring Revenue

Simply put, search firms that are diving into interim realize that the landscape is shifting, and that the pandemic only accelerated matters. “Part of it is the changing demographics at play here; as Boomers begin to retire it is creating a huge void in leadership which must be addressed,” said Mr. Tolan. “In our firm, we know for a fact several of our PE partners turned to another solution provider to fill in short-term gaps with interim finance execs while we initiated a new search. By adding this new service line, we can increase our value to our partners by enhancing our talent solution offerings. We want to provide a solution when there is a critical need.”

Related: The Interim Executive Model Has Become Mainstream

Not to be overlooked is the value that recruitment firms gain by providing a diversification of services. “Search is providing services for a particular engagement,” said Mr. Tolan. “Once that engagement is completed, so is the value exchange between us and our clients. Having an interim offering also gives The Tolan Group recurring revenue on top of our permanent placement fees. This increases our cash flow and in the long run it enhances our value as a search firm, and that is where Hunt Scanlon has been super helpful to us as we think about our business and our future.”

Korn Ferry Acquires Patina Solutions Group
Acquisitions continue to make news in the recruiting industry, with a number of notable purchases in recent months. The latest: Korn Ferry has acquired interim executive solutions provider Patina Solutions Group. The acquisition is expected to be immediately accretive to Korn Ferry’s adjusted earnings. “This combination presents real, tangible opportunity for Korn Ferry and our clients looking for the right talent, who are highly agile, with specialized skills and expertise, to help them drive superior performance, including on an interim basis,” said Gary D. Burnison, CEO of Korn Ferry. “Patina offers ideal solutions for today’s nomadic labor market.”

Patina brings to Korn Ferry interim executive solutions expertise across multiple industry verticals. Patina’s network of C-suite, and professional interim talent spans functional areas of expertise such as finance, operations, legal, human resources, IT and more. “The new realities of the workplace – including how people work and when they work – is creating vast new opportunities for executive search firms looking to extend their offerings,” said Scott A. Scanlon, founding partner and CEO of Hunt Scanlon Ventures. “Interim solutions are playing right into this new model and the sector has a massive runway ahead.

Interim talent also fills a particular need for The Tolan Group’s private equity clients, especially when a key executive suddenly departs in the middle of an audit or a year-end close. “That can be a disaster without an interim solution of some kind,” said Mr. Tolan. “In that case, that would be an interim until a replacement candidate is identified.”

PE-Focused

Interim leaders can prove a good addition at a number of points in a PE firm’s investment thesis. “In finance, there could be a need during due diligence to put a small team together for three to four months to help the existing team with all the diligence requests from the acquirer, which is another example of filling a short-term talent need,” said Mr. Tolan. “Another reason could be if a company acquires or merges with another company and they are required to move from cash-based accounting to accrual bases accounting. Same with implementing a new accounting software system. Implementation could take months to complete while the normal demands of the department continue, hence the need for more people to complete the work.”

Related: Key Capabilities for the Modern CFO

For PE firms, interim talent can be invaluable during an acquisition, an exit, or even after filing an S1 to go public. “Obviously, an interim becomes invaluable when there is a sudden departure of a key executive; those examples of interim needs will always be there,” said Mr. Tolan.

“Another situation that has recently surfaced is a PE firm may decide to bring some of their own financial due diligence in-house instead of paying an independent accounting firm to provide a quality of earnings (QofE) report as one example,” he added. “Those QofE reports can get very expensive. If a PE firm suspects any challenges with financial reporting from a portfolio company, they must determine if there is a problem. Getting an outside perspective can be a big help in those situations.”

It is with good reason that The Tolan Group’s interim offering goes beyond just the firm’s focus on healthcare and is open to virtually every PE-backed sector. “We made that choice because many of our PE partners invest across multiple vertical markets and all their portfolio companies have needs from time to time in finance and accounting,” said Mr. Tolan. “We have successfully completed multiple CFO engagements that were outside of healthcare. Because we complete so many CFO engagements, we understand the skills required across most vertical markets and we can be their solution provider for finance and accounting across the entire portfolio. We’ve found that the core requirements for finance and accounting leadership does not vary much from one vertical market to another.” 

Related: Why Interim HR Leaders Are in Growing Demand

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media