How to choose an interim manager and not choose your own company: Simon Srp (#196)
- Martin Hurych
- před 5 dny
- Minut čtení: 30
Do you feel like your company is starting to outgrow you? That you're choking more than you're breathing? And that maybe it's time to let go of management - but you don't really know how to do it all right?
Then you're facing one of the toughest decisions of your business life.
Hand over. And not to let your own business get smashed in the process.
For many business owners, handing over management is painful, uncomfortable or even scary. And it often ends in failure. They hire the wrong person. They keep everything under control. Or they make the interim manager a lightning rod. And then they say that way doesn't work.
But it does. If you know how to do it.
My guest is Šimon Srp, founder and CEO of Simon Says, which specializes in outsourced and interim management. He's not a theorist, he's a practitioner. His firm has managed dozens of companies when the owners stopped managing, the company grew too fast, or chaos needed to be resolved acutely. He has very clear views on this. And he's not afraid to say them out loud. Honestly, without managerial platitudes and ego games. Because interim management isn't about grandstanding. It's about responsibility, trust and the ability to stop holding your own company back.
Together, we discussed:
This isn't a conversation about everything going well. It's a conversation about what can happen - and how to prepare for it. Whether you're looking for someone or you already know it's coming, this is an episode you don't want to miss.
"The price of an interim manager is an irrelevant metric. That person, has such a big hit that if he (mis)succeeds, it will have more impact than it costs you. Make your selection based mainly on industry references."
Šimon Srp | CEO @ Simon Says s.r.o.
How to choose an interim manager and not pick your own firm
(Transcript)
Who is Simon Srp
Martin Hurych
As well as being the CEO of Simon Says, you're also the CEO of Simon Says Digital, co-founder of Simon & Ex, a trained historian and philosopher, a cimrmanologist, an introvert, a believer in good food and alcohol, and a digger with strong opinions, at least on LinkedIn. What did I miss?
Simon Srp
I studied history and philosophy but didn't graduate, so just to set the record straight.
How does he take speaking out on social media?
Martin Hurych
If someone follows your social networks, there was a time when I felt that Simon was a terrible lover of life, a terrible drunk and liked to pick on everyone. We only know each other relatively superficially, but when I sit with you, you paint a completely different picture. So is what you're posting on social media some kind of introverted defense?
Simon Srp
Probably not a defence, it's more just fun. A drunk who knows how to enjoy life, I'm on a liver diet for 4 months now, so I've proven to myself that I'm not a drunk and I don't have it because of alcohol by the way. I think I can enjoy life, my relationship with life is very ambivalent, so I can enjoy life very much, but I can also make it very complicated. As far as my social networking, typically LinkedIn because I don't really stay anywhere else, I'm not a fan of LinkedIn. I've probably never wanted to write posts using some sort of template and actually I'm significantly more comfortable with the comments ones. I don't measure if it has any impact at all, though feeling-wise I'd say probably rather. It just seems to me that people take themselves very seriously on LinkedIn and I enjoy throwing a pitchfork in now and then, especially on topics that affect me personally.
What does Simon Says Ltd. do?
Martin Hurych
As I've been watching you for a long time, I've also enjoyed the comments, back when you were on Facebook under photos like, with your daughter, Meda, walking with a beer in her hand and things like that. So you have to get to know Simon in person for at least a little while, because the facade that goes out is a little different. But today we are here for something else, today we have a topic to discuss interim/external management and how from the position of a business owner I should start thinking about it if I want someone like that in the company. So that we know what level you're commenting from, come tell us what you do in your companies.
Simon Srp
You mentioned some 3 companies, but basically it's all mine, my business is Simon Says. I started Simon & Ex with Vasek Exner because the synergy and the chemistry between us and the people is huge. Vasek's been doing M&A for x years and within the interims, M&A is a theme that's very synergistic with that. It's about you're either ready and the company is either ready to be sold or it's not and then it needs an interim manager or it's one of those possible solutions. We're basically fed by interim management and we're fed by analytics. I think it's different than it used to be, the analytics is a business of its own for us today.
We do a variety of analysis, it's analysis from small GAPs of 100k to analysis of a million and a half, two million, which can be a big process analysis, financial analysis and so on. But the gro that we grew up on is classic interim management or maybe external management, it's very on the edge because it's a terminology problem. I think that in the Czech environment, the professional discourse here is not fundamentally unified as to what it is. But for the purposes of the conversation, I would say that I see interim management as a standard crisis management, not necessarily, but largely and relatively time-limited.
Our customers, by default, if we survive the first two months together, will stick with us for a long time, on the order of years, so I would think we're fed more by external management.
When is external management an appropriate solution?
Martin Hurych
When I feel like I'm getting tired of the company or I'm not enough or I don't have enough staff and I start thinking about somebody from outside as a business owner, what are the main points that you think I should think about to last longer than those 2, 3 months with you?
Simon Srp
The use case is different every time. Then if you're not enjoying it, then paradoxically it's probably the most vital for that interim management because you know you don't want to do it and that motive could be quite strong. The biggest problem we encounter is often when you want to hand the company over to someone else. It could be your son and it could be another employee that you bring up, it could be someone that you recruit for the role, it could be someone in-house, it could be someone external, it could be a board. In essence, you have to be prepared for it in your head. 90% of the handover from owner, founder to any other manager is about the head.
The moment you don't want to let that person work, you approach it with some a priori distrust that it can work and you think you're doing it best, 95% of the time it's going to go bad. Then if you have that manager as a very strong personality and still relatively very independent and he manages to convince you, probably relatively hard, that you should stay out of it, it can still succeed. But then if you don't have the mindset to hire a manager, to let him do his job without you stepping in by double-teaming, bypassing him, wanting to approve everything, then it probably can't succeed.
What do you check as a contractor?
Martin Hurych
These are the things that you check when you go into a company to minimize your own potential failure. What else do you check when you go out and take a project?
Simon Srp
It has to be said that I, like Simon Srp, don't go anywhere these days. I think we're a little bit specific in that the people that we put on the project are our inhouse people. We're not an agency that hired some freelancer for the project and now we're putting them in. We're a relatively very small collective that works as a group. There are then two types of red flags.
The first would be the measurable/rational, cognitively observable and definable ones. That company is in bad financial shape, the product is bad, that company is toxic and it's not the owner's fault, there's something missing in that company, there are suppliers missing, there are employees missing. These are pragmatic problems, these are ultimately assignments that we don't mind and these red flags are quite often part of that experience.
Then there are the personality red flags, where most often the owner lives with the idea that they do it best and maybe they want to hire you to validate that idea, which by the way happens. Those are the red flags that we try to detect as early as possible and not go into it because the vast majority of things that can go wrong on it, and historically have gone wrong on it, have been caused by some sort of conflict like that. That's not to say at all that there wasn't a degree of fault on our part, but what I'm saying is that it's something that's very likely to trigger it.
It's a set of some personality and character traits of that owner where he blames all the mistakes on others and appropriates all the positive results. To everything he says they do it somehow, that's the way it's always been done and he knows the business best, which in most cases is true, but unfortunately that's not the only necessary criteria. Knowing the market is terribly important, but you still have to have a set of those skills to plow that field in that market in a good way. Of course, there can still be some extremely toxic behaviour, I demand compliance with agreements and I don't comply myself, you do the analysis, the customer presses you that tomorrow is late, but all the synergies are provided with a fortnight's delay.
Those are the red flags that are key for us. We primarily by my stupidity and naivety once every 2 years try to change it somewhere and it turns out the same as it always does, now we just have live experience. This by the way is one of the biggest fuck-ups of the whole general consulting business. Interim managers will now say we're an executive business, it's so on the edge of executive and consulting business, the client plays quite a big role there.
Can an outsourcer uphold the company values?
Martin Hurych
You've bitten off a bit of a different angle here, but a lot of smart books, consultants and successful owners say that a company is built around a vision, a mission, values. What they have in common is that those people must be burning for what they do, or at least very good at doing it. Which part of the spectrum are you on? I've heard several times from business owners that they don't want to hire an external or internal because they won't trust them to do enough for the company. He'll max out on what we say, the long term goals won't be that close to his heart and that's a red flag for some business owners on that side of them again. That's why they often look at putting their own person in the company.
Simon Srp
I respect that, but I don't agree with it. I think it's very individual. We historically grew up doing it on a success fee, purely, no fix for the first 3 years. I've almost gone broke on that, I've almost hung myself, often both at the same time and often separately. That's where it was clear we had the interest. Today we have some share of fixes and success fees and something else, and I think to succeed in that you really have to live it because the business is very tough. It sounds stupid, I'm not saying this to cry here, but it is tough in that it's like coaching Slavia. When you win it's taken for granted, when you win it's still judged on how you won, but when you lose it's automatically a bummer.
That's interim management in a nutshell and I'm not complaining, that's part of the experience, it's the default criteria of the whole business, you're the expert and you're supposed to take that responsibility. The moment you're not burning for it, I don't think you can do it because it's going to get you down. Nobody can do it indefinitely if they don't burn, so that's why we don't go for a quantitative model in the long term, because I know today that for it's harder for me to get that interim manager than it is to get that customer.
We really have those people inhouse, I'm still known for being hard on strangers, brutal on myself, so it's hard to pick that person. He's got to share some of our values and really want to light it up, and you've still got to convince that customer of that. If that customer doesn't have that 100% trust in you, then we get back to the fact that even though he was ready to hand something over in the beginning, he's got to the stage where he starts questioning it himself, he starts interfering, and that's the end of it.
When external and when internal management?
Martin Hurych
Again, I'll go back to the very beginning, I'm a business owner who either doesn't enjoy it or he enjoys it but he feels he's not up to it anymore and he'd like to give it to a pro, maybe the kids haven't grown up yet. How do I choose if freelance or interim is the right decision for me and when to choose someone who will be here maybe full-time and be part of that team of mine?
Simon Srp
It depends on what real agenda you really need to hand over. You don't have to hand over that agenda to one interim today, you can hand it over to a board, there are an awful lot of options today and you can pay some black box for that board. The decision between an internal person and an external person I think is deeply related to the strategy of that company and the situation it's in. Then if that company is stable and it's growing, business is good and it's not that uptight, I think in most cases the reasons for finding an in-house person might prevail. But if you feel like that company is being held back by people who are in important places in that company and they're going to screw that person over, then it's not a good idea.
That decision-making also hinges on the fact that the big issue is references, what a reference is and how it works, whether it's good or not, whether it's relevant or not. The vast majority of companies that do interim management have been struggling for years with the initial objection that they're doing a specific business and they can't understand that. Now, leaving aside the fact that specific business doesn't exist very much, to some extent I agree that there are types of business where it's not appropriate because you need contacts and relationships from that person. For example, we historically chose to focus on IT, we did that exclusively for an awful long time, then we added technology companies and other types of companies, but we don't do e-commerce, we don't do retail because we don't understand it.
You have to have an understanding of that market environment, which is something that ironically can be verified by that reference. I don't think you can verify by reference how good a manager you are because it's relatively very difficult. There's a whole range of factors that influence those references where people can't be very judgmental with each other and they drag their emotions into it. Ironically, an interim manager can be cheaper at some stages when you really only need a small amount of agenda. You have significantly less risk there because when you work with a company that tells you they have their own interim managers, they usually guarantee that the
the position will be filled. If something happens to that person or they leave or they don't like it, they'll put someone new in. Usually you don't have any major side costs and you don't carry the risk of like dues and things like that, you have it all in some sort of invoice, which is more convenient. I think it's still significantly more difficult to establish yourself as a company, in other words generate a large number of positive references and stay in that market, than it is to make a living as a roving manager. Those are the things that I think play a pretty big role there.
Then it's that long-term strategy. External management makes some sense, of course, but after a certain period of time, external management, when the person is burning through it, ceases to be external management ex definition. The moment you start to suffer from operational blindness, being in the thick of it, then of course the solution is to replace that person or put an opponent in. We often work with that, that we take turns on the project, that there is always that one person, but more people come in successively to point out to him some things that maybe he doesn't see anymore.
Then there's another big fact and that's how to find that person. With those internal people, for me, there's a really huge risk that you're going to get it wrong, significantly more than with the interim manager. I still think it's a better scenario to hire an interim manager and give them as one of their assignments to find a replacement, onboard that replacement, train that replacement, and hand them over. It's just because you're gracefully handing off the responsibility to a third party, you're always going to take something out of it, and it makes the whole thing easier. It takes quite a bit of time to find a good manager today, it costs quite a bit of money to onboard that person, it costs quite a bit of money to onboard that person, and there's a huge risk that that person is going to die on you. With interim management, that risk is there too, because the interims nowadays thankfully learn to say no, but it's not that big because it's their business and as a professional they take it so that they're usually there until the last possible moment.
How long should external management last?
Martin Hurych
How long do you think the external management makes sense for the business owner?
Simon Srp
For example, we have customers that we've had for 3 years, 4 years, we might have them for a long time and it makes sense for them. They know how much it costs them, it's maybe more expensive than what it would cost them if they switched to an internal person at some point, but here they really know that they don't have the risk associated with starting over. Here they know it works, they know they can put it into some sort of financial plan, they know it costs them a little bit more, but they also know they're paying for less risk. I don't think there's an ideal period of time, for traditional interim management it can be 3, 6 months, external management can be extremely long term at the point where it makes sense for that customer.
In addition, there are different forms. For example, what we do is that for customers that we've managed for a long time but they don't feel the need for us to be there anymore in that tenure, when we've been there for maybe those 2, 3 years, we'll add a board member. He's got some strategic job of kicking their ass, checking that these things are happening, they're buying him purely on an hourly basis. He comes in once a quarter, once a month, once every two months, gives them some feedback, hands out tasks, and checks to see if the big tasks are being done, but he's not there in that classic executive role anymore. This, for example, seems to me like it can run endlessly.
We have a lot of times, which I really like, for example, where you come in there to deal with one particular assignment and that assignment is in some internal vertical, like business or processes. But you find out that the way the customer evaluated it, in our case you find out during the analysis that the problems are hidden somewhere else. So you start delivering solutions to those individual problems, where all of a sudden there are 3 people in that project for us, and each one has their own very specific expertise. They have some set of their KPIs, some set of OKRs, some targets that they're meeting, and there again the question is how long does it take when there's such a dynamic change in the brief. For example, we have a customer who used our competition, quit after 3 months, maybe they just didn't chemically fit. We've been there for six months now, but we've gradually found that the agenda that the person in front of us had to deal with wasn't appropriate because it wasn't what the company was worried about. I can imagine that it might be problematic for the intern because he has some expertise, he's hired there to deal with it, but he's running into things that he can't control. From that perspective, that external management can be endless.
How does an interim or external CEO work?
Martin Hurych
I can imagine it when we're talking about a board or a board -1, where you have a given agenda, you don't have to have a full time job to do it, you just hand out tasks and you go back next door. But you're also doing an external CEO and there's usually the idea that that person is going to be there all the time. Because usually he's taken on when that company has some current challenges and the new boss is expected to step in significantly. So how do I envision an external CEO who is with me, maybe half-time or even less?
Simon Srp
He's probably not going to be less than half-time. Our experience is that interim CEOs are terribly hard to sell or hard to explain to these companies because there is a really big conflict. Every now and then you get asked by someone who needs to sort out the CEO role and needs to sort it out really interim because they know they'll find another one in 6, 12 months. Now, maybe the one before him happens to die or he gets hit with it, but that's more of a marginal part of that spectrum in our case. In most cases, we doiter over time to that customer that we don't usually come in as interim CEO, but we come in as maybe an internal sales director or CFO.
As we do that growth interim, a lot of our customers have the problem that they've grown quickly and now they don't know what to do and now they're ruining their name on a daily basis because they're not delivering or they're delivering poorly. The company hasn't adapted at all to the fact that all of a sudden there's not 12 of them, there's 120 or 240 of them. The way it usually works there is that you gradually pull the agenda under you because you really want to make a difference and gradually people start to trust you. For example, we don't rely at all on calling it interim CEO, maybe it's not even interim CEO in some of those cases. But I think the moment you still have a proxy, I don't think you can be much more of an interim CEO, but I would never write that into a contract.
Martin Hurych
There I guess I would understand that with these companies that have grown quickly, the company has outgrown many times the people who are in those positions. Then I can understand that you've already been where they're yet to go, so you're going to gain their trust relatively quickly and that position within that team because you're the one who objectively already knows where everybody should go. Right?
Simon Srp
You also have that clear view. One thing is the racio, the fact that you know the processes, you have the craft and there's a lot of tools there to build trust. Very likely in the beginning for a while you're going to be an arbitrator, you're going to be an arbitrator, if we wanted to call it noble, we'll call it a mediator, but in this case it doesn't have much to do with mediation. You're often just there at the beginning to answer these people about what you think is right in the disputes that they're doing, which works very well by the way. Part of those big analyses we do are interviews with those people, which we conduct in a really non-confrontational way. You'd be very surprised what those people are able to say in 10 minutes to somebody they've never met before in their life about that company or that owner or what's going on in that company. Now you're starting to untangle these things, we have this policy that there's always some sort of subordination.
Management always plays along, but the moment that the dispute is factual, cultivated or at least constructive and the side that's down is right, then you as interim manager should say we should do what the assemblers are saying. That works well enough, by the way, to earn that trust. You're not doing it to gain that trust, it's a waste product of doing it.
You have to take responsibility. I don't really understand why people in any state, relationship, reality, platform don't accept responsibility, you have to accept responsibility. I grew up on mayflies and foglar, you have to treat those people reasonably. I definitely don't think Pohlreich-esque interim management works in a normal business, you can't go in there and start punching people. I know cases where it might work, but practice shows that it's not such a good tool. It works awfully well on people, if you're judgmental, you're normal. If you go in there as the CEO of the globe, it's stupid. On the other hand, when you come in there scared and now you start telling them things that you don't want to be smart, that they know the business better than you do, that's a disaster too. So you have to find some middle ground where you treat these people normally.
You should in an ideal world forget that your business is there to be a manager, you should in an ideal world take your interest out of it and you should do it the best you can, which is the hardest part of that discipline. Often when you're doing it the best you can, you can cut a branch underneath yourself for a lot of different reasons. It can be politics, it's obviously about the art of having a good argument, in a healthy, human way, without going beyond some level of professionalism and humanity. The moment the other party, typically the owner, can't do that, it's in the bag, it's almost unresolvable.
Martin Hurych
Isn't it the case that these very people often look for someone to take over because they've got to the stage where they know they can't do it with people, they stick some middleman in there in the company through whom they hope that he'll manage the people, but they want to manage him?
Simon Srp
That's one of the classic cases. When it's people who realise that they can't really do the people business and they cut themselves off from it completely, that's great, but that's not the most common case unfortunately, the most common case is probably the one you mentioned. Then there's another one and that's the one where they actually hire that person, make them a lightning rod and try to be friends with those people. You're the bad cop there and all of a sudden he's the good cop, nobody believes him of course, he makes an ass out of you, which unfortunately happens.
Martin Hurych
That's what I call you being an excuse, that even Simon didn't do anything to them and he told them.
Simon Srp
That's one option. The other option is if he needs to make a decision that he doesn't have the balls to make, he'll take you up on it and we've seen that a few times. One time a lady from the grassroots wrote about us and then we followed up who it was and it was a lady who we found out was not physically doing anything. The owner knew, we confirmed it, he fired her and she wrote about us somewhere on the internet and said that we had fired her and it was terrible and we didn't even know she had been fired. The owner said we made that decision. But there again, it's about taking that responsibility. When somebody gets fired, I would want my guy, the interim manager, to be there and he would fire that person if he made that decision. Then if he didn't make that decision, the owner did, I would still want that person to be there because he's partly responsible.
How do you as an owner prepare for a handback?
Martin Hurych
We've painted a pretty bleak picture here, let's get back to the positive. I've hired an outsourced person to run a function within the board or stretched to the level of an external CEO. But I, as the owner, am either changing plans or I really had it figured out from the beginning that it would be an outsider who might build some successor of his own here. That's a very common model that maybe I operate in. The typical model is, bring us the rods, teach us how to fish, tell us what rods we should buy and then you can walk away, which is a fair contract, a very nice contract when you see a bunch of fishermen left behind. How do you prepare yourself from the business owner or the internal CEO side for that handover phase and what do you look out for when I say you have a quarter, two quarters to hand over to Vaclav who will take over from the 1st of January?
Simon Srp
When this is going on, I should have the plan first and foremost. It's usually the case that the owner will say that they would like Vaclav to take over and ask what needs to be done. The way we approach it is to do some micro-analysis or make an action plan. The handover process is usually one quarter at most. You do it so that the face of it is always someone else and you're managing it from the back.
Then I think it's terribly important to talk to Wenceslas about it, and that's a step that's pretty much forgotten. You have to find out if Václav actually wants to do it and if Václav has everything in place to do it. If it's established that he does, then it's a pretty simple process and then I think it's good for that owner to say how he envisions it and what his criteria for satisfaction are.
We can of course supply him with some revisions afterwards and we can supply him with the fact that we will spend some time with that person even afterwards from time to time to rather make sure that it's going in the right direction.
We help him with some troubleshooting, which by the way is one of the most underrated parts of the whole external management, that's a sport in itself. So there should be some sort of action plan and then it would be awfully nice if that owner was part of it, very passive, observing, because somebody has to carry the continuity of that relationship and that information there. It can't be the person to whom it's being passed on, because of course they're very much involved in it.
Then if the owner is determined that Václav should do it, we agree that Václav should do it, then Václav should be able to manage the process, just as we manage it. Then it very much depends on what agenda is being handed over, usually if Václav is to do it, then Václav should have shadowed it long before, and those things should not be unfamiliar to Václav. It should be that he has been going to those meetings with you, he knows what people are in that company and what is being dealt with at that moment, he should know absolutely everything that you know when you are handing it over. That's when the handoff starts, not when it ends, when it starts.
Martin Hurych
You very likely have almost the same process the moment you have an internal person come into the company to take over. What if Wenceslas doesn't have the chops for it, you bolt to your chair and you stay barricaded in the office and you don't let it go?
Simon Srp
Never, the need for popularity has passed me by and the need to be somewhere I'm not welcome has passed me by and my people too. Interim management brings with it a whole range of situations that are on the edge, and by default it's an edge where when you've got your values aligned you start to wonder if you're selling something to that customer. You're still out there figuring out if it's professionally correct and now you're pretty involved in it. If Wenceslas wasn't in on it, then you honestly as a professional who has confidence there should be able to explain to that owner why it is, which you don't always manage to do. If it doesn't, I would write some kind of memo on it, I would write that we don't think that Vaclav is the person to do it, and the solution is to either work with Vaclav for a longer period of time or find someone else. The customer needs to be formally introduced to this and then leave the decision up to them.
The worst situation is when Václav wants to do it, but Václav doesn't have the skills. It's like when you're in the passenger seat and now you see where he's going and you see that it's already wrong. But I have no right to make that decision for those people, I can only really recommend something to them at that moment. We normally tell them not to do it with us, but we don't do it with Václav either.
How do you not become dependent on outside management?
Martin Hurych
How do you act in the company from your side so that the company doesn't become dependent on you?
Simon Srp
That's a very good question. It's different every time because the input is different. There are companies where you come in really as the bad cop, which we don't do very often, but it happens. Then there are firms, which is most of the time, where you come in constructively. The first thing, which by the way applies to all external management, is that the moment you go there to prove anything in your own ego, it's automatically a disaster. The moment that owner disagrees with you and you're offended, it's wrong from the start. When you have that good mindset that you understand that these people may see it differently from their perspective and that it's not directed at you personally, because if it was, they probably wouldn't be paying the money for you, then it's a good start.
It's probably going to lead to you treating those people a certain way and trying to make them succeed, because it's your report card that those people succeed.
It's not just about that Vaclav, now we're not going to be extended by one long customer that we had and we love and they pay us good money. In fact, the lady who was originally there as some sort of store coordinator is good and has become an adequate replacement for business management.
We're just going to do some part of it there and hand the store over to her completely, which is officially objectively correct. To keep the company from becoming dependent on you, you have to be assertive and you can't be overly dominant or indefinitely. At some stage you have to empower those people to be responsible for partial results and successes, which again is about taking that responsibility. You're supposed to take responsibility and then you're also supposed to give it out very quickly.
How long does a typical project take?
Martin Hurych
When you join the company, you should already have this in your head somehow, because it's not just about responsibility, it's about empowering those people to take that responsibility and teach them something new. That's why you're going in there, not just to manage it, but to pass on some skills. To give you an idea, when you go in somewhere, how does that compare in your head, for example, how long do you take that assignment?
Simon Srp
We want to make it as comfortable as possible for that customer at the beginning, because our experience is that it works best for those long-term collaborations. Unfortunately, he has to buy the analysis from us, even though the GAP costs nothing compared to what he pays per month to the people we have to manage. But there are customers where we say he has to pay us 900k for the analysis and that's a whole different type of negotiation. Then we try to put some sort of trial period in there for that interim management, but that doesn't mean they can bail you out from minute to minute because I could never in my life hold the prices I hold. We don't have a bench and we don't want to have a bench, we want the interims to finish the project, rest for a while and go to a new one. So we give a fixed term contract at the beginning, if we feel the customer wants it, we are able to give them a 3 month contract, especially when we perceive some red flags there.
There are customers that we sign for maybe 2.5 years, which is again a different type of project, post startup, scaleup, a company that is working, has some customers other than the bro, the owner and the owner's friend who got it for free. They are paying customers, they originally wanted us to do an analysis so they would know if they were going to get any investment or not. We did a pretty detailed strategy for them, and they got the investment based on that as well, and we signed off on the project for the duration of the investment. That's a completely different type of project where we are motivated by the success fee that is there, we have some fixed fee but there are no red flags because we have already tried the cooperation.
If it's a customer that we don't know, or they're showing some red flags in that analysis, or conversely we're showing some red flags for them and they're suffering from some distrust, then we can start on that 3 months. That's not something that is financially or even qualitatively a hit rate, a risk game changer for him and then maybe we extend it for a year or six months in most cases.
Martin Hurych
I understand that it depends on the type of project from your side. I was trying to find something where the owners and the directors that are listening to us would think about this service, what do you compare in your head for the minimum to show that we're going in the direction that we've set out.
Simon Srp
If that's the state of play, then I think 3 months, provided with some sort of action plan that both parties can agree on and competently see as workable, is a good start.
That includes the analysis, where we said at one time that we didn't want to do without it, we have done a lot of work on that analysis, which is not to say that it is at all what I would like it to be. But for example, when we compete with the big four, even in blind testing we did very well. The way we used to have it was that we had one type of analysis for everybody, and that generated the occasional cannonball for the small customers. That doesn't happen to us anymore because we give the little guy the GAP and we don't need to dig down to the last screw, we can tell very easily even in 100,000. To put it bluntly, it's actually relatively skilled paid presales, but it's in the interest of the company because it can save them a lot of money.
So if someone is suffering from mistrust because they don't have enough experience with it, they imagine some risks, we're fine with going in there with a GAP and 3 months. But we're not okay with it if the customer then wants to lock in that price after those 3 months and doesn't want to buy any of the other things that we say are necessary. You find out within 3 months that there are significant problems somewhere other than what you went in there to do. You went there to solve some business situation, open some new market, launch some product, and now you find out that all the invoices the company is paying are late, which is not a business problem.
How much is the upfront investment?
Martin Hurych
So I understand correctly that the upfront investment is somewhere around half a million and upwards?
Simon Srp
We are saying that if it is to make sense, it is a million and above. The guys that are doing it with us, after 20 years, they want to do things that they enjoy. That's often the aspect where we put the fun or that we're going to learn something new there ahead of the cost, because you need to keep those guys loving the work and not getting burnt out. Because I find it easier to find a new customer than a new person, and we pay such good money that it feeds those people's families and I see a lot of responsibility there. There's a responsibility for that person's mental state, because I've also done
projects, I know what it's like sometimes, I know that it can be pretty dense and I don't want anything from these people that I haven't done myself before. So it could be a 300,000 project.
Now, we had a guy who came out and said he had a small software house and he wanted to sell himself. I took a Lexaurin, had another shot, and tried to explain to him that the data we have is quite large and speaks to the fact that it's not a good idea, especially since he's still the technical software house. But he insisted, using quite very reasonable arguments that he wanted to learn it himself and that he was then willing to form some kind of business team. He threw out all the points that didn't concern him from our standard business strategy and wanted an owner's sales strategy. We said we'd do it because it was super challenging and it cost 150k. It really seems like this guy has the discipline that we didn't believe he could have, he's got some talent relatively speaking, and then if he keeps it up, I think it can work. A project like this costs 150k to start and then it costs him maybe tens of thousands a month where we do more of a mentoring thing.
Summary
Martin Hurych
If people skipped all the way through this episode and got to the top five or ten good principles of external management for owners or directors who are considering it, what would you tell them?
Simon Srp
Price is irrelevant, not because we're almost the most expensive, but price is irrelevant. The person has so much reach and so much potential to influence things for the positive or for the negative, that if they do, it doesn't matter if you pay them 250k or 120k. If he fails, it doesn't matter if you pay him 20 or 40.
I would definitely choose based on references in the particular industry that you're in. You want an adequate reference so it's either a similar segment or you're selling something similar to a similar target audience. It doesn't mean that if you're making engines, the other one has to be making engines as well, but it has to be something that's at least somewhat similar. I think that's important.
You have to give up control, it's absolutely integral to the experience. I think giving up control is terribly important, whether you want an external manager or not. Companies that are one man shows are something I've struggled with for a long time because of their sort of bizarrely natural dominance. On the one hand, the kind of people who scream that you should be able to hand the company over within the first 2 years don't correspond with reality, but it's a nice philosophical laboratory thesis. That reality looks subtly different, but you can't be responsible for everything. Micromanagement is a good tool for a short period of time to solve specific problems or to address specific visions that you are not able to convey to anyone in that company, but it's not a good tool for the day-to-day reality of that company.
I'm not someone who demonizes micromanagement, but it's not something that's a long-term tool for a CEO or owner to continue to do.
Then it needs to be given some specific time like everything else. When you started the company, you also had some time that you probably gave yourself when things were sitting down. You need to obviously give it some level of time and care in the beginning to really onboard that person well. I was going to say something clever to enhance the reputation of this whole conversation, but I've forgotten it now, which I think is a shame.
Martin Hurych
That's not a shame, that's instead an excellent teaser for the bonus. Simon, thank you so much for visiting and fingers crossed that you continue to enjoy what you do and that it continues to thrive.
Simon Srp
Thank you kindly for the invitation.
Martin Hurych
If we've sparked any thoughts in you about interim or external management and you may be clear in your mind whether or not this path is for you, then we've done our job well with Simon. At such a time, I'll ask you to like, comment, share, because otherwise the world won't know about us and the internet will stomp us into the grey. I'll reiterate my invitation to join the newsletter, if you're interested in following what I'm creating and having weekly strategy, business and innovation news in your inbox, check outwww.martinhurych.com/newsletter . If you give /zazeh, there's already that mysterious bonus Simon promised us hanging around for this episode. All I can do is keep my fingers crossed and wish you success, and not just in using external managers, thanks.žerů, díky.
