Executive Mercenaries.

INTERIM CEOS are often a company's last resort. Meet the ultimate temp.

Don Bibeault is not your typical executive. By doing his job properly he's received death threats. Once, an employee barged into his office with so much vitriol, violence seemed certain. "It clearly has been a stressful job at times," notes Bibeault, who has since taken up martial arts-- Shotokan karate to be exact. By now, you're probably wondering what the heck this guy does. Something Sopranos like, perhaps?

Actually, he's an interim CEO. The title sounds innocuous enough, like a good post for someone looking for a cush way to spend a few months. But for most, it's far from that. In fact, the job's about as relaxing as piloting a fishing boat through a torrential storm. There are a number of reasons to hire an interim CEO, and almost all require some tricky navigating-- and the ability to take over mid-storm. Maybe a CEO quits suddenly or gets sick--or maybe the company needs a spark plug to come in and take it to the next level. But most often an interim CEO is called in because a company is in trouble. And it needs help fast.

It's no wonder then that today's market has been a boon for interim CEOs. The rate at which companies are falling into the business abyss is staggering, nearly unprecedented. In fact, the first quarter of 2001 had the second-highest number of quarterly bankruptcies in history, according to the Administrative Office of the U.S. Courts. And for those who want to stay afloat, or sail out of the doldrums, experienced and effective management will become even more crucial. "Managing in a down-market takes a much different skill set than in an upmarket," says Joel Tauber, owner of Tauber Enterprises, a Southfield, MI-based conglomerate of manufacturing companies. Tauber recently hired an interim CEO to run one of his companies. "Bringing in an interim guy to manage can be a good move for a short-term correction in a difficult economy and particular company."

In many cases a company needs to fill the CEO seat while it undertakes the often time-consuming task of vetting a permanent replacement. In other cases, such as an imminent bankruptcy or sale, luring a qualified full-timer might be difficult. Or, a company may need so much drastic fixing that a full-timer would just be resented too much if he stayed after the storm cleared. All are circumstances in which a board needs to parachute in an interim CEO.

The Cleaner

Bibeault is probably the most common type of interim CEO, a "Ming the Merciless" class of executive.

"If you were to call me anything you could call me a cleaner," says Bibeault, who is usually recruited by boards and creditors to come into a particular company and clean house. During a span of about 25 years, Bibeault has worked in nine different CEO jobs, mostly at medium-sized durable goods companies, like the Freemont, CA-based steel manufacturer Pacific State Steel and at the plumbing distributor Iron Oak Supply in Sacramento, CA.

But Bibeault is a bit different from other interim CEOs in that he began the interim circuit while in his 20s. After getting an MBA at Columbia University--where he's now a trustee--he worked as a roving manager at General Electric and then in the finance department at American Airlines. From there he jumped to a financial holding company, where he quickly gained respect from the top brass. One day management decided to send young Bibeault into a company on the verge of a big loan default to clean up the mess--and his interim CEO career began.

Going from one clean-up job to another, he found the mess comes in various forms. Most typically, he says, the outgoing CEO is overspending and the overhead is so out of control that he or she can no longer be trusted, not even for the few months it might take to find a replacement.

In one case, at California Windsor, a San Francisco-based financial holding company, Bibeault walked into the job and immediately discovered the CEO had a personal apartment in the city, but had buried it down deep in the balance sheet in the equipment leasing section.

Later in his career he found even more egregious offenses. After taking charge at PLM International, a San Francisco-based equipment leasing company, he discovered that the CEO had 37 outstanding company loans. The business was in so much trouble it wasn't making its loan payments and its CEO had managed to borrow $880,000 in cash from the company, interest free. As if that wasn't excessive enough, the CEO also had an $8 million Leer jet he was using mostly for his personal enjoyment. "He would fly friends to Mexico and go to the beach," says Bibeault.

Other situations came with less insidious--but arguably more damaging--problems. In some cases, the company had built up too many areas of operation that weren't succeeding and the board didn't believe the CEO could cut off what he helped build. Bibeault has sometimes had to come in, and, as he puts it, "lop off subsidiaries."

This is where the real stress begins. At Iron Oak he had to shut down 46 of 86 regional branches, firing a total of 1,600 people. One burly warehouse worker was so miffed he barged into Bibeault's office after learning of his dismissal, storming past Bibeault's protesting secretary. The worker quickly got in Bibeault's face and started screaming. "I was sure it was going to come to blows," he says.

The worker eventually backed off, but that was just the beginning. A few months later, Bibeault got an alarming fax--a death threat. The police eventually found out it was from a supplier he had cut off. "Unfortunately it comes with the job," he shrugs. And fortunately, nothing came of it.

Bibeault overcame the hazards and managed to eke more value out of the various firms he took on, actually tripling the value of Iron Oak for its eventual sale. "After a while it really got to me," he says. "I had to quit."

But Bibeault is only one of the hundreds of people who make a living restructuring company after company in a series of interim posts. In fact, there's a cadre of executive-level men and women who are perennial interim CEOs. And the need for their skills arises so often with small- and mid-sized companies that there are even outplacement firms, like Silicon Valley's The Brenner Group and iCEO, that primarily deal in filling spots for interim CEOs.

Yet often a company won't go outside for temporary help at the top. Instead, the COO, CFO, or a member of the board will become the interim CEO when the CEO leaves. This is most common at large companies that don't want to spend the time to get a newcomer up to speed with the operations of a large public company only to then rehire again. For example, Edward DeGrann, the interim CEO of Gillette, recently dropped back into his former COO slot at the company when new CEO James Kilts was hired.

And then there was Ronald Loeb, a Mattel board member, who stepped in as interim CEO when Jill Barad resigned in February of 2000. Loeb was charged with holding down the fort until the El Segundo, CA, toymaker could bring in a new leader. But in the meantime, there was some cleaning to be done.

Barad's purchase of The Learning Co., a business unit that had already lost Mattel $300 million, was one of the reasons for her sudden departure. Analysts estimated the unit was costing the company as much as $1 million a day. Loeb and the board needed to get rid of it-and fast-and to downsize several plants. By the time the new CEO, Richard Eckert, took the helm on May 17, expenses had been slashed and The Learning Co. was poised for sale. Loeb eased the transition for Eckert, who came in just in time to finish the sale, continue the cost cutting, and begin repositioning the company.

In many cases, a strong interim CEO makes tough calls to position the company for a full-time leader, who then effects a turnaround. But turnarounds are tricky affairs and the results aren't always rosy. In fact, even those with a turnaround track record have been known to fumble an overhaul. "Chainsaw" Al Dunlap was brought into Sunbeam to fix the beleaguered consumer products maker and made headlines firing thousands, but the brutality-and the whopping board-approved compensation package-didn't pay off. By the time its embittered board removed Dunlap, it was too late. Sunbeam ended up in Chapter 11 and Dunlap was charged with accounting fraud.

Those That Can, Do

But, of course, the flip side is that some interims prove to have staying power. When Steve Jobs became the interim CEO of Apple Computer the company wasn't going bust, but it wasn't really going anywhere fast. Microsoft's Windows operating system was leaving the Macintosh-inspired graphic user interface it imitates in the dust. The cult of the Macintosh was starting to die out.

That's when the founder and inspiration behind Apple came to the rescue. The company needed a spark. The current CEO, Gil Amelio, was a good operator but didn't necessarily have the marketing savvy to raise the company from the doldrums. Even though Jobs was also running Pixar, an animation company, he took the interim CEO post in late 1997.

His first big move was the launch of the hip, affordable iMac. The stylish machines triggered a recovery for Apple, which saw its market value subsequently soar from $2 billion in January of 1998 to $8 billion. Of course, now that Apple has anointed him CEO, Jobs is no longer an interim success story, but he has become a model in how an interim can recharge an organization.

In another tech sector interim tale, customer relations management company SoundLogic brought in interim CEO Pat Howard for a very different purpose. In this case, SoundLogic, like many Silicon Valley upstarts, was rapidly growing with good prospects, but poor direction. It had two choices. One was to hit up investor after investor until the company got the funding to further growth. The other was to sell itself to the best possible buyer. In this market, finding financing could be difficult. And since the founders were not operators but technologists, they didn't have the contacts and know-how to find a suitor and manage a tough transaction.

Howard had been through the rigmarole of selling a company many times. As a seasoned CEO with 27 years experience under his belt he had already sold two public companies, Mosaix and VMX.

"I developed the skills to position a company for a sale or present it to investors," he says. And, fortunately for SoundLogic, he didn't want to be a full-timer any more. Within a year he sold SoundLogic to Lucent.

A Tough Status Quo 

There are also those unfortunate and uncontrollable circumstances that require a seasoned executive at a moment's notice. Most of the time when a company releases a statement saying, "The CEO has resigned to pursue other interests," he or she has been fired. But there are times when a CEO legitimately has overwhelming family problems, or gets sick. Nothing's wrong with the company--that is, unless there isn't a fill-in when the CEO has to take an unexpected leave.

Dan Dickson came to the rescue in such a circumstance with ReachCast, a fast-growing document management company. On Friday he got a call saying the CEO was just diagnosed with cancer. They needed him on Monday. "I was basically asked to keep the ship going until he got better," he says.

But, as many know, a ship in the technology world never sails smoothly. Bumps need to be managed and icebergs skirted. Since Dickson had managed a General Electric subsidiary and had already served as a CEO at three different companies, he was ready.

While he was charged with making sure the sales cycle continued on track, his most important task was to handle the firing of the company's head technologist in Israel. The man, as Dickson puts it, had a bad case of "founderitis," an ailment that often occurs when a company's founder challenges the professional management brought in to take the company out of start-up mode. In essence, he wanted to take the application someplace the board didn't want it to go.

While the current CEO could bear the news over the phone, Dickson needed to fly to Tel Aviv to smooth things over with the technologist, who was not only an employee, but a major shareholder with influence over the technology. The company still needed his support, notes Dickson. "The most important thing I did was manage his emotions. That's an important quality in this job." In the end, Dickson smoothed relations with the dismissed CTO and the company continued on track.

Three months. That's the timeframe Dickson had to learn the business, keep the sales cycle up to speed and fire one of the most important people in the company.

The jobs that less high-profile interim CEOs like Dickson fill may not bring much glory, but they're challenging enough to keep many interim CEOs coming back for more. "I like confronting new challenges continuously," says Dickson of why he's chosen this path. "It makes me a better CEO."

Of course, it doesn't hurt that interim jobs can pay a hefty sum. They often rate a two-to-one premium on a current CEO's salary, plus equity on performance, which can represent a huge bonus if the turnaround effort is successful, plus the occasional fringe benefit. "I've definitely had some decent-sized hits [from equity] during my time," says Bibeault. Plus he got to learn karate.

THE GOOD, THE BAD, AND THE TEMPORARY

"It's not for someone who would be happy at one company for 20 years," says Richard Brenner, the founder of the interim CEO outplacement firm, The Brenner Group, of the characteristics required of an interim CEO.

Clearly, coming into the top job at a firm where you've never worked, with limited knowledge of the inside dealings, is a challenge. But good leaders are up to the task. Chief Executive asked recruiters Richard Brenner and Mike Braun, the CEO of interim CEO outplacement firm iCEO, to name the essential qualities of a good temporary CEO.

* Unquestionable leadership ability--jumping in and running a company from scratch isn't something for someone who is trying to test the waters as CEO. The person must already be very welt versed in the job. Recruiters say five years experience as a CEO is an absolute minimum. "Most typically have 10-15 years," says Brenner.

* A quick study--Most interims are in and out in less than 18 months. There's little time to get up to speed, so you want someone who's dealt with different situations. "That way he often knows the problem first-hand and can solve it quickly," says Braun. A quick resolution to a problem could easily save a company many potential headaches. Plus, since interim CEOs often charge by the half-day--at rates like $3,000--a quick study also saves money.

* The right disposition-"The good ones are akin to green berets," jokes Bibeault. "They parachute in, fix the problem, and get out." The person needs to relish the fire, while also having the temperament to deal with it effectively. Often times, a scorched-earth policy, like the one imposed by Dunlap, can cause corporate-side distress. "The person needs to be able to get along well enough so when he leaves the company it isn't in complete shambles," says Braun.

* Industry experience--Other skills can sometimes overcome a lack of industry specifics, but knowing them helps. Putting a software CEO into a steel company is definitely a stretch. "Even putting a software person into a chip company is less than desirable," says Brenner. Many technology companies, for example, have very specific business models that require highly specialized knowledge. It's true that a good leader can come in and make sense of it all. John Sculley became the CEO of Apple from PepsiCo, for example. But, industry experience is a bonus. The biggest problem is finding someone who has it and is available.

* Good language skills--No, not Spanish, or Japanese. It means that the person is a good communicator when breaking bad news. And seemingly more than anyone else, interim CEOs are the bearers of bad news. "I learned to get more inventive in smoothing out my language," says Bibeault. When dealing with a hotheaded vice president, the phrase, "You screwed up, you're fired," can bring bad things, whereas saying something like, "We've had to change course and leave some behind. But we are going to try and get you to a place that fits you better," could ease things.

Even if it's just demoting a person or telling a department they have to move elsewhere within the firm, language massaging is crucial. And often young executives have not mastered it yet. Early on in his career Bibeault says he was brusque because he got a bit of a power trip off firing people. "I wasn't subtle," he says. He learned.