PLANT

Need emergency back-up?


July 5, 2010
by Uwe Manski

Managing a business through continuing economic or market upheavals while contending with daily competitive pressures means few manufacturers are finding the time for contingency planning. Yet serious challenges arise unexpectedly such as declining profitability, difficulties securing financing, plunging cash flow or even the sudden illness of a key manager.

Management teams need to prepare comprehensive contingency plans but those without the time or resources to do so have another option: an interim manager with specialized business experience to devise practical solutions for pending or immediate emergencies.

Take ZYZ Manufacturing (company and executive names have been changed), which found itself in a precarious financial situation when Hugo, the owner, learned cash flow was rapidly deteriorating as a result of aging accounts.

Lacking someone internally with sufficient experience to address the situation, he hired an external interim manager with extensive experience in collections and troubled accounts receivable.

She launched a review of the company’s credit policies and determined that while ZYZ had established credit limits for new customers, there were no aging limits for accounts. As a result, there were a dozen accounts with payments outstanding for more than 60 days.

ZYZ instituted a focused collection process on all accounts over 45 days and within a month $160,000 was collected. New policies for credit and aging limits were established and the management team was trained to implement the new system with a few simple processes for monitoring aging accounts receivable and related cash flow.

Health issues can also create a disruptive internal crisis.

When the general manager of ABA Manufacturing (company name changed) needed emergency heart surgery, no one within the management team had the expertise to fill in while he was on medical leave. An interim management firm provided an executive with extensive experience in the manufacturing sector.

Crisis managed
Within two days of the executive’s surgery, the interim manager joined ABA full-time, assuming all of the general manager’s duties. He took control of the company’s multinational manufacturing and sales operations, managed the accounting team, worked with department heads to ensure that production targets and customer commitments would be achieved, and provided strategic leadership and guidance to the other members of the management team.

Interim managers may work individually, or, when complex operational and financial challenges are involved, as a team of specialists, each with a specific discipline, to develop integrated solutions. Thus, when ABA had to negotiate several important overseas contracts, the interim management firm also supplied a tax specialist with transfer pricing expertise to assist with the tax-efficient arrangements. When the general manager returned to work three months later, the contracts were in place, ABA had met production targets and customer commitments, and finances were in line with forecasts.