Daily Rates for Interims: Standards or a Floating Decimal Point?
I’m frequently asked what my day rate is. I always give a range, because the rate I charge depends on many factors that I take into consideration to strike the right balance between value delivered and effort extended.
For the CEO who is momentarily frustrated by the non-existence of a “rack rate” for interims I simply point to the fact that salaries for CEOs are all over the map, too. Sure, there are published averages and ranges by industry and company size, but those ranges can be wide; same too with IMs.
For thought leadership and best practices one only has to look east from this star spangled land to our friends in the U.K. where interim managers are an accepted and widely used resource.
A June survey by a leading U.K. Interim Management firm, Russam GMS, gives us a few data points to consider here in the Colonies. The electronic survey was distributed between June 2007 and July 2007 to nearly 8000 interim managers. It was completed by 670, or 8.4%.
Among survey respondents the average daily rate for a full-time engagement was £568 ($1,153) up 2.3% from a year ago. The average daily rate for a part time engagement was £618 ($1,255) up 9%. It’s important to note that the survey did not break down the data by level of position (Director, VP, C, etc.). The survey was heavily populated with respondents holding IM assignments in government and healthcare, two sectors not know for lucrative pay scales.
Dennis Russell in his excellent book, Interim Management, first published in 1998, stated that a good rule of thumb for IM compensation is 0.75% to 1.3% of the compensation for a permanent hire. According to Russell’s formula an executive in the role of an interim VP position with a $200K comp plan would charge in the area of $1,500 – $2,000 a day (0.75% – 1%), and an IM filling a director-level position with an equivalent $125k comp package would charge $1,250 to $1,625 per day (1% – 1.3%).
These rates apply to interim assignments, say, engagements of 3 to 9 months. Anything less than that is more of a consulting project than an interim assignment and the rates you can expect to see will be as much as 50% higher. Volume pricing applies to IMs, too.
The best thing to remember is this, it all depends.