Interim CEOs: Passive Placeholders Or Rented Fixers?

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The number of CEOs voluntarily leaving their jobs or being forced out spiked early this year. Many of those companies will be turning to an interim CEO to take the reins. These temporary leaders are increasingly in demand, according to those who watch corner office trends. NPR's Yuki Noguchi reports.

YUKI NOGUCHI, BYLINE: Over the Christmas holiday, Kristen McAlister got a call. The CEO of the company fell ill and its board of directors contacted her.

KRISTEN MCALISTER: How many individuals can you have in front of me within the next day?

NOGUCHI: McAlister is president of Cerius Interim Executive Solutions, a company that helps fill temporary executive vacancies. Interims usually come in for unplanned reasons - illness, poor performance or ethics violations. McAlister says last year, she saw demand for interim CEOs surge.

MCALISTER: The requests and demand on our end grew by threefold.

NOGUCHI: John Wood is vice chairman at executive search firm Heidrick & Struggles. He says CEO turnover is up in part because there's less patience with leadership that isn't working.

JOHN WOOD: Boards are perhaps more active in strategic decisions than in the past.

NOGUCHI: Wood says nowadays, contract work is more common throughout the work world, even at the top rung of organizations. John Challenger is CEO of outplacement firm Challenger, Gray & Christmas. He believes the interim should be like a ship's ballast, maintaining stability until a permanent replacement comes on board. Take, for example, the troubled Valeant Pharmaceuticals, which faces investigation by the Securities and Exchange Commission. This week, its CEO Michael Pearson returned from medical leave.

CHALLENGER: The interim CEO by definition is there to keep things steady, not go too far in one direction or another.

NOGUCHI: Challenger says interims cannot assume they have the backing of the board of directors or the rank and file to make big changes.

CHALLENGER: Your authority, in some ways, is limited.

NOGUCHI: In some cases, the interim CEO might be trying to keep the job, or they might expect the old boss to return. But in some instances, some say a temporary CEO is less babysitter and more specialized surgeon. Robert Jordan has served as a drop-in leader for companies over 18 years and now runs the Association of Interim Executives.

ROBERT JORDAN: This has become a career. It's still virtually unknown in the U.S.

NOGUCHI: In Europe, he says, interim CEOs are rented fixers. Jordan says the virtue of an interim chief is that they are not beholden to the existing system and aren't trying to keep their jobs.

JORDAN: It creates a bias in favor of action and against playing politics.

NOGUCHI: Also, he says, interim CEOs are compensated based on results and do not have a long-term contracts.

JORDAN: The interim is trying to solve a problem and work themselves out of the job.

NOGUCHI: Richard Lindenmuth says the balancing act involves addressing problems without alienating key people.

RICHARD LINDENMUTH: You cannot come into a company, bang on the table and say, this is what we're going to do.

NOGUCHI: Lindenmuth is working in his 23rd stint as an interim CEO. Last year, he took over at Delano, Calif.-based Styrotek, a troubled private firm that makes plastic containers for fruit. He says he interviewed many rank-and-file workers to determine where the system was broken.

LINDENMUTH: You really have to listen. The solutions are generally held very well within the company.

NOGUCHI: In Styrotek's case, Lindenmuth hired outside experts to help deal with a change in water supply that was causing manufacturing problems.

LINDENMUTH: It is now back to very serious profitability. And in this next year, we're going to almost double the profitability of the company.

NOGUCHI: Within a few months, Lindenmuth expects to be replaced and will move on to his next temporary assignment. Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.