Throughout the business world, the concept of interim management has become more accepted and more commonly used.

Executives and professionals are frequently hired for specified periods and clearly defined purposes to assist companies in the management of their business.

For a bank's board of directors, with its legal exposure increasing and a greater need than ever to fully understand the bank's business, interim management may offer a prudent alternative in certain situations.

Take, for example, a key executive's sudden departure. This creates a problem - but perhaps also an opportunity.

Leadership During Search Process

Unless there is an obvious heir to the position, the board faces a lengthy search process. Rather than allowing the bank to be undermanaged for several months, the board could bring in an interim executive.

With day-to-day management taken care of, the directors can go about a careful search instead of making a hurried effort to find a new leader.

Similarly, a specific event - a nasty surprise or poor performance - may make it apparent that a key executive must be removed right away. Interim management may offer the best solution during the reassessment that will probably follow.

The bank may have a cadre of strong managers, but they may have too many problems to deal with at the moment. Rather than permanently increase management ranks, the board might find an interim executive to be a valuable resource.

Tryout' May Yield Best Candidate

Many interim executive assignments turn out to have been tryouts; the person who had been engaged for just a while is asked to join the bank permanently. The directors will have seen the executive in action, rather than relying only on a polished resume, a couple of good interviews, and references.

The bank may realize benefits not directly related to a specific role or assignment. They include an infusion of new ideas and an objective look at the bank's strategies.

Most important, engaging experienced bank interim executives can offer reassurance to remaining staff and lead to the preservation of morale and good customer relations.

Keeping Up with Regulatory Matters

A key consideration today is regulatory compliance and an effective working relationship with regulators. In particular, it is important for banks and thrifts to remain current on all compliance matters.

As most directors are aware, the scope of compliance and the scrutiny that accompanies those changes has broadened, particularly since the thrift-bailout law was passed.

And if your institution is under a special order, such as a cease-and-desist order, it is wise to consider every option.

Mr. Moore and Mr. Reidel are managing directors of Financial Institution Management Inc., a Cleveland-based company that specializes in interim management for banks and thrifts.

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