The Polish Interim Market.
General economic picture
At the end of the second decade of the 21 century, the Polish economy enjoyed continuous solid growth (5,1% in 2018, which was consistent with previous years – average annual growth of 4% in the period 2004-2018), a steadily growing internal demand, and a record low unemployment rate (3,3% in September 2019). Poland was the only EU member to have avoided recession during the crisis of 2008-2009. As a result, the country receives relatively high economic ratings: Fitch A-, Moody’s A2 et S&P A-.
Nevertheless, continuous effort is necessary to close the wide gap still separating Poland from Western Europe due to historical reasons: horrendous destruction levels during World War 2, estimated at 50 to 90% depending on the sector, followed by almost 45 years of Soviet rule and the ensuing distortion of economic growth combined with deep scars in the mentality of whole generations. The vitality and entrepreneurship characteristic for the Polish people brought about extremely fast reforms and changes after 1989, but could not compensate the lack of domestic capital and the absence of modern management know-how. The consequence was that at the beginning of the nineties the post-communist era industrial giants, which dominated the market, were mostly ineffective and used obsolete equipment and management practices. There were no larger scale Polish private enterprises, and foreign investment quickly took the lead in developing key business ventures. Although there has since been incontestable growth of private domestic companies, until today foreign entities hold almost 30% of the total Polish economy (54% in manufacturing), provide over one third of the Polish GDP (47% in manufacturing) and create almost half of the exports (63% in manufacturing). This in turn has been influencing the structure of Polish industry and services: a large part consists in sub-contracting to companies abroad, mainly manufacturing parts and assembling under foreign names, or providing support services in shared service centres.
The main threats which may negatively impact the situation in the mid-term are: demographic stagnation, as the population ages quickly while the birth rate has been falling steadily, reaching a level much below the already low European average; and very low level of R&D investment, which is consistent with the industrial structure mentioned above.
The Interim Management Market
Apart from the historical factors, which only recently made it possible for an IM market to emerge – as there were practically no potential clients before the middle of the first decade of this century – two key elements impact the shape of the Polish IM market: the structure of the enterprise world and the levels of social trust.
In 2017, there were about 2 million companies in Poland. Out of these, 96,5% were micro companies (defined as employing less than 10 people and with sales below Eur 2 MM p.a.). The number of SME’s (10-250 people, 2-50 MM EUR) was 69,000. On top of that Poland counted 3600 large companies. Theoretically, the latter two categories constitute the potential market, which combined with a stable and fast- developing economy, a growing shortage of manpower and a hunger for top level business management know-how – particularly in the SME group – should provide an interesting and relatively broad hunting ground for experienced free- lance interim managers.
However, as demonstrated i.a. by systematic sociological research, Polish society is characterized by a relatively low social trust level. This translates into the frequent lack of appetite among family businesses and other Polish CEO’s to trust an individual from outside the company for a limited period of time.
Barriers to hiring an Interim Manager
Research conducted by SIM showed the following typical barriers to hiring an IM:
Power to take decisions. The need for additional legal safeguards to prevent possible damage to the organization
Lower morale. A lower morale may be observed along with a resistance from the team
IM project duration. Concerns about IMs having the appropriate skils and limited time to get to know the business inside out
Experience. Doubts whether it is possible to find an IM whose skills will prove adequate to a particular industry and limited time to get to know the company while it is widely believed that if one wants to make favurable changes they need to know the business inside out
Experience. Doubts whether it is possible to find an IM whose skills will prove adequate to a particular industry
(Cited after B. Skowron-Mielnik, G. Sobiecki: “Effectiveness factors in interim management projects – research concept”, Silesian University of Technology 2020)
Such concerns of company owners show their low awareness of how interim management works and their lack of experience in employing IM’s. That attitude is reflected by recruiting companies, most of which are reluctant to engage systematically into promoting interim management as they believe the clients are not interested. There are very few providers in Poland having a deeper experience with IM projects. This in turn limits the possibilities for awareness raising among businesses. For several years SIM has been focusing on propagating the IM concept among companies through conferences, publications and workshops, but the market is still at its beginnings. The above is also reflected in the distribution of sources of IM projects:
The majority of projects – 62% - come from various forms of networking and only 18% from IM providers.
Most projects duration is up to 6 months (over 50%), and about 30% last from 6 months to a year. IM’s usually have a registered company, so they can sign B2B contracts. This entitles them to a much more advantageous tax regime than other employment forms. As per SIM-conducted research (SIM (2017): Interim Management w Polsce) , the current number of IM’s in Poland is somewhere between 1000 and 2000, but there has been no way to obtain a more accurate number. The IM market was last estimated in 2018, to be 450 MM PLN, i.e. a bit above 100 Million €.
About 1000 people are members of the SIM group on Linkedin, but only 130 are fee-paying members of the Association. This also reflects the lack of social trust mentioned above, which translates among others into the reluctance to associate formally. However, as there is no official “Interim Manager” profession, the company registry does not constitute a source of estimating numbers, because IM’s register as consultants which is a much broader designation. A process led by SIM has been under way since 2018 to include the interim manager title into the Polish Professional Qualifications Framework (related to the EQF). The descriptive part has been completed, and we hope the IM qualification will be officially recognized in 2021, paving the way to a unified certification process nationally.