What is a Fractional Executive and When Does it Make Sense to Hire One?

What is a Fractional Executive and When Does it Make Sense to Hire One?

Fractional executives are the hottest thing in the C-suite. Once a rarity, fractional executives have gone mainstream, especially since the pandemic. Companies across the spectrum, from start-ups to Fortune 500 firms, are considering hiring fractional or part-time executives.

During a webinar, InterimExecs CEO Robert Jordan took a look at the trend and some situations when a fractional leader might make sense for your company.

First, the definition.

What is a Fractional Executive?

In short, a fractional executive is an experienced C-suite executive — CEO, CFO, CIO, COO, CSO, CTO, or CMO — who works less than full-time. The work arrangement might call for the fractional executive to be on the job a few hours each day or a few days each week. They often work for two or more companies at the same time.

Fractional executive work “has become its own career calling,” Jordan said. “They are not ‘between jobs.’ They love doing fractional work.

“Executives who excel at this have a strong repeat track record of success. If not, it would be a hard career to sustain,” he said. Fractional executives “are driven to take on new challenges, drive for results, and focus on building, growing, and transforming businesses.”

Here’s how a fractional CEO can benefit your organization.

What Are the Benefits of Hiring a Fractional Executive?

There are many benefits of hiring a fractional executive rather than a full-time employee, including:

Reduced cost

There is no employer-employee relationship with fractional executives. They typically charge a monthly or project-based fee. That can be a fraction of the cost of hiring a full-time executive with similar experience, who will expect a big paycheck along with other perks of the job, from health insurance to stock options to severance pay.

More Flexibility

Fractional executives can be hired on an as-needed basis so companies can adjust their staffing levels based on workload and budget. Fractional executives work for a defined period, from as little as a few days to as long as several years, depending on the needs of the company.

Access to a Bigger Talent Pool

Fractional executives who are part of InterimExecs RED Team are highly experienced and talented professionals who are not interested in full-time employment.

That means business leaders have “more tools in their tool box now than ever before.” Like a baseball manager who will bring in a new pitcher mid-game, a business leader can bring in new leadership as needed.

“The nature of business is such that thee are stages and cycles and things that happen for all of us. Now, there is more possibility for everyone to put someone new into the game,” Jordan said.

Less Risk of a Bad Hire

Because fractional executives are typically hired on a short-term contract, companies can assess their performance and make changes relatively easily if the executive doesn’t work out.

Ability to Access Specialized Skills

When your company is growing or going through transition — such as a planned IPO or sale — it requires specialized skills. This is a great time to contract with an experienced fractional executive who has been there and succeeded in the past.

In one case, Jordan related, a European tech company wanted to enter the US market. It contracted with a fractional CEO who had “hit two home runs — zero to $100 million twice!” It proved to be an affordable and effective way for the European company to launch in the U.S.

Which Companies Can Benefit Most from Hiring Fractional Executives?

While any company could benefit from the experience of a vetted C-suite executive, there are some situations when a part-time leader is a better choice than a permanent hire.

Early Stage Start-Ups

New companies that want to ramp up quickly might know that they need experienced leaders, but they can’t always find room in the budget to hire an executive with the requisite experience and skills. That’s when fractional leadership makes the most sense.

It also is an easy way to discover what leadership skills you need. Without the time and expense of hiring a full-time executive, companies can contract with a fractional executive  for a short time or even bring in more than one talented leader at a fraction of the cost.

The fractional executives placed by InterimExecs are vetted and experienced leaders, many of whom have taken other start-ups to the next level.

Small Businesses in Transition

When it’s time to transition the company you started to the new owners, having an outsider lend expertise, advice, and perspective can help keep both sides happy. This is a prime example of a time when the skill sets of an executive are invaluable but likely not needed on a full-time basis.

The transition can lay bare the leadership gaps in the company. It’s easier and more cost-effective to fill those gaps on a part-time or project basis.

The fractional executive can take on leadership roles and mentor the next generation as they get comfortable in their new positions.

Alternatively, companies can use fractional leaders to take some pressure off business owners.

For example, a fractional COO can spend a few hours each day managing the daily operations of the organization; a fractional CMO can focus on new product development; or a fractional CFO can oversee the financials while the business owners concentrate on the succession plan.

Medium-Sized Businesses in Search of Growth

Navigating strategic transitions. Entering new markets. Developing new products. Fending off market interrupters. Launching an IPO. Seeking investors. Those are all critical passages for companies during which specific expertise can mean the difference between success and failure.

Companies exploring investor or IPO options likely need the higher-level financial skills a fractional Chief Financial Officer can bring. Entering new markets or developing new products to fuel the company’s growth could require the expertise of a fractional Chief Marketing Officer. A fractional Chief Operating Officer could be key to optimizing production processes.

Large Companies in Need of a Fresh Perspective

Big, successful companies aren’t immune to leadership gaps, market challenges or lagging profitability. Engaging an experienced leader on a part-time basis is an affordable and flexible way to get the company through those challenges.

For example, a part-time CTO in a project-based fractional executive role could spearhead efforts to ramp up online retail operations; a fractional CEO could lead a division in need of a turnaround; a fractional CFO could oversee efforts to attract new funding.

Are You Ready for Fractional Leadership?

Contact InterimExecs to learn more about how a part-time or fractional executive from InterimExecs RED Team can help solve your biggest challenges, opportunities, and leadership gaps.

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