Take an executive and split them into pieces - you’ve got a fractional executive!
Metaphorically, of course. Fractional executives aren’t C-suite officers who have been drawn and quartered; they’re executives who split their time across different businesses. They are not consultants; they play active leadership roles in the companies they work for.
In this guide, we cover all of the basics of fractional executives: What they do, when you should hire them, how they get paid, and much more:
What Are Fractional Executives?
Fractional executives are experienced professionals who provide C-suite and other executive-level management services on a part-time or contractual basis.
Defining Fractional Leadership Roles
Fractional leadership roles can be anything your organization is missing; fractional leaders may work as CFOs, COOs, CTOs, or even CEOs. The only difference between a fractional executive and a traditional executive is the amount of time the executive works; while a traditional C-suite professional may work well over 40 hours a week, fractional executives work part-time.
How Fractional Executives Differ From Consultants
Consultants give advice. Fractional executives are part of the leadership team; they’re hands-on in running the company. They don’t just give advice on what changes you should make; they implement those changes, see their ramifications, and adjust their strategies accordingly.
Benefits Of Hiring Fractional Executives
Access To Senior Expertise Without Full-Time Cost
You may find that your business is in need of a C-suite executive, but that you don’t have the budget to bring one on full-time; a fractional executive may be the perfect fit. You can pay them a fraction (pun intended) of the salary you would pay to a full-time executive.
Flexible Support For Growing Businesses
As your business grows, you may realize that there are gaps in your C-suite’s experience. These gaps might not be monumental; you might, for example, realize that you need a CTO to guide technical development, but realize that the technical side of your business doesn’t need to be tended to full-time.
Strategic Insights During Times Of Transition
Continuing with the example of a fractional CTO, imagine your business is developing an app for the first time. You might not have the technical knowledge to guide your team during app development and rollout, nor the experience to judge what kind of team you’ll need to build, how to budget development, and what you’ll need once the app launches. A full-time CTO might be overkill; a fractional one might be the perfect fit.
When To Hire A Fractional Executive
Filling Leadership Gaps
Anytime you hire a fractional executive, it’s to fill a gap in leadership. What that gap is will vary from company to company - and in most cases, the gap will become obvious to you well before you start looking into fractional executives.
Supporting Mergers, Acquisitions, Or Scaling
One of the main reasons we offer fractional executive services is that we’re mergers and acquisitions experts. When you’re looking to merge with or acquire another company, you need a leadership team with a deep understanding of both your own operations and the operations of the other company.
Imagine that you’re running a social media company, and that you’ve acquired a tremendous amount of user data. To analyze that data and improve your data collection, you decide to acquire a small data analytics firm.
A chief analytics officer could help you determine if the company is the right fit and give you greater insight into their operations, but hiring one full-time would be overkill. A fractional CAO is perfect in these circumstances.
This philosophy is also true when scaling your business; if you decide, for example, that you want to hire and develop an analytics team, a fractional CAO could help get you started.
Driving Growth & Solving Complex Challenges
You may also want to hire a fractional executive when growth or challenges demand a change. Companies often run with virtually no C-suite structure at all when they’re small; as they grow, they may quickly realize that they lack the experience to expand or deal with certain challenges.
A fractional executive can act as a sort of trial executive in these times, helping companies move through rapid growth or get past operational or financial hurdles.
How Fractional Executives Work
Typical Engagement Models
There are all kinds of ways to fit a fractional executive into your team; it all depends on what you’re trying to accomplish. You might:
- Hire them to complete a project
- Hire them as interim or transitional leaders
- Embed them on a more permanent, part-time basis into your leadership structure
Flexibility is one of the best things about hiring a fractional executive; you can decide collaboratively how and when they’ll engage with your team, your projects, and your company at large.
How They Integrate With Your Team
Hopefully, they integrate well; you don’t want an executive who doesn’t get along with anyone.
In all seriousness, the way they integrate with your team is, just like everything else about fractional executives, more or less up to your (and their) discretion. A lot of fractional executives like to take a hands-on approach; they’re not advisors, so they take the chance to get to know the people they’re going to work with and lead.
Other fractional executives might take a more hands-off approach, evaluating systems, procedures, and technology instead of working with the team on a more personal basis. Many fractional executives work in the office; others work remotely. The arrangements are completely up to you - there’s really no wrong way of going about it. Figure out what works for your company.
Measuring Success Of Fractional Leadership
You’ve heard this chorus before: How you measure the success of fractional leaders depends entirely on what you’re hiring them for and how you integrate them into your operations.
Hiring a fractional executive for a new project? You might measure their success by the overall success of the project. Hiring one for a merger or acquisition? You can measure their success by the ease, speed, and value of the merger or acquisition in question.
Fractional executives aren’t working for free - and you probably wouldn’t want one who would, because good fractional executives have a lot of opportunities for employment. Compare how much you pay them to the value they provide; use KPIs and other metrics to assess whether or not you’re getting what you’re paying for.
How Much Do Fractional Executives Cost?
Common Pricing Models
Pricing models for fractional executives tend to come in two forms: A flat fee in exchange for a certain number of hours each week (or month), or an hourly rate.
Typically, if you’re hiring a fractional executive to help manage a team, you want to go on the flat fee model; otherwise, team members might hesitate to call on them with the knowledge that every call costs them money. Fractional executives who are mostly hands-off, on the other hand, can be paid hourly, so you don’t end up paying for unnecessary work.
When you’re getting a fractional executive to help you through a project or a period of growth, you can also offer performance-based incentives. These incentives will help motivate the executive and give you negotiating room to get as much value out of the deal as possible.
You can create a contract that splits payment between monthly retainers for a set number of hours, hourly rates when needed, and performance-based incentives; some combination of the three is often best!
Cost Vs. Value Considerations
The cost of a fractional executive can reflect a number of factors, including:
- Their level of experience
- The amount of responsibility that they’re taking on
- How much they work
- The results they deliver
Results-based compensation is often a good bet; you’re incentivizing the executive to deliver on their promises, and it’s fairly easy to calculate an ROI where a particular incentive is worth the cost (more on that in the next section). Fractional executives may be hired on a term basis; it can be a good idea to write off-ramps into your contract so that if the executive isn’t the right fit or isn’t delivering value, you can part ways without extra headaches.
ROI Of Hiring Fractional Executives
I hate to sound like a broken record, but the ROI of hiring a fractional executive…depends on what you’re hiring them for and the results they deliver.
That’s not the most compelling answer (even though it’s an accurate one), so let’s go over a few things to consider when contemplating the possible ROI of a fractional executive:
- Hiring a fractional is less expensive than hiring traditional (that’s the whole point)
- You can set KPIs to determine if you’re getting bang for your buck
- More experienced fractional execs are going to charge more - but you might get better results
We recommend talking with other business owners who have hired fractional executives in similar roles (or, ideally, the same fractional executives you’re looking at). Ask them what they hired them for, how the project went, and what their estimated ROI was to get a better idea of what you might get out of the arrangement.
How Hiring Fractional Executives Can Help Your Business
Fractional work statistics reveal that fractional work is booming; that’s because business owners are finding that fractional executives help them grow their business. Hiring a fractional executive can:
- Shore up competencies that your C-suite is missing
- Help your business grow
- Get you through transition periods
- Give you the tools to complete novel projects
These statistics also show that most fractional executive roles are filled by people with decades of experience, with over 30.4% of fractional talent having over 26 years of experience in their role or industry. These are veterans with experience that new business owners can lean on.
Ready To Hire A Fractional Executive? Partner With Catchfire Business Advisors
Whether you’re planning to buy or sell a business or you’re looking for a fractional executive to help you with a new project, we can help. We partner with industry veterans with decades of experience to help you shore up your C-suite and deliver competent, reliable leadership.
We have over 50+ years of combined leadership experience ourselves - so if you’re looking for someone to help you steer your business to greener pastures, we’re the team you should call. We also offer fractional business consulting to help you determine which fractional executives (if any) you should hire. Get in touch! We’d love to hear from you.