Fractional leadership. Virtual executive. Part-time Chief Financial Officer (or Chief Marketing Officer, Chief Operations Officer, etc). Perhaps you’ve heard these terms before, especially since they’ve been popping up more and more in everyday business. So it may be no surprise that these are all referring to the same thing — the practice of outsourcing executive functions as business needs become increasingly more complex.
So what exactly is a fractional executive? How do they work in the real world? And most importantly, why should you as a business owner care anyway?
THE WHAT AND WHY OF FRACTIONAL LEADERSHIP
Despite the various terms used to describe this role, its definition is quite simple. A fractional executive is a senior professional who devotes a fraction of their time to several companies, and helps them strategize for growth while managing implementation through internal staff. Typically, these part-time contractors/consultants offer strategy and planning for a specific function, like operations or finance. They also have previous in-house experience at the executive level.
You’re more likely to find a fractional executive at a startup or small-to-medium business. That’s because these types of organizations don’t need a full-time executive in the C-suite yet or are hampered by budget constraints. Oftentimes, the Chief Executive Officer (CEO) in an early-stage company may be doubling as CFO and even COO. Although each of these functions may be essential to business success, a full-time executive is an expensive hire and could very well be more capacity than needed. Whereas, a virtual executive fulfills the required function at a fraction of the cost of a full-time employee or employees.
Outside of burgeoning businesses, you may also find virtual executives at organizations considering a significant pivot. That’s especially true in our current climate. The COVID-19 pandemic has created new and different needs on all fronts, especially the financial and operational. Many companies are realizing that they don’t need to hire a full-time CFO or COO with expertise in crisis management, when they can effectively “rent” one for about a year, a year and a half.
FRACTIONAL LEADERSHIP IN PRACTICE
Even before the pandemic, businesses were moving away from the traditional 9 to 5, Monday to Friday, in-person office settings, and becoming more flexible. However, the pandemic has accelerated the adoption of virtual work practices. As systems catch up to the reality of Zoom meetings and home offices, executives signing in remotely is becoming normalized.
The consultative nature of the virtual executive contract cuts down the lengthy hiring process. Plus, you can adjust the engagement duration (usually short-term) to fit the needs of the business. This model saves on recruiting costs, prevents delays, eliminates interviews and relocations, and more. The virtual executive works part-time, has multiple clients, and really only needs to commute (or telecommute ) for key meetings. In some cases, they may work at the client’s office full-time for a short period of time.
Beyond providing strategic guidance and a senior executive presence, fractional leaders usually add value in other ways. Lodestar’s virtual CFO services, for example, offer support across the board: from basic bookkeeping functions to being an essential member of the C-Suite and conducting audits, functioning as an interim executive during the search for a permanent replacement, coaching or mentoring lower-level employees, etc.
AN INCREDIBLY POWERFUL AND AFFORDABLE TOOL FOR TODAY’S BUSINESS OWNER
Here’s where businesses everywhere, including yours, can benefit substantially from fractional leadership.