The use of fractional executives has gained significant press and popularity over the past several years. Like other contingent talent strategies, fractional hiring involves hiring experienced executives on a limited, part-time basis. It is increasingly attractive not only to start-ups and small growing companies looking for expertise they might not otherwise be able to afford, but also to larger organizations where specialized experience is needed to support novel circumstances or strategies.

By accessing high-level expertise and leadership skills without the financial commitment of a full-time executive salary and benefits package, fractional executives bring a wealth of experience and specialized knowledge that can be leveraged to drive strategic initiatives, foster innovation, and guide companies through periods of transition or rapid growth. These fractional executives offer numerous benefits, including access to fresh perspectives and agile decision-making, but they must be balanced against several common challenges that companies that employ such individuals face.

When executed well, this strategy can offer companies the leadership they need to navigate complex challenges and seize new opportunities, making it an attractive option for businesses looking to optimize their executive talent cost-effectively.

What is a fractional executive?

Fractional executives are temporary, part-time contracted workers hired to bring their unique blend of experience as senior leaders whose experience and skills fill a critical gap in a company’s talent capabilities. While the definition varies, the U.S. Chamber of Commerce defines them as those hired for a “fraction” of a normal employee’s time commitment to drive a particular set of ongoing goals versus a project. One key element of the definition is their hiring without the long-term commitment of a full-time role. Another is their most typical use as an actual decision-making executive.

Furthermore, these hires are differentiated by their level – they typically involve CxO-level work, such as that called for in a top CEO, finance, technology, or HR role. They are assigned leadership-level work involving strategy development, large-scale planning and execution guidance, and counseling and coaching within a given function. They commit to a certain amount of time per week, are free to act in this role for several clients simultaneously, and may fill the role for between 6-9 months and, in some cases, for much longer.

They are typically differentiated from other roles, such as consultant (project-based work), advisor (guidance without execution responsibilities), interim executive (full-time commitment), or freelancer (specific deliverables).

What makes a successful fractional executive?

The most sought-after fractionals bring their clients a wealth of experience and perspective. They tend to be well-credentialed for top leadership roles, have broad experiences where they have “seen and done that” multiple times, have accumulated many “lessons learned” from designing and leading the execution of a wide range of strategies, and have worked in a variety of business environments. 

In general, fractional executives tend to have these traits and capabilities:

• Deep functional expertise in their professional field.
• Significant experience in the top (C-Suite) level roles of multiple organizations.
• Track record of success as a leader either within a single or across multiple related industries.
• Experience leading organizations through significant business lifespan events and challenging periods (start-up, rapid growth, IPO, global expansion, mergers and acquisitions, etc.).
• Previous employment and consulting in companies at different stages of maturity, including start-up, mid-market, or F500.
• Well-networked within and knowledgeable of one or more industries’ leading companies, competitors, vendors/supply chains, professional associations, regulators, etc.

The ideal fractional executive has the capabilities to lead an organization or one of its key functions at a top organization, but prefers to spend their time guiding others through significant corporate life events. Many of these former executives enjoy the challenge and excitement of overcoming barriers and working towards a specific outcome that can change an organization's fortunes, without the bureaucratic tedium that often comes in between. They bring business, industry, and functional experience, along with a wealth of associated life experiences, that can significantly enrich the skill sets and expertise of those they work with (and then leave behind).

The recent rise in the use of fractional executives 

While reporting on the use of fractional executives has been substantial over the past several years, data on their use is difficult to find. However, one provider of fractional executives reports a 57% increase in their deployment since 2020. In particular, start-ups and other venture capital-backed companies appear to be among the leaders, as their headcount funding is limited and their needs are specific, such as support and growth from experienced marketing and finance executives. Another firm reports that the demand for temporary business management or fractional jobs has increased 57% since 2020, with even higher demand for fractional roles.

Some experts observe that the timing of this increased demand points to post-pandemic acceptance of remote work among executives, combined with greater availability of executive talent due to widespread layoffs at top-tier employers in recent years. In addition, research from Korn Ferry indicates a shrinking average CxO tenure to 4.9 years across positions and industries, with the CMO role averaging only 3.5 years and the CHRO role 3.7 years. As a result, the replacement rate for these roles has only increased, leaving critical skill gaps in those organizations for months while they search for replacements.

Where fractional executives can best be utilized

The most common place for the use of fractional executives appears to be in early-stage companies, which lack the financial resources and business maturity to commit to a long-term relationship with a top-shelf CFO or CMO. Likewise, they typically lack the scale to employ a full-time, fully capable human resources or sales executive. However, depending on their growth rate or market opportunity, the need for more sophisticated strategies and processes may arise as a requirement to enable such growth. In such a case, using a fractional executive may make the most sense as the company grows to its potential. Other possible scenarios include businesses that are...

• Small but growing and on the verge of a significant transition into newly available markets, new applications of its core products or services, etc.
• Early stage, but have attracted a mature, well-funded business interested in partnering to gain access the company’s patented technology, products, work methods, or client base.
• Rapidly growing with a less experienced leader who is in need of a partner to co-lead to maintain the company growth curve while accelerating their capability development.
• Facing a major change and in need of a skilled leader to guide them through it (e.g., IPO, seeking new investments, market expansion, acquisition, merger, etc.).
• Mired in flattened results and in need of fresh perspectives and leadership on priorities and opportunities.
• Mature but in need of a fill-in with specific expertise, as when entering a new market, geography, or industry or facing a novel challenge requiring ongoing support and expertise lacking in the current leadership team.
  
  

Motivations for using fractional executives

While circumstances often call for more experienced support, many internal factors can drive the decision to hire a fractional executive. While a wide range of opinions exists on when and how best to use one, there are a few basic, common rationales that can lead a company to hire one over a consultant, a temp, an interim, or another option.

1) Economic realities. When a company needs expert leadership but cannot afford to employ a full-time executive in a role whose capabilities might only be needed for a limited timeframe.

2) Time constraints. At a time when leadership is needed to help the organization respond quickly to a crisis, circumstance, or other unforeseen event, an outside resource can be identified and retained. 

3) Skill-gapped. Is the current leadership team lacking the experience and know-how to stabilize and guide an organization through a turbulent time or a major lifecycle event? Also, when an executive leaves, this can quickly fill the gap at a lower cost while a replacement is being sought. 

4) Consulting is insufficient. When a company faces a challenge for which a technical solution or strategy is insufficient, it must be addressed as it occurs, making a consulting firm's time and solution process unlikely to produce the needed results.

5) Adaptability is required. Change and volatility are consistent partners in rapidly evolving businesses. After responding to a specific need, a fractional leader’s role will become unnecessary, and a full-time employee would otherwise need to be laid off.

6) Mitigating risk. When a new and unique challenge arises, the leadership team lacks the expertise and confidence of the CEO or the board of directors to manage it. Bringing in a fractional can build a sense of security for those stakeholders while ensuring that the right leadership is in place to resolve the situation.

Understanding the costs 

The relative cost of a fractional executive is based upon many factors that an experienced HR or Procurement professional would use to create an offer to a part-time or contract hire. That said, the key elements to consider are the number of hours to be worked each week, the experience level (total years and those at an executive role), the relative market value of a full-time executive in the same role, and the mark-up expected from an agency if needed. Considering that many options exist for sourcing such talent (including traditional job boards and aggregators), finding the right candidates often means rates will be pre-set but negotiable through outsourcing firms or web platforms.

Considering that the total expense is often built upon an hourly rate, plus the cost of taxes and benefits the person would be eligible for, plus a markup or profit margin, estimates can vary greatly. That said, estimates range from 60-70% of what you would expect to pay a full-time executive down to 20-30% for a full-time employee in the same role. Similar estimates on the lower end are suggested, with the caveat that an average monthly retainer can range from $5,000 to $ 15,000. Key to the total cost is the number of hours the fractional leader will be committed to delivering, with hourly rates typically ranging from $150 to $500.

Remember to budget for assignment-related travel costs and any other costs required for the successful performance of the role.

The benefits of hiring a fractional executive

Hiring a fractional executive offers numerous benefits for businesses, particularly for small- to mid-sized companies or startups that may not require or cannot afford a full-time executive in a specific role. Aside from the previously mentioned financial savings, key advantages include:

Flexibility

Companies can adjust the fractional executive's hours and responsibilities based on current needs, providing flexibility to scale up or down as the business evolves. This can be especially valuable in addressing specific initiatives or during transition periods.

Expertise and experience

Fractional executives typically bring a wealth of knowledge and experience from working with multiple companies across various industries. This exposure allows them to bring best practices, innovative solutions, and a fresh perspective to tackle challenges effectively. They can be used to support and augment the work of an existing functional leader as a load-balancing measure when key corporate lifecycle events arise, allowing the fractional to use their expertise to drive a new initiative while the incumbent manages the day-to-day, or vice versa.

Speed to market

With an experienced executive stepping in, companies can accelerate decision-making processes and strategy implementation. This can be critical for startups and growth-stage companies looking to capitalize on market opportunities swiftly.

Networking and resources

Fractional executives often have extensive networks and relationships that can benefit the company, including potential clients, partners, and investors. Their industry connections can also facilitate access to other resources and expertise as needed, such as assisting with a regulatory challenge, negotiating a teaming opportunity, or finding partners for an international expansion.

Objective insights

As they are not involved in the day-to-day operations and politics of the company, fractional executives can provide objective, unbiased perspectives on the business strategy and operations. This can be invaluable in identifying issues and opportunities that may not be evident to the internal team.

Example: how to leverage a fractional Human Resources executive

Given Wowledge’s focus on the HR community, it is important to understand how hiring a fractional Human Resources (HR) executive can offer specific advantages that closely align with a business's strategic and operational needs. This is especially important for small to medium-sized enterprises or startups that may not require, or cannot afford, a full-time senior HR professional. The fractional executive can bring significant value to the entire business and HR team through a range of services and deliverables.

• Strategic HR planning: A fractional CHRO can help develop a strategic HR plan that aligns with the overall business strategy. This can include workforce planning, talent management strategies (especially recruiting and learning), and succession planning, ensuring the company has the right talent for future growth. 
• Expertise on demand: They bring specialized knowledge and expertise in HR areas where leaner HR teams might lack, such as compensation and benefits, employee or union relations, and compliance with labor laws. This expertise can be particularly valuable for companies without a dedicated HR department.
• Objective perspective: A fractional HR executive can provide an unbiased, external perspective on the company's HR practices and challenges. This can help identify areas for improvement and implement best practices that an internal team might overlook or lack the gravitas to address, such as poor leadership and management practices.
• Enhanced compliance and risk management: Keeping up with changing labor laws and regulations can be challenging. A fractional HR executive can ensure that the company remains compliant with federal, state, and local employment laws, thereby reducing the risk of costly legal issues.
• Leadership coaching: When a company lacks an HR leader at the senior-most level, a seasoned fractional can earn the trust and ear of the CEO and top team, and help drive greater HR impact through coaching.
• Access to Networks and Resources: Fractional HR executives often bring a network of contacts and resources, including potential talent, vendors, and consultants, that can be leveraged to support the company's HR and business objectives. They can also leverage their connections and relationships within the regulatory and legal community to help resolve issues that inevitably arise when an established, well-resourced HR team is not in place.
  
  

Common issues and challenges to manage

While the fractional executive model is promising, common challenges do exist. Being aware of these can help create a structured approach to their employment and use it in a way that maximizes the return on their employment. Many of these lessons have been learned through the engagement of contractors, temporary workers, and consultants. However, a major difference lies in the level and role of the fractional leader – a senior-level position that has the ability to impact the company’s operations, employees, customers, stakeholders, and overall fortunes. As a result, extra care should be taken in how these elements are set up, communicated, and managed.

1. Candidate review and selection

While the commitment is limited and rapid hiring to fill a gap is often a priority, the selection process should follow the same criteria and steps as those used to select a full-time executive. The rationale? The role may be temporary and part-time, but given its organizational level, it will have an outsized impact compared to other temporary roles. Clarify the requirements and desired experience criteria, and interview/review candidates for a minimal cultural fit.

2. Contract requirements

It is critical that the fractional and the company formally agree on the nature and details surrounding the engagement. Set clear expectations for hours per week, location (remote vs. onsite), projected length of the assignment, and an opt-out clause in case of poor alignment of the fractional leader’s skill sets or availability with the requirements. Ensure a reasonable notice period protects the company and the individual. Be sure to include NDAs and other legal protections to remind the fractional executive about their responsibilities to protect the data, intellectual property, and competitively sensitive resources that they will need to review and use in their work.

3. Onboarding and integration

Given the relatively brief and part-time nature of their relationship, a quick and comprehensive onboarding approach is necessary. Provide access and formal introductions to all the leaders and employees with whom they interact. Have access to vital systems and digital resources available on day one. Share key objectives, timeframes, responsibilities, and performance expectations in writing and verbally.

4. Clarity of responsibilities

Set clear responsibilities, goals, and boundaries for the role, including where, when, and with whom they are to advise, coach, or direct. Explain clearly their management responsibilities, including the frequency and content of individual and team meetings, who they will have management responsibilities for, and what those entail. Goal setting and timetables are necessary, and regular check-ins should be scheduled on the calendar to provide them with the guidance and feedback they need.

5. Staff resistance

Be prepared for other staff members to be wary and perhaps resistant to hiring a fractional. As they will have temporary responsibility and accountability for the work of others who may already be performing the function without higher-level leadership, they will need to be briefed on the rationale and action plan for the new contributor. Similarly, be prepared to assess their fit with the culture, listen to staff concerns, and respond by providing frequent feedback, guidance, and coaching to help them adapt quickly and sustainably.

6. Schedule alignment

Many fractional executives have more than one client, and as a result, a proactive approach is needed to align the fractional executive's availability with project plans, deliverable timeframes, and critical meetings and deadlines (e.g., Board of Directors meetings, strategic plan due dates, and so on).

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