The sharing economy has changed the way we vacation, get around, and even dress for fancy events. Why invest a lot of resources into something you need only for a short amount of time, right?
The same concept is making its way into the C-suite, too. Called the “Great Fractionalization,” the growing movement replaces senior executives with fractional leaders and consultants. In fact, these temporary business management positions have increased by 57% since 2020, according an analysis of Bureau of Labor Statistics data by MDL Partners.
While the practice is becoming mainstream—for example, Paul Gubbins holds a fractional role of vice president of strategic partnerships for Tubi—the model has been used within small and midsized companies for the last 10 years, says Lauren Wambold Patel, CEO of Keenan Reid Strategies, a provider of independent management consultants.
“It’s incredibly common to see midsized companies—both private equity-backed or startups—have not just fractional leaders, but fractional roles across their organization,” she says. “They want to tap these skill sets, and either they don’t have the budget, or they don’t see the value in having those people full time. Now it’s starting to creep into enterprise-level companies. I started to notice it with some critical mass about 18 months ago.”
The most popular employer requests for fractional consultants and leaders are for finance, marketing, and human resources talent. Catalant, a consulting firm, reports that 31% of its fractional projects are for fractional positions, 19% are for marketing, and 11% for HR. The move to minimize some roles makes sense and is creating a win-win for employees and employers.
Benefits for an employer
The obvious benefit for companies is that they only pay for what they need. “Most small and midsized businesses don’t need or can afford a full time CFO,” says Michael Stier, director of marketing for FocusCFO, a firm that provides fractional CFOs. “They need the experience and guidance, but just on a part time basis. They benefit from having a CFO who has experience in much larger businesses and can help them grow into that next stage of their evolution.”
Stier says 80% of FocusCFO’s clients use a fractional CFO for one day a week. “For larger clients, a couple of days a week is needed, and some small ones might use one day every other week.”
Wambold Patel says fractional executives are often brought in to transform, grow, or fix initiatives without a long-term commitment. “They’re saying, ‘We are unsure about where the economy is headed, so we are not apt to make a long-term risk. We know about these models, and we’ll take a chance on this,’” she says.
Fractionalization is also an efficient way to build and grow a brand, says Kate Galecki, head of partnerships and growth at the marketing solutions provider We Are Rosie. “You get incredible talent, you get incredible output, and you get a ton of flexibility,” she says. “These are people who have worked at the biggest brands in the world and led incredibly successful brand transformations. It’s all about getting access to exceptional talent in a way you couldn’t do 10 years ago.”
Hiring a fractional C-suite role also allows businesses to fill specific needs. “It’s rare for one executive to be all the things that are needed, such as both a creative and a brand strategist and highly digital,” says Galecki. “You get the ability to augment another executive. You get to test it out over the course of six months or a year and see how it goes. [Then] you might decide to ask the fractional executive to come on full time or you may decide it’s a nice arrangement [as is].”
Benefits for the fractional leader
For employee-turned-consultants, the benefits can also be great. Downsized executives, for example, can rebrand themselves as fractional experts, says Wambold Patel.
“There are many people who are mid-career who would rather take a more balanced lifestyle and apply strategic consulting knowledge,” she says. “They’re amazing SMEs—subject matter experts—they understand their business.”
Taking a fractional role provides a lot of flexibility. “We have one fractional CMO who works for different brands,” says Galecki. “She has little kids and works remotely, setting her own hours.”
Wambold Patel is seeing a lot of interest from Gen Xers and rising elder millennials who have stock equity from the last five years of market growth. “Financially, they are able and more apt to take this financial risk and leave a full-time job or they have a partner that has a full-time job and can support them,” she says.
And then there are fractional executives who enjoy the role structure. Steve Stewart had about 28 years of experience in financial roles before becoming a fractional CFO for FocusCFO. He says having different experiences is one of the best parts of being fractional.
“You can see the results of your efforts and those results being appreciated because you’re dealing with a smaller organization,” he says. “[Office] politics generally don’t enter into the discussion. And the variety makes it fun. I’ve had a wide range of clients, from a guitar manufacturer to an urban planner to a caterer. All of them are very different. That’s part of the fun. It’s probably the most fulfilling work I’ve done.”
Building an inclusive workforce
To be successful in a fractional world, Wambold Patel says consultants need to always be prospecting and relationship building. “It’s no different than if you were a real estate agent,” she says. “You need to focus on the people, not just the problem you’re there to solve.”
Steady fractional work can also take time to build. “You have to align your needs for financial security with what this is going to provide,” says Wambold Patel. “You have to be willing to do the work and get it rolling.”
Fractional leaders create an inclusive way to build your workforce, which benefits companies and consultants, says Galecki. “If you’re not bringing in freelancers or fractional talent, you are missing out on a large swath of the working population,” she says. “A lot of these people are women, they’re caretakers, they’re underrepresented people. This is also a way to combat agism. A lot of brilliant people work this way. They don’t want to work in an office 40 hours a week anymore, or they have been told to leave. They still want to work; it’s what lights them up.”