The Rise of Fractional Executives (and Managers)

‍

‍

Contract ICs (individual contributors) have been common for many decades. Fractional CFOs for almost as long. Today we’re seeing a rapid rise in the number of other fractional executives, and to some extent middle managers, too. In this article look at what the work involves, why this is, and what it means for your career and the labor market as a whole.

Disclaimer: I’m a fractional CTO / CPO (chief technology officer / chief product officer). For many years I have been part time, or sometimes full time interim, with companies to fill an executive level role. My book and writingsabout career skills come from my 20+ years of teaching these skills at MIT and elsewhere, somewhat separate from my fractional executive work (although plenty of what I teach was learned the hard way on the job, in permanent and fractional roles).

We begin with some history. At the individual contributor level, contractors became common when companies realized they had short term projects. The cost of finding someone fulltime was high. Not only is there tax overhead for full time employees, but the corporate hiring process wasn’t designed for it. If you need someone to create a UX for a mobile app it might be a one-off project taking six weeks. In such a case you’re not so concerned about cultural fit, or how someone will progress the company over the next three or four years. Instead, you hire specifically for the needed skill: mobile UX design.

I suspect (but can’t find data to prove) that fractional CFOs (chief financial officers) became more common with the rise of startups during the dot com era. While companies had full time employees in sales, marketing, product, and engineering, they didn’t need much in terms of finance. Often an in-house bookkeeper or accountant was sufficient to deal with the regular cycle of monthly accounts receivable and accounts payable activity. This in-house person met 90% of the need. Where the bookkeeper would come up short was doing the monthly close of the books, developing the annual budget, and the financial projections needed for raising investment funds. Someone more senior was needed, but not full time. Hence the need for a fractional CFO. (I suspect the dot com era drove primarily because financial projections were needed for raising capital by early-stage companies, unlike with traditional small businesses where the owner operator could do a sufficient level of financial projections by herself for herself without a CFO.)

Importantly, the CFO and accounting activities weren’t a competitive advantage for tech startups. They didn’t need to keep it in-house, unlike, say, engineering or sales where it provided a key driver to growth. Moreover, accounting, like law, was a function where companies already regularly used an outside firm for some of the work, so this was not that big a step for them to take.

Today I see not only fractional CFOs, but also fractional CMOs, COOs, CROs, CPOs, CTOs, CISOs, and others. I also see people in non C-level management positions who are part time with the company.

‍

This is not to say long term hires and strategy don’t matter, but companies need to respond tactically very rapidly in today's world.

‍

Technology was one of the last because so many companies saw technology as their competitive advantage. Fractional sales leaders lagged the other roles for similar reasons. Today you can build software quickly and easily with offshore teams, and while technology may help you improve your business (e.g., better connections to customers, automating operations), unless you’re creating patents or trade secrets it’s probably not a proprietary advantage where you really need full time, dedicated strategic senior resources for small and mid-size teams.

There are a couple of common circumstances where it makes sense to hire a fractional executive (or fractional manager). These cases apply to any sort of fractional CXO, or fractional manager.

‍

Optimal ROI

Many early and mid-stage tech companies come to me saying they need a CTO because they create software. They don’t need one full time. As with the CFO example above where most of the accounting work was daily operations for which the CFO would be overkill, most of the work needed by these companies is writing the code. They need to hire software developers to write the code. Senior CTOs aren’t the best way to do that. Some have forgotten how to code altogether; even those like me who still do code are pretty rusty at it since we write code so rarely (I was good at it when I did it 50 hours a week, not so much when I do a few hours a month at best). For what we cost on an hourly basis, you don’t want us sitting around writing code when there’s someone cheaper who writes code every day and doesn’t have to look up the latest third-party library since they just used it last week.

All these coders, however, need some supervision. Some smaller companies have fractional CTOs oversee a team of 5-20 coders (typically offshore). Even then, some companies have part time or full-time project managers or engineering managers to oversee this work. Like the accountants described above who can do the day to do work, but not the bigger picture work, so too, do these companies bring in a fractional CTO to oversee the engineering management and to help focus on the big issues, but not to write code.

I often find my work is a combination of reviewing what the project or engineering managers are doing, but also working with the executive team to help create an ongoing strategy and roadmap for the organization. I’m also usually brought into key business development meetings or sales meetings where they need a more experienced leader than their full-time middle managers or a less experienced department leader. Admittedly, they often like having my name and credentials on their deck for fundraising or partnerships since my experience and academic credentials are stronger than some mid-level manager.

While I gave the example as a CTO / CPO, I have seen the same thing in other lines of work. A fractional CHRO sets up processes and strategy for a business while more junior full time HR employees execute it and do the day-to-day work. Fractional CROs help set sales practices and strategy but do little or no selling themselves (particularly if the company is still doing only small value sales contracts at this stage). A fractional head of marketing might own the website and some basic content strategy, but not actively manage the campaigns.

The key in all these cases is that companies are arbitraging for skills. Matt Blumberg, Co-Founder CEO of Bolster, a fractional executive marketplace, says, “the central [benefit] is that companies can access a level of talent they otherwise wouldn’t be able to afford.” (Disclaimer: I have a profile on Bolster and his wife and I work together at MIT.)  A full-time person gets into the weeds, even if not needed there, because she or he is a full-time sunk cost to the company. Fractional leaders, where you're effectively paying per hour, are limited to the areas where the company gets the optimal ROI. It might mean getting into the weeds on a thorny problem from time to time (I do review code as needed in key areas of the system), but otherwise staying out of it since most of those issues can be solved by the more junior full-time people at a lower cost.

Additionally, instead of looking at someone as a long term fit for a full-time role, companies simply ask if this person can work well enough for some period (maybe just a few weeks or months, although many times longer) to get the job done, even if they’re not a fit in other ways. You’re buying the single, not the whole album. It makes the recruiting process faster and more targeted, and the overall process more cost effective.

‍

Vendor Oversight

A related but distinct activity is overseeing vendors. Oftentimes CEOs will tell me they have an IT firm but don’t always trust that the firm is making the right decisions, or that they are getting the optimal value from the firm. Sometimes the vendor just speaks in technical jargon and the CEO doesn’t know if it’s smoke and mirrors covering up mistakes or valid issues. They see me as someone who can keep the vendor in line. In marketing I see the same things with fractional CMOs who oversee a third-party agency (or multiple agencies). The third party does the work, but the fractional CMO does the check to make sure the company is getting good value.

It’s not unlike if you hire a contractor to add an addition to your home. If you don’t know anything about construction you don’t know if you’re being oversold, perhaps the work should be cheaper and take less time, or other materials used than the ones suggested. If you have a friend more knowledgeable than you, you might ask him to review the quote and see if it sounds reasonable.

Often vendor oversight goes hand and hand with the optimal ROI case. There are times where it’s just one of the other, though.

‍

Deputy Role

Another common case is as a deputy. Often mid to large companies, particularly high growth or evolving companies, have a lot of things going on, be they fires (problems) or projects (opportunities). Sometimes an executive just has too many reports or too many things going on. I often get brought in by colleagues who need me to hold down the fort on some projects. They might be responsible for 10 different projects and will bring me on to babysit 2-3. Usually these are not the most critical, but they often involve more time and attention then the ROI justifies for the executive’s time. Examples include maintaining legacy systems, doing security audits, or investigating uncertain areas (like AI) that can’t be ignored, but may not have payback for a while. The actual executive can focus on projects that have the bigger direct impact and sleep well knowing that I’m on top of the time sinks. Instead of spending 10-15 hours a week she doesn’t have on meetings and emails for these projects, she spends one hour a week or less meeting with me knowing that I can either manage it or will pull her in when I need her to make a decision above my scope. This works across all functional areas, not just technology.

I refer to it as a deputy because in this role you basically act as a proxy for the overburdened executive or manager. Your role is to stave off problems and/or make the actual executive look good. Here again it’s not about seeing if the fractional person is an ideal long-term fit, or if they’re a good leader (it’s not a leadership role, the full-time person is the leader, makes hire/fire decisions, and is responsible for the growth of the employees), but only if they have sufficient tactical skills to keep the project moving along.

Again, this applies to any functional area. I know of a chief medical officer, who, among many other responsibilities, had to do a final patient review and authorization on certain procedures. All that was needed for this role was an experienced doctor who understood the policies and medical best practices to make a judgment call. The full-time person got freed of what he saw as busy work and the fractional medical officer could review cases without the hassle of budgets, office politics, or other headaches of the role. Both got to do what they enjoyed.

‍

Mentor

Many classic stories and movies follow what’s known as the hero’s journey, or monomyth (e.g., Star Wars, Karate Kid, Lord of the Rings, The Wizard of Oz). In addition to the hero and villain, there’s a mentor (Obi Wan, Mr. Miyagi, Gandalf, Glinda). Some companies just need someone who has been there before. They may have someone in the leadership role for the department who is new to it and could use some guidance.

This is the inverse of the deputy role. While as a deputy you are very hands on for a specific scope, here you are hands off with a broad scope. Unlike a coach who typically helps a single executive personally on general leadership and management skills, a mentor helps them (typically more than just the one executive, rather the executive team as a whole) think through business strategy and operations, and often joins in other meetings and activities alongside the leadership team. In some cases, coaching the functional leader personally may be part of the job, too.

Note that this role is the least likely to be at a non-executive level.

‍

‍

These aren’t the only times a fractional executive is brought in, but they are the most common. It can be a single one of the roles above or a combination of two or more of them needed by a company. For long term engagements it can vary over time. For example, it may start with vendor oversight, but then a young leader is brought on and you shift to more of a mentor role.

While I use the term executive, these roles could apply at any layer of management. What would be an executive role at a small or mid-sized company could be team-lead level of a newer project at a large company. (While I’ve mostly done A-C round startups, I’ve had two Fortune 500s bring me in for such roles where I was the de facto CTO of the fledgling division.) Or a “deputy” CMO could just be a part time fractional marketing manager who is an expert on a specific type of marketing.

It raises the question, why now? Why didn’t we see this trend before? The theme running through all of the above is that there’s a specific scope to the work. The deputy role usually just involves operational execution for specific projects, not true leadership, strategy, hiring, or other aspects of the full role. The mentoring is not execution at all, but wisdom and guidance from someone who has done one before. It’s mostly meetings, and emails, with little if any execution. In the first example above, you’re optimizing for where the fractional executive can do something that the middle manager cannot, so you’re willing to pay the premium cost of the fractional executive for that limited amount of work.

All this is possible, and desirable, for three reasons. The first is that everything is electronic now. Fifty years ago, you couldn’t be around just some of the time, you might miss something important the day you weren’t at the office; quite literally you may not have gotten the memo. Now information is stored online in shared file systems and project management systems. Email and instant messaging allow for asynchronous communication.

‍

“the pandemic opened the floodgates because ‘work from anywhere’ has driven more and more senior executives to want flexibility in their work lives.”

‍

Second, related to the first, is that people now recognize that work can be done remotely and/or part time. Pre-pandemic the expectation was that senior leaders must be co-located in the office to work. Only specialized project work, like the UX designer example, could be done remotely. The last few years showed companies that executives not always in the office can work out and executives saw that they can work remotely, allowing them to build flexible portfolios of clients instead of one single employer. Blumberg observes that, “the pandemic opened the floodgates because ‘work from anywhere’ has driven more and more senior executives to want flexibility in their work lives.”

Third, and most importantly, the pace of change is accelerating. People have talked about the “internet speed of change” for years but it’s gotten even faster. Think about the time you first learned about the world wide web until you started using websites regularly at your work. It was probably on the order of years. When covid-19 hit we had to shift our businesses in months, even weeks. While people have talked about AI for years, ChatGPT-3, a revolutionary, viable, practical large language model became available in late 2022 and in less than a year companies are racing to figure out how to integrate it into their work. Supply chain changes during the pandemic and ongoing geopolitical realignments require solutions on the order of months, not years.

This is not to say long term hires and strategy don’t matter, but companies need to respond tactically very rapidly in today's world. Finding the right person takes time; the more senior the role, the more time it takes. Looking at a fractional person you can align just on the key skills needed for this time sensitive task. The risk of a bad hire is also reduced since if the person isn’t right, you can terminate the contract on short notice. Not only is there no severance, but there’s also less egg on your face since this person wasn’t expected to be long term, or even fully integrated into the team. It’s awkward when you bring in a new executive only to have them leave a few months later, not so much with a fractional executive who is known to be temporary. (Note that in some cases the fractional person can convert into full time if both sides feel it is a fit, allowing a try before you buy hire on both sides.)

One common question is about the difference between a fractional executive and a consultant. I’d argue there isn’t one. I know fractional CFOs who come in a couple hours a month, talk only to the CEO and accountant, do their work, and leave. Likewise, I know some consultants who give advice or perform some tasks, and then walk out of the office. I also know consultants who are embedded with a team for months on end and are a de facto member of the team. Likewise, a fractional executive or manager is often embedded with the team the same way a full-time person may be, just with less hours. While it’s usually more of the latter (the closer, embedded relationship), it can be the former.

‍

While the demand for soft skills in full time employees continues to rise, there will be an increased demand for people who can execute on specific tasks, not just as individual contributors but in mid and senior management positions.

‍

Now for the $64,000 question: what does this mean for the labor market and your career? Companies will continue to hire more people tactically. While the demand for soft skills in full time employees continues to rise, there will be an increased demand for people who can execute on specific tasks, not just as individual contributors but in mid and senior management positions. While soft skills will be important in those roles (as with any management or leadership role), the evaluation function will be more oriented towards the ability to achieve the goal in the short term based on demonstrated history. (Note that as someone who wrote a book on soft skills, I still encourage you to learn them. They do matter for full time roles, and even for fractional roles it’s better to have them than not.)

There’s upside for everyone. Companies can be nimbler and optimize their resources. The faster flow of people will help bring in new ideas and keep companies up to date. The fractional workers can pick and choose projects best suited for them and grow their networks through exposure to more people (not one-off meetings of strangers connected on LinkedIn, but actual relationships with people you’ve engaged with over time as coworkers).

I’ve seen early-stage companies hire senior leaders they could not possibly afford full time, because they are arbitraging the work, getting low-cost labor for some of the work and senior guidance for a small part of it. While I do this regularly as a CTO / CPO I’ve seen some companies where most of us at the senior level are fractional to start.

For those thinking of pursuing this option a quick word of guidance. There’s a lot of upsides such as working on multiple projects, portfolio of revenue, variety of work, and faster network growth. It comes with the challenge of finding your own clients of course, as with any contract work. With fractional work specifically there are two unique challenges. The first is a lot of context switching. As an executive, I’m used to jumping from meeting to meeting on different topics, but fractional work does it on steroids. You’re not just switching projects but industries and project states with much bigger jumps. Second, you need to set calendar expectations. As a fractional CTO / CPO many of my companies have teams in Eastern Europe and Asia. It means there’s high contention in my mornings across all my clients and my afternoons are more open. Make sure you have a discussion of what hours and specifically when, or clients may try to overschedule you.

While the past two decades have mostly seen fractional CFOs there will be a Cambrian explosion of fractional managers and executives in the coming decades. Everyone will benefit as it allows a finer grain type of hiring. This will not replace long term leadership hires, which remains critically important, perhaps more so with the revolving door of others, but it will allow companies to more efficiently fill in the gaps in a rapidly changing world. As with any career choice, there are pros and cons to pursuing such a path.

‍