- A leadership take on the subscription service. Fractional leadership gives organizations access to experienced executives on a flexible, part-time basis.
- The concept is not new. Since the 1970s, organizations have employed similar solutions when facing leadership gaps or requiring specialized expertise for short-term projects.
- Weigh the pros and cons. Fractional leadership isn’t for everyone. As such, consider the costs or cost savings, plus the use cases and intended benefits, before moving forward.
In our post-COVID-19-pandemic world, employee expectations and priorities have undergone a seismic shift, creating an even more daunting challenge of attracting, retaining and motivating top talent while managing rising labor costs.
The 1.2% increase in the Employment Cost Index (ECI) last quarter and 4.2% increase for the 12-month period ending in March 2024, as reported by the U.S. Department of Labor’s Bureau of Labor Statistics, is a wakeup call. Businesses are being squeezed. Solutions that help them balance these complexities may no longer be optional.
Subscription-based services (for media, software, transportation and more) are common in consumer and business settings — enabling users to access premium features and resources without a significant upfront investment. Such solutions have transformed the way we consume information, initiate experiences and perform tasks. The concept of fractional leadership may be thought of in a similar manner.
Fractional leadership is increasingly transforming the way organizations approach talent management by offering them access to experienced executives on a flexible, part-time basis. It can provide organizations with experienced strategic insights and budget flexibility — allowing total rewards dollars to be reallocated to full-time staff, thus potentially enhancing those offerings.
The cost difference can be staggering and bottom-line busting — or saving — depending on your perspective. Take the position of chief marketing officer (CMO), as an example. The average annual cost for a full-time CMO in the U.S., according to Salary.com, is $360,000 per year, not including bonus, benefits, equity or other total rewards costs, compared to $10,000 to $15,000 per month for a fractional CMO, depending on experience, industry, time commitments and other factors.
Beyond the potential cost savings, employing fractional executives can help reduce turnover while adding executive-level flexibility. This could be especially valuable when market conditions shift or strategic pivots are necessary.
The fractional model also can transform leadership into a variable cost, aligning it more closely with actual needs and current financial situations, which can be advantageous in a financial climate that favors lean operations.
Fractional Leadership in Action
Potential scenarios for fractional leadership include:
- Rapid growth. Fractional leaders can often be onboarded more quickly than full-time executive leaders and may maneuver more freely within the organization. Unencumbered of political boundaries often associated with full-time executive roles, they can help jumpstart growth efforts.
- Budget-consciousness. The concept may offer a way to access top-level leadership within a more manageable financial framework.
- Driving focused projects. Fractional leaders can inject fresh perspectives and innovative approaches without disrupting the core team’s balance.
Reside Admissions, a workflow management and connected admissions platform for long-term care, found itself facing a critical period of growth and transformation and turned to fractional leadership as a solution.
“One of the biggest advantages is flexibility,” said Reside CEO Ari Shabat. “As needed, we’ve been able to embed a fractional chief financial officer, chief marketing officer and chief operating officer as part of our leadership team to give us access to top-tier expertise and strategic guidance when we need it most — without the overhead that takes away from investing in the strategies that will catalyze our growth and secure market leadership. We want their strategic leadership and direction; our people can execute on those plans.”
Similarly, Lisa Bomrad, founder and chief people officer at consulting firm HR Catalyst, has worked as a fractional CHRO and hired fractional leaders as a full-time CHRO.
“I’ve experienced fractional leadership from both perspectives — as the hiring manager and as the fractional leader,” she said. “I’ve worked with diverse organizations, each with their own unique challenges and goals. Through it all, I’ve seen firsthand how fractional leadership can help drive long-term growth and success and give companies a competitive edge by accessing talent they would not have been able to afford on a full-time basis.”
What Are the Downsides?
While fractional leadership can offer numerous benefits, it may not be for every organization. Some potential drawbacks to consider include:
- Limited availability. Fractional leaders often have multiple clients, which could limit organizational access to their expertise during critical times or emergencies.
- Lack of long-term continuity. Fractional engagements are limited in scope, which could lead to a lack of long-term continuity in leadership and strategy.
- Perception issues. Some employees may perceive fractional leaders as less committed to the organization, given these leaders’ fluid arrangement, which could impact morale and trust.
Despite these drawbacks, with the right leader, organizational use case and plan, the strategic value and benefits of fractional leadership may outweigh those negatives.
The Strategic Value of Fractional Leadership
Fractional leadership is not a new concept. It has its roots in the 1970s and ’80s, when interim management first emerged as a solution for organizations facing leadership gaps or requiring specialized expertise for short-term projects.
However, the rise of the gig economy, coupled with technology advancements for remote work and increasingly complex business environments, have further fueled the growth of fractional leadership, making it a more common practice.
By investing in fractional executives, organizations may enhance their strategic agility, navigate rising labor costs more effectively and position themselves for long-term success.
“Fractional leadership is a valuable tool in the talent toolbox,” Bomrad said. “It’s about more than cost savings. It adds a whole new level of agility and flexibility that can enable companies to compete at a higher level.”
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