What Are “Fractional Executives” And How Do They Benefit Startups

By Canopy Advisory

Amidst the many obstacles of successfully launching a company, talent management consistently ranks as the single greatest challenge for founders. In fact, attrition in startups in their first year exceeds 25%, according to the Kauffman Foundation 2016 Index of Startup Activity. Founders wear so many hats that they don’t have adequate time or resources to seek out, recruit, vet, train, and onboard talent effectively.

One solution for startups and growth phase businesses alike is to take advantage of high level, on-demand talent. Fractional executives are leaders who become a part-time addition to the C-suite or executive leadership of a company. They are often big firm trained, high-level freelancers that work only a percentage of full-time, but can bring the same credibility and skills to an organization as a comparable full-time hire.

Here are the top 3 benefits of hiring a fractional executive:

1. Scalability with company growth

A big challenge for entrepreneurs has often been identifying the appropriate time to bring in talent to scale systems. In legacy employment models, a full-time hire had negative profitability implications since the talent was on-boarded prior to the associated increase in revenues. With fractional executives, however, companies and founders ramp the fractional executive at the same time as the organizational growth. In addition, efficiencies are gained as the fractional executive typically needs less training based on their higher experience level and they have big brand experience which helps the organization plan more effectively for the ramp.

2. Managing Margins

Startups are hungry for top talent but often lack the revenue base to support having costly full-time executives. Hiring a fractional executive allows startups to attract top talent without having to pay a full-time price tag. Marc Prisant, former Executive Vice President & CFO of the Steadman Philippon Research Institute in Vail, Colorado shares, “The advantage of a fractional executive is that companies get 100% of their expertise and brain power, without incurring 100% of their true cost. This preserves margins and the bottom line.” With access to big brand talent on a fractional basis, companies tap into the brain trust of talent that otherwise would be far more expensive if hired on a full-time basis.

3. Focus

Founders and executives of startup and growth phase organizations must maintain focus on their customers and their mission. Although talent management is a critical component of growth, with turnover among startups higher than in other stage businesses, managing the process of finding and bringing on new employees typically comes at the expense of focus on product or service delivery. Fractional executives grow with an organization, freeing up a founder’s time for its customers. Canopy consultant and Co-Founder of the American Transplant Foundation, Heidi Heltzel, says that this model, “provides leadership and a steadying hand to ensure continuity in operations, thereby allowing staff to focus on their individual responsibilities to keep company goals and timelines on target.”