Insights

The Sharp Rise In Demand For Fractional Executives

The rise in demand for fractional executives has greatly increased since the pandemic. This is being fueled by a number of factors – many executives are leaving the workforce in search of more flexible working arrangements and many companies are also turning to fractional resources due to decreased budgets and lack of company talent and resources.

More than 19 million US workers—and counting—have quit their jobs since April 2021, a record pace disrupting businesses everywhere. From the Great Resignation to the Great Layoffs, McKinsey says “it’s the quitting trend that just won’t quit.”  Even today, workers are still switching jobs, industries, and locations – starting their own businesses, changing industries or roles, or just taking time out to care for their families.

The Workplace Is Transforming

The workplace is transforming from traditional, in-house employment to external expertise. With the rise of fractional hiring, many businesses are outsourcing to gain deep expertise and the ability to scale at the executive level.

This trend has been more prevalent in the financial area hiring for fractional Chief Financial Officers (CFOs) and in the technology area hiring fractional Chief Information Officers (CIOs), but we are seeing this demand increase even more. We are also seeing this increases across other functional areas including sales, marketing and other leadership areas.

Fractional executives—usually with long experience in their fields—typically work with two or more clients at a time. The part-time leadership positions take advantage of their expertise but avoid the 24/7 pressures of the typical executive role, giving seasoned professionals more autonomy in their lives.

Companies Can Gain Deep Expertise

Fractional experts typically are recruited for specific expertise needed. This could be expertise the current execute team lacks or that is needed for specific projects. Fractional experts also can bring tools and expertise gained serving multiple clients with similar needs when can be invaluable. They are often specialized in certain areas which can allow them to provide greater results and faster.

Fractional hiring allows you to skip the imprecise recruiting and onboarding process to go straight to doing the work. You can find strategic executives with hands-on experience across a range of functions, from CMO, CIO, to CFO.

Cost and Time Efficiencies of Fractional Leadership

Companies not only can gain deep expertise through fractional leadership but they can do it without the recruiting hassle and long time frame to ramp someone up. Many fractional executives can hit the ground running and are often brought in during critical timeframes with little time allowed to get someone trained. Often times the fractional executive may train incoming executives as well during transitional times.

Not only can a fractional leader fill a gap in a part-time or full-time capacity, but they can also bring value as a company specifically seeks effective ways to scale without committing to a permanent employee. The cost of hiring a full-time executive often times greatly outlays the cost of fractional executives. Hiring a full-time employee is expensive, with estimates putting the cost per hire at three to four times the salary of each position.

The fractional leadership model can be a win-win for both the leader and the company.

The Venture Capital and Private Equity Effect

Other factors increasing the recent demand for fractional resources is being driving by Venture Capital and Private Equity firms.

Fractional executives are in high demand as venture-capital firms pour more money into early-stage startups, creating a gig economy for executives. On-demand chiefs work across industries but fill a particular need at startups after early funding rounds. Many firms at that stage don’t have a full-time CFO managing their finances because they mostly have basic accounting needs, but they increasingly need someone to fill the gap when more complex financial questions arise, investors and company leaders say. Such part-time CFOs help establish processes and make operational decisions, for example how to create financial forecasts or whether to expand to new markets. The recent deal-making craze is also fueling the demand for fractional finance services.

Interim executives such as Chief Information Officers (CIOs) are in large demand demand in Private Equity to serve in transitional needs for their Portfolio Companies. This has increased substantially since the pandemic, due to the increased focus on digital and the increase in cyber security risks. The fractional CIO plays a critical role in mitigating technology and cyber risks and controlling costs. A fractional CIO can also serve one or more portfolio company needs depending on the scope and workload, thus allowing the portfolio company and the Private Equity firms to gain cost efficiencies. Private Equity firms can also tap into more specialized expertise for specific needs for their portfolio companies. Many fractional CIOs have expertise in Mergers and Acquisitions (M&A) and Private Equity as well.

N2M – A Leader In Fractional Leadership Services

N2M has been leader in Fractional Leadership services for decades serving leading corporations, mid-market and private equity firms and portfolio companies.

We hired N2M to provide an interim Chief Information Officer for one of our portfolio companies which is a global manufacturing company. We needed specific expertise in Enterprise Resource Planning (ERP) and specific food manufacturing expertise. N2M provided the exact expertise and skills we needed and in a fast timeline. Their executive is a former Fortune 500 CIO in the food manufacturing industry. Our portfolio company’s CEO was so impressed with his expertise, we further engaged him as an advisor to the CEO per his request. We continue to use N2M over multiple portfolio companies as trusted advisors.

Managing Director, Private Equity firm

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