Several years ago, Fidelity Bank was both working on succession planning and implementing the “Traction” portion of the Entrepreneurial Operating System (EOS). While going through some of the prep work, company executives recognized they were not all on the same page on many human resources issues.
The company has always had an internal HR person handling issues like job descriptions, payroll and compensation — the blocking and tackling of HR — but found it could use some help with strategic planning, says Todd Williams, president.
“It became evident that even at the senior levels, there were differing opinions on HR,” he says. “We knew right away that having some HR expertise or some outside perspective was really important.”
Enter Steve Schad, who owns Optima Advisory LLC. Schad is a fractional chief financial officer who, instead of being hired on staff, embeds part-time within several different companies offering insights and advice. With his guidance, Williams says Fidelity has improved its systems, expanded into performance management, which is helping build accountability in the workplace, and hired an HR generalist to work on recruiting and other functions.
“Steve is also working around coaching, mentoring and empowerment, trying to get those tools within our organization,” Williams says. “He also gives us a keen perspective on ‘Hey, this is how other organizations look at this, there’s where you are, you may want to think about these things.’”
Ongoing role in growing companies
While Fidelity has achieved many of its objectives in bringing Schad on board, Williams thinks he’ll still be around a while. There are a lot of changes taking place, for example, in the employment market right now where he feels Schad can be a valuable mentor. And Schad will continue to help as the company gets into more coaching and mentoring of its employees.
“I see Steve working with us for a long time to come,” he says.
Fractional executives, Williams adds, can be a great benefit, but companies need to make sure they find the right person for the role. Steve sits in on all company meetings and he did a great job of listening and of giving an outside perspective “in a fashion where it was tailored to us and based along our timeline. I thought he did a really good job.”
The benefits of having the right relationship can be illustrated by the arrangement between Elena See, a fractional content and operations specialist who recently founded Whisper Speak Roar Media, and Susan Cevette, founder and CEO of wealth advisory WatersEdge Wealth Management.
See’s skillset is a bit more general than those brought by some fractional executives, but Cevette says she fit right in. They’d met four years ago, shortly after Cevette went out on her own. They didn’t work together then, but about a year ago, they reconnected. See was looking to change careers and was considering becoming a financial adviser. And Cevette knew she needed additional help in the office.
“Elena just came in and started doing stuff — whatever was needed,” Cevette says. “We carved out a role over the summer.”
See eventually ended up driving WatersEdge’s content creation. She has knowledge of Traction, as well, and has led the company down that road, with her playing the integrator role to Cevette’s status as visionary leader. While the arrangement started informally, what developed has been instrumental toward building the company’s future.
“Be fluid,” Cevette says. “Be open to not always knowing what the outcome is going to be but create along the way.”
So, See works between five to 10 hours a week for Cevette doing marketing and Traction and she works with other companies doing workflow creation, project management and training.
“She’s a dynamo,” Cevette says. “Traction has been a game changer. Every week we know where we’re going and what we’re doing. There are many prospects in the pipeline. Our pipeline was dry six months ago. We’ve gotten very clear on what it is we need to do next to generate growth. This next year our growth trajectory will be significant.”
While they enjoy working together and have driven improving results, See says her ultimate goal is to help WatersEdge get to a position where the company can hire one or more people to do even more.
“Then I will go on my merry way,” See says.
Filling all the roles
Fractional executives are filling roles in HR, operations, marketing, finance and basically any other role in the C-suite. The fractional CFO becomes immensely valuable for companies that have grown to around $2 million in sales, says Craig Siiro, CEO and founder of Integrated Consulting Services LLC.
Siiro and Cathy Sedacca, managing director, say that’s the point at which seeking financing from a bank for growth capital becomes more complex than many business owners and their controllers, bookkeepers or family members who figured out QuickBooks are equipped to handle. Fractional executives offer an alternative to the prospects of hiring an expensive full-time CFO.
“When they get to $2 million, the entrepreneur has to decide they are going to make it a business, not just a lifestyle company,” Siiro says. “When they decide they’re going to start getting bank loans and grow, that’s when they need that outside expertise because that’s when they are outside their comfort zones.”
The company’s services include helping close books, doing reconciliations, helping with their weekly cash flow and attending meetings. It’s a retainer model on which Siiro banks on building a long-term relationship with clients who will continue working with Integrated Consulting Services even after they add their own internal CFO.
“We’re business advisers for them,” he says. “We build a pretty good relationship with the business owner. We’re still outside people that are giving them great advice.”
Fighting brain drain
This has been going on for a while, but there has been massive growth recently, as hiring has gotten more difficult and expensive.
“It’s really picked up this year,” Sedacca says. “There’s always been some fractional, but it seems like there are more and more in every area of the business.”
John Arms, a fractional marketing executive himself and co-founder of Voyageur University, which helps educate fractional workers on how to build their businesses, says there are multiple reasons.
On one side, experienced executives, whether by choice or force, are leaving the corporate world and, instead of finding new jobs, are going out on their own.
On the other, small- and medium-sized businesses are realizing as they grow that they need more experienced help in various areas of their company but aren’t ready to hire someone full time.
“Companies, as they adjust to all their HR issues, they’re flocking to it,” he says. “It’s cheaper. ‘I can get seasoned talent for a lot less.’ That’s definitely part of it.”
The “Great Resignation” is also having an impact. Companies have lost talent they need to replace but can’t with full-time help.
“It wasn’t the young ones,” Arms says. “It was [people] over 45. So, there is a little bit of brain drain coming out of full-time work and going independent. They know they can’t claw those brains back in a full-time role, but they need the wisdom.”
It started with CFOs, moved into CMO roles and now, the biggest right now, Arms says, is chief operating officers. But depending on the experience brought by owners and management teams, he adds, there are fractional employees available for every position in a C-suite.
Companies considering hiring fractionally should start with a deep look at their budget to make sure they get the best bang for their dollars. Does it make sense to hire an inexperienced person for a role when, for a similar price, you can get guidance in a part-time role from someone who has been around for 30 years?
“A young person who is cheap doesn’t know what a seasoned person does,” Arms says. “You can have that guidance, that brain that’s been around 30 years and apply it to your price model.”
Companies that do hire fractional executives, Arms adds, do need to be prepared to be informed of what is best for their company.
“Be ready to be told what to do,” he says, adding that part of the upside of bringing in seasoned talent is the experience they bring. “They are there to educate you on what you are missing or what you are not doing.”
Know where your business is at
When Jennifer Zick started Authentic Brand, she wasn’t familiar with the use of fractional executives, but knew she’d be excited to help small businesses do better marketing while wasting fewer resources. The problem is those businesses often don’t have someone on staff dedicated to marketing — which, she quips, leads to a lot of poorly executed “random acts of marketing.”
“In most organizations that marketing true executive role is the last seat filled in the executive table,” she says. “Most companies start out as founder led, sales driven. The first leadership roles they fill are finance and operations because they have to run a business and make revenue happen.”
Zick was among the first to start offering fractional marketing services. Much like in finance, operations and HR, fractional marketing is taking off, whether it is with independent chief marketing officers who offer services to multiple clients or advertising agencies that have begun offering the service as an add-on to existing services, Zick says.
All Authentic Brand consultants are W2 employees who follow its established methodology. The company provides benefits, technology and sales and marketing, doing business development so those CMOs “can spend their time doing what they do best,” she says.
CMOs generally cost, she says, between $150 and $350 an hour. Authentic Brand offers flat rate structure though she doesn’t consider the company a low-cost alternative. It works with small businesses with between $5 million and $100 million in revenue across all industries. Most are entrepreneurial growth businesses that have never had head of marketing.
“We work inside the company on a long-term contract basis to build strong teams and programs,” she says, adding that most engagements are for between 12 to 20 hours a week and they usually take two years or more.
That said, Zick says, the company does not embed CMOs within companies that are smaller than $5 million.
“For a lot of earlier stage small growth businesses, having a CMO, at any level, either fractional or full-time, would be overkill,” she says. “A CMO seat even fractionally is a six-figure investment backed by a six- to seven-figures of marketing spend they are helping to lead and guide and hire. It’s no small investment.”
The company does like helping small businesses grow. For companies approaching $5 million, Zick says Authentic Brand offers coaching rather than an embedded CEO. Or, for smaller companies, it will put them in touch with a collection of allies, be they freelancers or small agencies, “who are ninjas of marketing execution,” she says, adding that those companies have specialists who can help with any marketing issue that might come up.
“Any business of any size can reach out to Authentic Brand and say, ‘This is the pain we are having, how would you suggest we move forward.’ Usually there is a provider in our network that is the next right step for them.”
