With venture capital drying up due to the looming economic recession that America may be headed into — 72% of economists expect a U.S. recession by the middle of next year, as reported by CNN — CEOs have three main objectives: slow down growth, cut the burn rate and tread carefully to ensure profitability.
For founders making plans to accelerate growth this year, it can be challenging, especially as many advisers and investors are expecting them to consider downsizing their product offerings, considering mass layoffs and freezing all hiring, among other obvious ways to handle the upcoming recession.
However, not hiring any new employees may not be an option for some. So, what can such founders do to get out of this precarious economic downturn and pull ahead of the competition? The answer is: fractional hiring.
What fractional hiring is
The U.S. Chamber of Commerce defines fractional hiring as “the practice of hiring an employee for a ‘fraction’ of the time a normal employee would work. An employee could be hired to work for multiple organizations throughout the week.”
“Fractional hiring is similar to hiring a freelancer or contractor. The key difference is that fractional hiring is not project-based and the time for which a person is contracted is more than a typical part-time work contract.”
In simple words, fractional hiring allows new businesses to benefit from experts with deep industry experience at a fraction of the cost.
There’s more to fractional hiring than simply hiring seasonal workers
Even though fractional hiring or outsourcing may bring to mind temporary or seasonal workers, a business can also outsource a number of high-level roles in order to find the relevant mix of cost and experience. In return, these high-level professionals can offer strategic insights that make an organization more efficient, allowing the business owner(s) to focus on essential, core tasks.
High-level roles can be outsourced, too
While outsourcing leadership roles may not always be a good idea and such positions as chief executive officer should be kept in-house, outsourcing other C-suite positions can be an effective way to save money and bring in professional expertise.
Such fractional professionals offer access to experience as well as top-level strategy, but without the associated costs. For instance, a virtual CFO can offer several services, such as operational optimizations within an organization; raising capital; systems analysis and design; fixing cash flow issues; implementing more efficient processes and systems; developing pricing strategies; and preparing for growth.
Four top-level roles that can be outsourced are chief financial officer, chief technology officer, chief human resources officer and chief marketing officer.
How fractional executives can benefit small businesses
Even though a firm of any size can hire a fractional executive, fractional employees are better suited for smaller businesses. If a company is still in its infancy, steering it through turbulent times can be extremely challenging. In such situations, smaller organizations may need the counsel of an expert, who can guide them on what they should do to succeed.
Check out six top reasons why small businesses should consider getting a fractional executive on board:
Significant cost savings
Small businesses need to be smart about how they build their budgets. That said, budgetary constraints can prevent them from hiring expert industry leaders. This is where hiring fractional executives come in.
Fractional hiring allows small businesses to cut overhead costs because they don’t have to spend on salary and such benefits as retirement, vacation time and health insurance.
Access to experts
A fractional worker can offer expert guidance, which may otherwise cost a lot of money. For instance, accounting mistakes can have disastrous repercussions on an organization, such as penalties, cash flow issues and even an investigation by the IRS. Hiring a fractional accountant gives the business access to a team of highly qualified and trained professionals, who use the latest technology and processes to ensure that your data is accurate and secure. And since accounting provides a platform for improving cash flow, driving profits and growing your business, it can also have an effect on such things as the number of employees you need to — and can — hire, identifying the most and least profitable product lines to your future expansion plans, and so on.
Strategic approach
There are many things a small business needs to be good at, and one of them is having a strategic approach. And a fractional hire can help business owners come up with a well-considered strategy.
For example, a fractional CFO is a finance expert who offers high-level, strategic services on a project basis or on a part-time basis; for example, working on systems design and analysis as well as operational optimization.
In order to effectively target problem areas and emerge successfully, a strategic approach is important.
Flexibility and scalability
Fractional hiring offers the benefit of a solution that is tailor-made for a company. With an outsourcing company, one can even add or remove processes depending on specific needs. For instance, if a firm needs seasonal help, they can choose to outsource for a few months only. As demand wanes, they can scale back and pick up again when needed.
Protection in an economic downturn
As situations change economically, businesses tend to shift their workforces, which can be a challenging and resource-intensive process. But since the responsibility of managing the talent assigned to a project lies with the outsourcing company, one can scale up or down in terms of staffing with ease.
Long-term results
Fractional hires may not stay with a company for a very long time, but they come with many long-term benefits. Even if the fractional executive is no longer with a company, they can help set up an actionable, long-term game plan. Fractional hiring is a short-term investment that continues to yield results for a long time.
How to gather a fractional team that works
Check out the three-step approach for identifying, prioritizing and recruiting for key fractional positions:
Step 1: Determine the most-needed outcomes first before deciding who can drive them
Before even thinking about fractional hiring — or hiring, in general — it is crucial to figure out what the business needs. Is it a product or service that converts? Economic leads? Higher retention?
Once that’s done, the next step is to figure out what kind of executive one needs to drive this metric — and how they would do it.
Step 2: Share success metrics right at the start
Fractional teams need to have a shared understanding of what success looks like, especially when resources are limited. Hence, fractional employees should be made aware of what they need to accomplish — along with the deadline to achieve it — for continued engagement.
Step 3: Work with experts to identify experts
If a business owner is not a tech guru, they most likely don’t know what to look for when hiring one — and this holds true for any key role. If one does not have the right expertise required to identify and hire well in-house, then working with external partners is the next best option.
Final words
It makes sense for a growing business to tread with caution, as it allows the business to extend its runways and adjust to changing market conditions. However, prudence should be balanced with the right degree of aggression.
While some businesses may be wary of recruiting during an economic downturn, one should not stop building and innovating. And, working with fractional employees may be one of the best ways to do so while mitigating risk.
