Large companies are turning to an innovative staffing strategy to remain nimble and cost-effective: fractional management.

What is Fractional Management?

Fractional management refers to hiring experienced managers and executives on a part-time, project, or contract basis rather than bringing them on as full-time employees. These fractional managers provide strategic guidance and leadership without requiring a long-term commitment from the company.

For example, Microsoft brought on a former Apple executive as a fractional Chief Design Officer to lead its hardware redesign efforts. And Unilever utilizes fractional finance executives to support specific brands and projects.

Unlike consultants who are brought in for specific issues or advisors who offer limited monthly support, fractional managers have higher levels of engagement. They typically work 10-30 hours per week on an ongoing basis and are invested in helping the company meet its key performance metrics.



The Rise of the Fractional Economy

The concept of fractional work has been growing over the past decade, accelerated by the COVID-19 pandemic. Remote work opened new opportunities for on-demand labor. McKinsey estimates that up to 30% of workers in advanced economies now regularly engage in independent work.

For businesses, fractional roles provide agility in an uncertain economy. Companies can scale expertise up or down as needs fluctuate without high fixed labor costs. This on-demand access allows them to remain nimble.

Benefits for Large Enterprises

Here are some of the key reasons major corporations are adopting fractional management:

Cost Savings

Compared to salaried roles, fractional managers cost significantly less in terms of compensation and overhead. Companies pay only for the hours of work delivered instead of carrying the burden of salaries, bonuses, and benefits. For example, a fractional Chief Technology Officer may cost $8,000 to $15,000 monthly compared to a high six-figure salary for a full-time executive.

Strategic Guidance

Large enterprises often need targeted leadership for specific divisions or projects. Fractional executives can provide insights and direction honed from decades of specialized experience. An example is bringing in a fractional Chief Marketing Officer to lead a critical rebranding initiative.

Flexibility

Fractional arrangements allow companies to scale executive leadership up or down as business needs change. During a period of rapid growth, additional fractional executives can be engaged. When business stabilizes, those fractional roles can be reduced accordingly.

Global Access

Thanks to remote work capabilities, fractional managers can be located anywhere yet readily collaborate. This grants access to a global pool of talented executives that may be unavailable locally.

Fresh Perspectives

Long-tenured leaders within an organization can fall into groupthink. Fractional executives bring fresh eyes and new approaches forged from their diverse experiences. This outside perspective can lead to innovative solutions.

Specialized Skills

Not all executive skill sets are needed year-round. Fractional arrangements allow companies to utilize niche experts tuned into current trends and technologies. Examples include data scientists, cybersecurity specialists, and machine learning engineers.

Derisking

Bringing on a full-time executive has long-term risks if they underperform. Fractional arrangements let companies test-drive high-level talent before fully committing. This reduces the risks and costs of a bad leadership hire.

Implementation Strategies

Adopting fractional management requires careful planning and execution:

• Assess needs - Analyze current talent gaps and priorities to determine where fractional management will provide the most value.
• Define clear expectations - Develop robust contracts covering intellectual property, non-competes, measurable goals, and other parameters.
• Vet candidates thoroughly - Rigorously evaluate each fractional candidate's experience, fit, and references to ensure they can deliver.
• Onboard thoughtfully - Schedule onboarding calls, provide access to systems and documents, and introduce fractional hires to key staff.
• Facilitate collaboration - Foster connections between the fractional executive and internal team members through meetings, messaging, and team-building activities.
• Evaluate regularly - Continuously assess the fractional manager's impact and adjust the arrangement as the company's needs evolve.

The Future of Work

Fractional management allows enterprises to thrive in the age of agile work. As Deloitte notes, "The old model of the corporate ladder is being replaced by the corporate lattice." Fractional roles present rungs on that lattice, offering businesses scalability and expertise on-demand.

While not a universal solution, fractional management unlocks strategic benefits from cost savings to specialized skills. Ultimately, folding fractional executives into the talent mix can help large companies remain nimble and competitive. The fractional economy promises to only gain momentum as the nature of work continues rapidly evolving.

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