What Does Fractional CxO Mean?

Fractionals are different from consultants, contractors, freelancers, gig workers, work for hire workers and other types of contingent workers.

Yes, fractional CxOs are what is known as “contingent workers.” They work for a company without being “hired” as an employee. However, the fractional executive is something truly special in the category.

Fractionals United, the largest community serving fractional leaders in the world, uses the following definition to help hiring managers tell fractionals apart from other roles:

FractionalConsultantInterimAdvisor
Embedded with team?yesnoyesno
Engagement has end date?noyesusuallyno
Engagement is full time?yesmaybeyesno
Represents company as leaderyesnoyesno
Leads a teamyesnoyesno

Although there is less job security, many fractionals report incomes higher than their former traditional jobs. Fractional executives have to charge higher hourly rates than full-time employees because they have to take care of their own healthcare, benefits, taxes, vacation and retirement.

Luckily, most fractional marketing leaders and other fCxOs are not needed full-time to deliver big-time value to your growing organization. This means big cost savings that can be applied to campaigns, other key hires or other initiatives.

For any rapidly growing company, keeping unnecessary costs to a minimum is always a big focus. Why would any small company want to add executives that cost $250,000 or more per year, when they can have access to the same high-level expertise for a fraction of that cost?

Why is it Easier and Better to Hire a Fractional Leader for your B2B Company?

The fractional CxO model makes sense for B2B businesses that want to grow fast, have excellent experts right there with them every step of the way, and not break the bank. 

Here’s ten things that will tell you exactly why. For this list, we used the fractional CMO as an example. 

1. Fractional Leadership Saves a Ton of Money

Get a Budget Boost: Hiring a fractional CMO is cost-effective when your business faces budget constraints (and what company doesn’t have this issue?). Fractional CMOs work on a part-time basis as a fully-committed member of the team. This means you get high-level expertise and passion in your leadership team without the financial commitment of a full-time salary. The money you save on salary means hundreds of thousands of dollars are freed up for campaigns and other company expenses.

Flexible Contract Arrangements: Fractional CMOs offer flexible arrangements depending on monthly needs for time, length of contract, amount of strategic input vs implementation and reporting, and other considerations. Companies can engage a fractional for specific projects, strategic initiatives, or during critical phases – but not face the long-term financial commitment of a full-time hire.

2. You Can Stick to Your Knitting

Free the CEO: Founders and other leadership team members always wear a lot of hats and spin a lot of plates. They can make significant progress in areas they might not be expert in, like marketing/sales or operations, but they also can make expensive, time consuming mistakes. Let the CEO drop something and instead focus on high-level management of the function in partnership with a tried and true, experienced fractional leader. 

Don’t Stress Over Foundational Tech: Software is a big time and resource drain on any company looking to grow fast. Deciding which SaaS, how much to spend, how to integrate with other platforms… these can all be make or break problems when growth is coming rapidly. A fractional leader can help you set up a best-practice, highly efficient tech stack from the first, saving you much precious time and stress in the future.

3. Special Skills, Top Expertise

Highly Specialized Skills: Fractional CMOs bring specialized skills and expertise gained from working across various industries and with multiple clients. Unlike full-time employees who quickly become siloed, out of date, and out of touch inside their companies, fractional executives bring the best of their current and recent engagements with them, so your company is right up to date. Companies can tap into a specific skill set that’s needed for a particular project or strategic focus.

Quick Launch and Implementation: Fractional CMOs quickly apply specialized knowledge to address specific marketing challenges and opportunities. They ramp it up quick with the right mix of research, project management, team training and reporting to make sure they get the job done and the results show.

Best Practices on the Tech Stack for Marketing, Sales, Accounting and More: Fractional CxOs have plenty of experience across multiple current clients to share in building the optimal tech stack for operations, marketing, sales and more. Creating this stack properly and integrating it together is often a big challenge for rapidly growing startups. It wastes lots of time searching, demoing and piloting software with all the learning and onboarding. Your team could be operating off an efficient, best practice tech stack from day 1 with the right fractional CMO.

4. Only a Short-Term Commitment

Flexible Contract Terms: Fractional CMOs can be engaged on a project-by-project basis, allowing organizations to address immediate needs without committing to a long-term employment contract.

Rapid Scalability: Businesses can scale up or down the fractional CMO’s involvement based on evolving needs, providing flexibility in adapting to changing market conditions or organizational requirements.

5. Lightning-Fast Onboarding

Instant Integration in the Team: Fractional CMOs are experienced pros who can integrate quickly into an organization – both interpersonally and technically. Their familiarity with diverse business setups, operations and team dynamics means they can adapt and start kicking butt right away.

Reduced Hire Time: Unlike full-time hires who may need time to leave their current job (and who might want to take some time between roles), fractional execs hit the ground running upon contract signing. They have the experience to acclimate to a new company culture and can bring their fractional expertise to bear almost immediately.

6. Data-Based, Experienced, 3rd Party Perspective

Fresh Insights: Fractional CMOs, being external consultants, can provide a fresh, objective perspective on marketing strategies and operations. This outside viewpoint can be valuable in identifying opportunities and challenges. 

On the Cutting Edge: Fractionals serve multiple (non-competing) organizations at once, allowing for staying current. They tend to lead in developing best practices and leading in the latest trends, more so than stale full-time employees can.

Unbiased Recommendations: Fractional CMOs are not embedded in the day-to-day operations of the organization, allowing them to make unbiased recommendations and decisions based on their expertise.

7. Reduced HR Burden

Simplified HR Processes: Hiring a full-time CMO involves complex HR processes and wasted time. This can include recruitment, background checks, onboarding, benefits administration, and potential long-term commitments. Fractional CMOs totally simplify these processes.

Flexibility in Scaling Teams: Organizations leverage fractional CMOs to scale their marketing leadership without the administrative burden associated with full-time marketing hires.

8. A Proven Track Record

Proven Results: Fractional CMOs have a track record of success, having worked with various clients and organizations. This provides a level of confidence for companies seeking tangible and proven results.

Portfolio of Achievements: Fractional CMOs come with a portfolio of successful projects and campaigns, allowing organizations to assess their capabilities and fit for the specific needs of the business.

A Network to Lean On: Fractional CMOs have sizable “black books” of expert contacts, agencies, vendors, data vendors, tech gurus, gig workers and more who can be brought in on short notice to assist in implementing tricky projects.

9. Mitigation of Risk

Bring Down Long-Term Risk: Fractional CMOs provide a lower-risk option, especially if the organization is unsure about its long-term marketing needs. The commitment is shorter, and the organization has the flexibility to reassess and adjust as needed in a 3, 6 or 12 month time period – one that is naturally tuned to showing measurable performance against a list of defined goals over a certain time period using a set of preset resources of time, budget and people.

Give it a Trial Period: Engaging a fractional CMO allows organizations to assess their performance and fit before considering a more permanent or expanded role. In fact, a common task for a fractional leader is to define, hire and train the full-time person who will take their place when their engagement is complete.

10. A Friend Indeed

Less Burnout: Startups fail at a scary rate every year. Most are run by single founders who face severe personal and professional failure if their company does not succeed. Being the main decisionmaker for every aspect of the business can be maddening and stressful. No amount of Google searches or Generative AI plans will give you the same confidence as having an experience, humble, confident leader at your size, fully committed, helping you make the right decisions while also being very affordable.

Stay Flexible: No Need to Get Bogged Down in Full-Time Hiring

As just one example, hiring a fractional Chief Marketing Officer (CMO) instead of a full-time one is just easier.

Hiring a CMO full-time away from a job they already have is a multi-month dance of searching, interviewing, negotiating. All before they give their 2-4 week notice at their existing job.

Fractional executives are often available for initial consultation, onboarding and launch of their fractional work within a week of signing a contract. 

In my personal experience, I have been hired and been working on Zoom calls for a client within 1-2 days of the first time we meet. In cases like this, coming in as a referral from a mutual good partner really helps drive trust both ways. 

The term of the agreement with a fractional executive can also work in the favor of your company. The typical contract with a fractional exec is only one year, and they are highly incented to make sure that contract pays off for you as the client in that time. 

Full time employees tend to have a longer trajectory for their career with your company. This can sometimes lead to a certain lack of energy or creativity over time. Not every company is subject to this, of course. But it speaks to why bringing in a fresh expert with a shorter-term trajectory keeps your organization flexible and cost-efficient at the same time. 

What are the Signs That My Company Could Benefit From Hiring a Fractional CxO?

There are three common signs that it’s time to think about adding fractional expertise to your leadership team today.

If you spot two or more of these challenges, talk to a fractional CxO about how they can help:

  1. Our company’s time and money budget is tight and the deliverables are big
    A fractional executive will save hundreds of thousands in people cost that can be spent more wisely on other initiatives. Without their expert leadership, you might not reach your goal. The right strategy, the right execution, the right learning – will maximize your results.

  2. We don’t have the specific leadership expertise we need
    When going to market in a new vertical, or if you are looking for more horizontal expansion, a fractional executive can be a key member of the success team. The right fractional can fill in key gaps in knowledge, experience, contact, influence and other factors that will make the difference between success and failure.

  3. We’re transitioning and need help in the interim
    When your company is in transition, you need knowledge, efficiency, and flexibility right now. Long term commitments like lengthy contracts, full time hires, agency contracts and other items can be minimized with fractional leaders. A fractional expert can also act as the “grownup in the room” for a set of outside vendors that are brought in as part of the business transition and ensure they deliver strongly on anticipated results.

Balancing the need to deliver results with the need to pay for expensive executive leadership is not easy. Fractional executives make growth and transition easier pills to swallow, and they can even hire and train their own replacement when the time truly comes for a full-time hire. 

Common Contract Length Terms for Fractional CxOs

The contract lengths for fractional Chief Executive Officers (CEOs), Chief Financial Officers (CFOs), and other fractional CxOs vary a lot based on factors such as the nature of the engagement, the specific needs of the organization, and the preferences of both parties. 

In my role as a growth advisor to Fractionals United, the largest fractional executive community in the world, I’ve seen the following variations used.

Put simply, most fractional workers work on a monthly retainer basis, which guarantees a number of hours and deliverables each month against a master set of OKRs.  

Common contract lengths for fractional CxOs fall within the following ranges:

Audits and One-Off Fixes (1-2 Months):

Examples include:

  • Opportunity Gap Analyses
  • Growth Planning
  • Analytics Setup 
  • Competitive and Market Industry Research

Short-Term Fractional Engagements (3-6 Months):

Examples include:

  • Interim Leadership to provide leadership during periods of transition, such as during the search for a permanent executive

Medium-Term Fractional Engagements (6-12 Months):

Examples include:

  • Strategic Initiatives: 6 to 12 months allows for a comprehensive approach to achieving specific goals, with time for research, launch, reporting and optimization for key OKRs.
  • Turnaround or Transformation Projects: Fractional CxOs may be brought in for medium-term engagements to lead turnaround efforts or business transformations. A more extended period of work allows for proper planning, implemention and monitoring of changes.

Longer-Term Engagements (1 Year and Beyond):

Examples include:

  • Ongoing Strategic Advisory Leadership: Longer-term contracts can be useful if the fractional CxO is providing ongoing strategic leadership and guidance that the company relies on. This relationship could insure exclusivity within a certain competitive niche or other terms.
  • Part-Time Exec, Full Time Energy: Fractional CxOs can be engaged on a part-time basis for an extended period, rather than hiring and maintaining a full-time employee. The role of a fractional leader is highly committed, like a real employee, but not needed full-time for many companies. Fractionals provide consistent support and leadership without the commitment of a full-time executive.

Retainer Agreements

Examples include:

  • On-Call Advisory Services: Fractional CxOs may offer retainer agreements where they provide on-call advisory services, allowing organizations to access their expertise as needed over an extended period.
  • Advisory Board Roles: Some fractional CxOs may serve on advisory boards, engaging with the organization periodically throughout the year to provide strategic insights.

Flexible Fractional Agreements

Examples include:

  • Renewable Contracts: Contracts with fractional CxOs can be structured with options for renewal based on raw data performance, evolving organizational needs, or the successful smashing of OKR goals.
  • Adjustable Terms: Organizations can negotiate flexible contract terms and keep a flexible, agile attitude towards what makes the fractional relationship most useful and powerful for them. This allows for adjustments to the contract and the work based on changing circumstances or goals.

The flexibility in contract lengths is one of the key advantages of engaging fractional CxOs. 

This flexibility allows organizations to tailor the engagement to their specific needs, whether they require short-term expertise for a specific project or ongoing strategic guidance over an extended period. 

The terms of any contract should be clearly defined in terms of expectations, deliverables, and any potential extensions or renewals.

Definition of a Fractional Executive Leader

The role of the fractional CxO has never been well-defined, though there are several professional organizations that now are working on establishing clear standards. 

There are some common characteristics among all fractional execs.

The New York Times calls fractional executives “Your CxO, a ‘Fraction’ of the Time.” They have this definition of what is a fractional leader:

  • Senior business leader that gives a company their divided attention
  • Lead marketing, finance or operations on a part-time, contractual basis at multiple companies simultaneously
  • Help owners of small to midsize businesses who have grown skittish about hiring expensive full-time leaders and are more open to remote work
  • Tend to have more fun, more flexibility and more money
  • Unlike consultants, they have the authority to both set and execute strategy
  • Use their experience and work across several clients to help solve problems faster
  • Tend to be engaged short term. 
  • Spends one or two days a week working with a company for six to 18 months
  • Often serves until the company grows to the point where it can hire someone full time or the internal team is ready to take over

According to Chief Executive Magazine, “against a backdrop of rising inflation, we’re realizing that we can’t necessarily afford pricey full-time execs.” They define fractional executives as:

  • Experienced hired guns
  • Fully embedded and accountable members of their leadership teams
  • Becoming more popular
  • No two are alike; each must complement what the founder or CEO needs

Wikipedia has their own definition of a fractional executive:

  • Highly trained, C-level professional
  • For-hire, part-time worker
  • Extensive experience in roles such as chairperson, owner, CxO, senior vice president, VP
  • Focused skills and/or broad-based expertise
  • Not consultants in classical sense
  • Take active leadership just like permanent counterpart
  • Hired on time-limited, project basis and on retainer
  • Don’t work full time for any organization
  • Is gaining in popularity as a way to optimize resources and bring in skilled leaders

Beyond the Chaos says “you can’t afford to miss out” on the fractional CxO trend. They also call it “the gig economy, for the C-suite.” They say fractionals:

  • Are perfect for small businesses and startups and companies trying to scale
  • Bridge the gap between the need for executive brainpower and limited resources
  • Provide a time commitment equivalent to 20% to 50% of a full-time executive, at a third of the price
  • Exist for every position of the c-suite: CFO, CMO, CIO, CHRO, CTO, COO, and even Chief of Staff
  • Are not a full-time employee and work limited hours each day or week
  • Don’t require retirement benefits or bonuses like typical executives
  • Use a “pay for what you need” model that is a win-win for everyone
  • Have fresh, outside experience as 20 or 30-year subject matter experts

SelectSoftware Reviews says there are three signs that indicate your company needs to hire a fractional CxO. They believe fractionals:

  • Are experienced executives who work with multiple companies on a fractional basis
  • Work on a flexible schedule
  • Offer crack strategic guidance and support in a specific area of expertise, such as Chief Executive Officer (fCEO), Chief Human Resources Officer (fCHRO), Chief Product Officer (fCPO), Chief Financial Officer (fCFO), Chief Marketing Officer (fCMO), Chief Operating Officer (fCOO), or Chief Technology Officer (fCTO)
  • Bring expertise to your leadership team in a cost-effective way
  • Are a flexible and cost-effective alternative to traditional full-time hiring
  • Enable companies to access experienced leaders to contribute specialized knowledge and strategic insights
  • Have many of the benefits of a strong C-Suite leader without the hefty price tag commonly associated with such roles

The Economic Times of India calls the trend of fractional CXOs as “leadership by fraction.” They argue that fractional workers:

  • Make leadership hiring easier
  • Help minimize costly foundational mistakes like “we hired the wrong guy” or “we built our sales process out on the wrong CRM”
  • Are an agile way for growth-stage companies and startups to build both depth and scale
  • Are at the cutting edge of innovation in their chosen domains, while providing flexibility and reduced cost for the companies that hire them

Fail-Proof Your Startup with Fractional Leadership

Fractionals are a great way to fail-proof your startup from mistakes that could have been avoided and plans that only got 63% executed.

Time moves quickly and capital gets expended quickly as well. People costs should not stand in the way of running campaigns, building awareness and going to market.

Fractional executives now fill the transitional space between needing the “big gun” and affording the “big gun.” That seasoned leader brings more than experience – they bring executive energy, contacts and reputation. They also work under a short-term set of deliverables and OKRs that keeps everyone motivated to drive forward to the right goals.

SMBs will do well to think of how fractional executives can help their leadership succeed and their companies grow.

https://snohat.com

Founder, Fractional CMO