As a fast-growing Tech SaaS startup, you are probably poised for hyper-growth in the next couple of years. However, the biggest roadblock in your way is likely to be a talent shortage. It can take weeks or even months to find the right leader, who can help you scale up.

Filling in leadership gaps within weeks can be a huge challenge and that is where ‘fractional’ executives can save the day.

Introduction – What is fractional hiring?

As the name suggests, fractional hiring is a system in which you hire an executive to devote a fraction of their time to your startup. Instead of offering advice and strategy like a consultant, they work as an employee, but on a part-time basis. 

Potentially, you can attract senior-level talent for specific roles, offering flexibility and gaining the right expertise, without a full-time commitment. The factors that fuel the fractional movement include the rise of the gig economy, technological advancements, and the growing acceptance of remote and flexible work arrangements.

In the past, companies used to hire contract workers as a model to outsource low-end or non-core work. However, the fractional hiring model is becoming more popular even for senior-level talent. 

Why should you consider a fractional hire?

On-roll hires take time and come with a lot of uncertainty. First, you wait for them to join and then start adding value. On the other hand, fractional hires are more ‘plug and play’ – meaning, they are available to immediately start and begin contributing. 

There are several advantages to bringing in a fractional hire:

• Skills and expertise: You get access to seasoned industry veterans with extensive experience in areas you are looking for, who may otherwise be beyond your budget (or reach). 
• Cost-effectiveness: Fractional hires cost less to hire and pay than full-time employees. Overhead costs of salaries, benefits, and bonuses can be reduced or eliminated for fractional hires.
• Flexibility: You can adjust their schedule to the needs of your startup and even opt for ‘contract-to-hire’ kind of options.
• Fresh thought process: A fractional hire is likely to bring in more diverse industry practices and expertise, due to the way they function.
• Scalability: For a startup, the ability to adapt and scale operations is critical. Fractional hiring allows for rapid scaling up or down of leadership resources in line with the business's evolving needs.
• Risk management: Through fractional hiring, you can evaluate the ‘fit’ of an executive, without committing to a long-term commitment. 

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The Business Case for a Fractional CXO

After you clearly understand the need for a new leader – to steer a new project, fill a temporary gap in leadership, or bring in specialized expertise to guide strategic decisions, there is still the need to articulate a clear business case. 

A well-laid-out business case should be able to make a clear decision about whether to hire a full-time CXO or whether a fractional leader would provide more value.

The criteria that you can use to make a better decision are:

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How should you get your first fractional CXO?

Making up your mind to hire a fractional executive is the first step (and the most complicated one). Once you carefully consider the option of a fractional hire, here are some steps to successfully onboard your first fractional CXO:

1. Define the role and expectations: Articulate the role and its scope and responsibilities, and be ready to explain the impact you want the fractional executive to have. This clarity helps in attracting great talent and setting up for success.

Ensure that you plan to measure performance on outcomes delivered and not on the actual time spent.

2. Create a compelling value proposition: Define your employer’s value proposition (EVP). What unique opportunities (like the ability to shape the future of a growing company) can you offer to a top executive? 

3. Rely on your network: Leverage your professional networks, industry contacts, and platforms like LinkedIn to identify potential hires. Ask for referrals from people in your network.

In addition, there are sites dedicated to connecting fractional talent with companies that are hiring. Use them to find the right talent fit.

4. Conduct an effective assessment: The selection should support you in assessing the fractional executive’s skills and experience along with their ‘fit’. Working fractionally does not mean that the person’s commitment needs to be fractional as well.

Gather insights on their prior experience in similar roles and their approach to creating a win-win while working fractionally.

5. Negotiate a working agreement: Clarify with transparency what you can offer in terms of salary, working hours, and expectation of output. Working across time zones can be tricky but talk about how you can help them draw the line and balance their work-life.

6. Carry out a smooth onboarding process: Ensure seamless integration into your team. Even though the executive is fractional, they should feel as much a part of the team as full-time employees. Provide them with the necessary tools and resources to get up to speed quickly.

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What policies and practices will help you retain and engage fractional executives?

Hiring a fractional executive is only one part of the process. If things don’t work out, they may make a quick exit. However, good management practices will ensure that they stay around and contribute for the years to come.

• Create clear communication channels that allow you to provide and get timely updates. 

• Be respectful of time and schedule meetings and important discussions at times that are convenient to both parties.

• Involve fractional executives in decision-making processes and make them feel valued as contributors.

• Build flexibility and recognize their efforts, even though they are not full-time employees.

Even with the right policies and practices, you will need more structure around the terms and conditions to make the partnership fruitful and productive for both parties.

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What are the terms and conditions to keep in mind before hiring a fractional executive?

Clear communication and a defined structure for the engagement will ensure a fruitful engagement. In particular, the elements to maintain clarity on will include:

1. Contract agreements: Define the scope of work and key responsibilities/outcomes to be delivered. This ensures that there is no ‘scope creep’ and that both parties have clear expectations from each other.

In addition, specify the contract duration and whether the contract is a fixed-term contract or an ongoing one with periodic reviews.

Also, establish the working hours and availability. Would the fractional executive be required to work onsite, remotely, or in a hybrid manner? Also, discuss availability for meetings and responsiveness expectations for communication.

Finally, specify termination clauses that permit either party to exit the arrangement, after fulfilling notice period requirements and other obligations. 

2. Invoicing: Agree on whether the fractional executive will invoice on a monthly, quarterly, or other time frame, or a milestone completion basis. Well-defined billing cycles provide clarity on cash flows and keep both parties engaged.

In addition to pay, define how you will handle reimbursements and ‘out-of-pocket’ expenses. Specify which expenses will be reimbursable and the process to invoice them as well.

Provide templates for invoicing along with all necessary information that is needed to make timely payments. This helps in transparency and low administrative burdens.

3. Payment processing: Establish clear payment terms such as 30/45/60 days from the invoice date and provide clarity on supporting documentation needed for payments to be made.

Agree on the payment method to be used, based on mutual convenience, and specify if any taxes would be deducted at source, before payment. 

Document any late payment policies and the accountability for the same. In addition, if payment depends on performance outcomes attained, the contract agreement should address that. 

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Conclusion

At face value, the cost of hiring a fractional executive may still seem prohibitive, as compared to bringing in a mid-level employee. But by tapping into the ‘Expertise as a Service’ economy, you can unlock faster growth. 

The journey to bringing on your first fractional CXO needs a clear strategy, where you understand the benefits of doing so, and then use a structured process to integrate them into your startup.

As you embark on this journey, remember that the success of fractional hiring lies in the alignment of expectations, clear communication, and clarity in achieving your startup's goals. The right fractional executive can be a catalyst for growth, steering your startup towards new horizons of success.

In conclusion, fractional hiring is not just a hiring strategy; it’s much more than that. It is a strategic shift towards a more agile model and to being open to thinking differently about leadership. It is a strategic decision that can redefine the trajectory of your startup. It's an invitation to embrace agility, think differently about leadership, and open doors to opportunities that will shape the future of your business.

The question is, how ready are you to embrace the future of hiring?