What is a fractional Executive?
I’ve recently seen the term Fractional Executive marketed as the panacea to a fintech founders growth challenges. And whilst the term seems to be gaining steam on LinkedIn, it is yet to fully hit mainstream.
Over the past decade I’ve been a big advocate for startups engaging executives on a project basis to deliver specific outcomes. I even coined the term ‘Gig Exec’ back in 2016.
The Fractional Executive - a short history!
The concept is not new, in 2008 I noticed a number of my network switching their title from 'Interim' to 'Consultant' and in 2012 from 'Consultant' to 'Virtual Executive'
Where a 'Virtual' or 'Fractional' Executive may differ from a traditional interim executive is they have asynchronous clients.
Sadly my research indicates that over 80% of founders were/are unhappy with the results when they engaged a ‘Fractional Executive’
On the surface it seems like a great idea, tapping into an experienced executive for a fraction of the cost. But there are some real challenges prohibiting successful outcomes.
So if you are thinking of engaging or thinking of a career as a Fractional Exec, here are some thoughts to ponder:
10.1 reasons why Fractional Executives fail
1. Fractional execs charge time but are measured on outcomes
2. Fractionalised means your focus is on several missions, not on one mission. Which often results in conflicts delivering client outcomes
3. Startups are demanding, like babies - if you have 3 clients it's like having triplets - the challenges compound
4. Fires 🔥 have to be extinguished immediately- a client can't wait for your scheduled day in the office or until you log on.
5. Our research indicates presenteeism is essential for the creative phase of company building. People need leadership and as yet the human race is still figuring out how we do that virtually.
6. Mental exhaustion- startups present complex problems that must be solved under intense pressure. Multiple clients means multiple problems - again there is a compounding effect leading to rapid burnout.
7. People overestimate their ability to deliver and clients underestimate the size of and cost associated with the problem. This creates big expectation gaps.
8. Which leads to expectation gaps. A client will expect you to deliver the same outcome as a full time employee and usually expects the same level of commitment.
9. Lack of experience in startups. Many fractional execs come from corporate land where they are one dimensional and political. Under pressure they don't deliver, make mistakes and then blame other people or simply go awol
10. My Linkedin research shows less than 10% of fractional execs have more than 3 year's experience working this way. Startups have very different challenges in 2023 and many fractional execs may not have experienced these challenges in their careers.
10.1 Trust or lack of - from board and founders
Here are my tips on how you make Fractional Executives work in fintech startups👇
- Make sure to engage someone who has experienced startups in all phases of growth and has the battle scars.
- Get references from past clients.
- Context is everything- has this person delivered the outcome you're looking for with the resources you have to offer, in a similar business?
- Fintech is full of regulatory landmines. Will this person help you avoid them or could they inadvertently have you step on one?
- Set clear expectations on commitments and expected outcomes written into the contract.
- Make a significant part of the compensation outcome based.
- Don't fall for big name tech companies on the resume. An Exec from Google is rarely much help to an early stage startup.