Hiring a fractional (part-time) CFO is becoming increasingly popular because this type of employment engagement offers significant cost benefits. Outsourcing their CFO role allows an organization to bring someone in for a fraction of the cost because they do not incur expenses related to benefits, bonuses, payroll taxes, etc. As Michael Newsome explains when talking about utilizing fractional service providers,
“Searching for ways to optimize human capital, while fighting the inefficiencies of talent markets, is an ever-present challenge for businesses in the middle market. The human capital corollary to the engineer’s triangle (fast, cheap, reliable – pick two) seems to be availability, relevant experience, and compensation expectation... An increasingly popular way for businesses to address this issue is using fractional service providers, which have proliferated significantly in their breadth and depth of service offerings in the middle market... A fractional solution can offer a way for a business to access additional capability at a lower total cost than bringing on a full-time hire.”
And while the cost savings are clear, many companies remain resistant to hiring a fractional CFO. Their biggest fear is that doing so requires that they sacrifice on quality in a role that requires the utmost proficiency. Leadership with these types of reservations will typically ask questions like, “Is a part-time CFO as good as a full-time CFO?” or “Can you really trust a fractional CFO to perform at a high level?”
Organizations that question whether a fractional CFO can truly get the job done well for less should consider how a fractional CFO can:
Provide Needed Experience
Given the current state of the finance talent pool you will likely get a better qualified candidate by hiring a fractional CFO than hiring one internally if you do not definitively have enough work to necessitate a full-time role. In today’s hiring market experienced CFOs can choose to be selective when considering and accepting new roles, which means they are largely not looking for the kinds of positions that will require that they do the “in the trenches” work that they did earlier in their careers to get them where they are today. Therefore, organizations looking for a “CFO light” type of role (one that combines CFO responsibilities as well as more day-to-day finance or accounting tasks) will likely end up hiring an accounting/finance professional and needing to train them up into the CFO-level responsibilities of the role. Inherently, this person will be less qualified in the CFO role than someone who already has one or more CFO roles on their resume. Companies that need executive financial leadership but do not have the budget or the amount of work to justify bringing someone into a full-time CFO role are better suited to hire a fractional CFO and leave the other financial tasks to their existing accounting and finance staff.
Going the fractional CFO route opens up an entirely new candidate pool – tenured or late career executives that do not want to work full-time but also are not ready to retire yet. These highly experienced CFOs do not need to work – they want to work. They love doing what they do so much that even though they may be able to retire comfortably already, they want to stay in the game. What drives them is not only compensation; it is a desire to make a difference and be a part of something great. And their proven track record of success is their ticket to being able to work on their own terms. They are highly experienced, passionate, and well-engaged. These are the kinds of professionals you want at the helm!
Your CFO should be a truth-teller, helping to identify blind spots for the CEO. However, in some cases, this does not happen. Family-run businesses or organizations with a tight-knit group of employees may find that their financial leadership lacks the impartiality needed to do the job of a CFO well. Bringing in a third-party CFO to offer unbiased financial management and strategic consulting is an important component of success.
Improve Financial Planning & Analysis
One of the areas where impartiality becomes extremely important is in FP&A (Financial Planning & Analysis). Using an objective approach, an experienced and impartial CFO will be able to effectively determine which metrics to track as well as be able to identify current challenges and future risks. Subsequently, they will be able to turn business goals into a strategic plan to guide the organization into the future. Our team explains how a fractional CFO can improve FP&A in saying,
“FP&A is crucial in setting and executing on strategic vision and, as such, falls under the umbrella of a CFO’s responsibilities. Therefore, it should not be entrusted to non-executive level employees, nor should it necessarily require creating and hiring into a separate role for small to mid-market companies. In these size organizations, a CFO’s skillset includes FP&A because these activities are vital for strong financial leadership, which is their primary concern. For organizations that are not ready to hire a full-time CFO, an outsourced, fractional CFO can fulfill the same function to provide strong FP&A at a much lower cost.”
Help During Periods of Growth
Hiring a fractional CFO is also a great way for emerging companies or startups to get the financial leadership they need to help them scale up. Frequently, this means that a fractional CFO will act as a steppingstone for a full-time role that will come later on. (This is not always the case though. A company may never need a full-time CFO if their business model is not growth-oriented; but if it is, then a fractional role can pave the way for what is to come.) A fractional CFO can get everything ready for a full-time hire, making the roadmap to hiring a CFO an easier process and setting the new person up for greater success.
When you need part-time financial leadership, please reach out to us! We provide fractional CFOs to companies across all industries. Find out more about how one of our highly experienced CFOs can come alongside your business to provide the financial support and direction you need to help you achieve strategic goals. And if you do get to the point of needing to hire a CFO, we can help there as well! We also have a team of executive finance recruiters ready to help you bring someone into a full-time role if/when you need one.