When a company considers whether it needs more management capacity, the first thought is almost always the same: do we need to hire someone? Post a job advertisement, conduct interviews, perhaps bring in a headhunter, and hopefully, a few months later, the right person will be sitting across the table.
That is a perfectly valid way to solve the problem – when the need is permanent. But not all needs are permanent, and this is where it is worth borrowing from British management thinker Charles Handy and his “shamrock organisation”. Handy’s idea was simple: a company has a small, permanent core that is responsible for direction, values and continuity – and around this core is a range of other, more flexible resources that are brought in precisely when they are needed. (Read my other article on the topic.)
This article focuses specifically on that more flexible layer: Interim and Fractional management, from the perspective of the company buying the service.
Interim and Fractional do not compete with permanent employment
Let’s start with something that is not discussed enough: Interim and Fractional are not alternatives to permanent employees when permanent employees are the right solution. They are alternatives for situations where permanent employment is not the most efficient model.
So where does permanent employment work best? As the name suggests – in permanent situations. A company needs a permanent, stable team at its core to carry its long-term direction, approach and values. Many roles in a company also specifically require continuous presence and predictability, and that is precisely what a permanent, stable workforce provides.
But that is more or less where the need for stability ends. Today’s business environment is not particularly stable, and the future does not look any more promising in that regard. Markets change, technology – and now artificial intelligence in particular – is reshaping industries faster than organisational charts can be updated, and geopolitical developments can turn the entire operating environment upside down at short notice.
The only constant is continuous change.
In this world, companies’ expertise needs are no longer as often permanent as they once were – and that is entirely natural, not a problem that must be forced into the mould of permanent recruitment.
Interim and Fractional respond to a need – for change and development
Both models share the same core promise: a company can quickly access the expertise and work contribution it needs without having to commit to the obligations and risks of a long-term employment relationship.
Recruitment always involves risk. The impression created in an interview and the reality of day-to-day work do not always match – competence, motivation and effectiveness may turn out to be quite different from what the CV and interview promised. On top of this come sick leave, statutory annual leave and holiday pay, as well as the employee’s entirely justified expectations of the employer. In other words: the employer’s obligations towards the employee, some of which are precisely what many managers privately call “dealing with the HR merry-go-round” – not because employees are a problem, but because managing it takes time and attention away from the actual business.
Under the Interim and Fractional models, a company can transfer a significant part of this burden to the service provider – particularly recruitment risk, employer obligations and the risk of long-term commitment. This is closer to a planned B2B transaction than an employment relationship: the service provider sells an agreed service package to the client company, takes responsibility for any absences and for managing their own time, and invoices according to the agreed model – on a daily, monthly or project basis, depending on the situation.
When are Interim and Fractional services the right choice?
Interim management is the better known of the two, so let’s start there. The most typical Interim assignments involve serving as a CEO or CFO. What these situations have in common is the sudden but temporary emergence of a need: the dismissal or resignation of a CEO, their move to a competitor, a prolonged illness, a death or some other unexpected situation. There may also be a need for a rapid, radical change in the company’s direction or strategy – or simply a financial situation in which an unprofitable company or an overly heavy organisation must quickly be restored to a sustainable footing. Often, the previous CEO has already been relieved of their duties and the company needs an experienced, proven change leader who brings a different way of thinking and operating.
Whatever the situation, an Interim manager usually brings the following benefits:
- Rapid start – often within a few weeks, compared with recruiting a permanent CEO and accounting for notice periods (easily +/- 6 months)
- Rapid command of the situation in unexpected periods of change, protecting the company from greater harm
- Stabilising the situation – giving the owners and the board more time and breathing room
- The opportunity to plan the next phase without rushing – for example, the Interim manager can take part in finding and onboarding the next permanent leader before their own assignment ends
The need may also be for a temporary additional resource
Next, let’s look at a practical example in which the same identified need can be addressed using either the Interim or Fractional model.
Imagine a flat organisation: a CEO with the entire operational workforce (10–20 people) reporting directly to them, together with an emerging sales organisation comprising 2–3 sales managers in field sales and 1–2 DeskSales functions supporting sales. For a long time, the company’s sales have been driven by the CEO, with operations providing support in the background. Since then, the company has first hired a sales manager and then DeskSales support, and it is gradually developing its own separate sales unit. This unit should operate with sufficient independence and efficiency, while still maintaining close links with operations and supporting the company’s strategy in the best possible way.
This is a familiar challenge in organic growth: the baton is still firmly in the CEO’s hand, but there is no longer enough time to manage sales fully when the administration and leadership of the entire organisation are also on the same desk. The problem has been identified, and the solution should be both cost-effective and viable for sales and growth over the longer term – without creating unnecessary supervisory and management layers in the organisation. In other words, the organisation should remain flat and lean in the future. This allows it to respond more quickly to changing circumstances than a tall, multi-layered and administratively heavy core organisation.
In this case, the solution can be implemented using either model, Interim or Fractional. In both cases, the aim is to bring in an experienced, effective sales director who develops the existing sales organisation and its processes to a level at which it can operate efficiently under the CEO’s direct supervision. The assignment could cover, for example:
- Reviewing the overall strategy and making any necessary adjustments together with the CEO
- Developing a sales strategy that supports operations, the overall strategy and budgeting
- Job descriptions for sales managers and DeskSales
- Process descriptions for sales functions
- Drawing a clear boundary between operational and sales responsibilities – no overlaps, no grey areas
- Setting sales targets, the Pipeline and CRM system, and the KPIs to be continuously monitored
- Rolling out and implementing the entire system described above – putting it into practice
Under the Interim solution the assignment could last, for example, 4–6 months, during which the Interim sales director works full-time at the client company in a standard sales director role. During this time, the sales team’s operations and tools can be developed to a level from which the CEO can take over responsibility once the assignment ends.
Under the Fractional solution the same need is addressed with a solution that has a lower monthly cost but correspondingly runs for a longer period. A Fractional sales director can begin by conducting an assessment and analysis and preparing a 6–12-month roadmap as an initial project, working closely with the client company during the first few weeks. Once the initial package and plan are ready, the Fractional sales director continues to assume full responsibility for leading its long-term implementation, but with a limited time commitment. Initially, the agreement might cover, for example, 4–8 working days per month – in practice, 1–2 days per week at the client company’s office, as well as, for example, responsibility for leading the weekly sales meetings.
Does Fractional offer the client company a financial benefit?
Yes, it does – but it is important to understand that benefit correctly. A Fractional manager is not “half a manager”, nor is this about buying a manager at a discount. The point is that responsibility can be a full 100%, even if the time commitment is not.
The following figures have been deliberately simplified to illustrate the approximate cost of the different models – they are not a universally applicable salary survey, but an illustrative calculation.
The small or medium-sized, CEO-led, flat organisation with a limited budget described above is a good example of how properly scaled Fractional management can deliver benefits many times over. The company gains access to a sufficiently substantial contribution from an experienced leader – someone whom it could not afford to hire for a permanent, 100% position. By an experienced leader, I mean a professional with more than 10 years of work experience and a track record of achieving results during their career. Such a person’s monthly salary is often closer to €10,000 than €5,000. To estimate the total cost, we can use an intentionally rounded rule of thumb of 1.5 × gross salary: statutory employer costs are added to the gross salary, along with other employment-related expenses – occupational healthcare, equipment, telephone, insurance, premises and so on. Using this rule of thumb, a gross salary of €10,000 can easily represent a total cost to the company of closer to €15,000 per month. A more experienced C-level executive with over 20 years of experience, several management team positions and multiple demonstrable results will bring the total price tag, including ancillary costs, closer to €20,000 per month.
But what if the company could access comparable expertise, experience and ability to deliver results for a cost of around plus or minus €5,000 per month? After all, managing a sales team successfully and developing its operations does not require a skilled leader to be in the office five days a week. When the assignment is clear, responsibilities are well defined and results are monitored appropriately, one or two days a week embedded in the client company’s day-to-day operations may well be enough.
You can buy as many potatoes from the shop as you need each month. That doesn´t mean you need to own the entire potato-field.