12 Reasons Why Early Stage Startups Should Hire Fractional Leaders

12 Reasons Why Early Stage Startups Should Hire Fractional Leaders

In the dynamic world of startups, the concept of fractional leadership is gaining momentum as a strategic approach for early-stage companies. To gain more insights into this, we interviewed Peter Anstey, Talent Director at Entrepreneur First, who shared with us valuable observations on why startups should consider hiring fractional leaders. From navigating the uncertainties of market recovery to gaining a competitive advantage over major competitors, Anstey sheds light on the multifaceted benefits that fractional leadership brings to the table. In this blog, we delve into 12 compelling reasons why early-stage startups should embrace this innovative model, exploring how it can foster resilience, optimize operations, and propel these businesses towards sustainable success. 

1. Feel safer in face of downturn risk

Fractional leadership is quickly gaining traction among startups. 

According to Peter Antsey, this is true not only around the Series A mark startups but also for those in earlier stages. He believes that as the market begins to recover, there will be a genuine fear among companies about rescaling their businesses. 

“Many companies have been reducing lots of redundancies and that pain has been felt everywhere. No one was safe. I think with the general expectation of the market recovering in 2024, there will be a rescaling period but I think there will be a general fear of permanency for hires,” Peter notes.  

The traditional approach of bringing in full-time permanent hires might not be the most strategic move for startups during this phase. In this context, Peter emphasizes the importance of questioning the need for permanency in every new hire. 

“One of the things I think any company should consider as they restructure their teams is the discussion of why they want the hires to be permanent or why in that team or why in that structure, “ he stresses. 

In the post-COVID landscape, where remote work has become the norm, startups are reevaluating their structures and team compositions. The fractional leadership model presents an intriguing solution to this dilemma by offering the flexibility to tap into expertise that might not be available through traditional hiring channels. 

In conclusion, the rise of fractional leadership is not just a trend; it's a strategic response to the evolving landscape of startups. By embracing this model, companies can reduce the fear of permanency, navigate rescaling challenges more effectively, and position themselves for success in the competitive world of entrepreneurship.

2. Gain advantage over major competitors

In the competitive landscape of startups, finding a unique advantage can be the key to success. 

One such advantage that sets startups apart from major competitors is the ability to leverage fractional talent. This model allows startups to tailor roles to individuals, a luxury that established companies find challenging due to their well-defined structures.

“It's very hard for a company that is very well defined and established to structure roles around people. I think it's a huge advantage to any company to be able to pick who they want, build a role for that person, take advantage of it for a few months, few days or whatever it may be to speed up what that company knows about that sector,” Peter concludes. 

This stands in a stark contrast to established businesses that often plug individuals into predefined roles. Unlike this, startups can design roles based on the specific needs of the expert they are bringing on board.

In conclusion, the ability to design roles around individuals is a game-changer for startups. It not only gives them a competitive edge over major competitors but also enhances their adaptability in the ever-changing business landscape. As the role of fractional leaders continues to evolve, startups can leverage this unique advantage to propel themselves to greater heights of success.

3. Utilize the skills your company needs

In the ever-evolving landscape of startups, the role of fractional leaders has undergone a transformative journey over the past three years. 

Peter Anstey sheds light on this evolution, emphasizing that it's not just about the availability of fractional leaders but about understanding how to effectively leverage their skills.

Conceptually, the fractional leadership model is still relatively early in its adoption within businesses. However, there is a growing awareness of how to utilize the unique skill sets these leaders bring to the table. 

In this context, Peter mentions the example of a fractional Chief Financial Officer (CFO), a role that has been popular for years. The strategic move of employing a fractional CFO who focuses exclusively on the company's finances, away from the day-to-day operations, allows startups to navigate complex financial challenges and make informed decisions without committing to the costs associated with a full-time hire. 

As Peter notes, the rise of fractional leadership extends beyond financial roles to areas like Chief Marketing Officers (CMOs). Startups grappling with the complexities of launching their first marketing department or devising a go-to-market strategy find value in fractional CMOs. 

“For example, in a startup launching its first marketing department or its first Go-to-Market (GTM) strategy, they don't even know what a permanent role looks like. Because then if you talk to most founders who are hiring for these types of positions, they're not super clear what to say. They just know they should be marketing, And so, relying on a fractional leader who's been there before, has prior experience, and can run some of the testing for you involves relatively low risk,” Peter notes. 

It's a flexible approach that allows startups to tap into the skills they need for tasks they are not sure how to do, precisely when they need them, and with the option to scale up if the fit is right.

In conclusion, the evolution of fractional leadership is not just about the availability of experts but about startups learning how to strategically deploy these leaders to address specific needs. Utilizing the skills of fractional leaders enables startups to navigate uncharted territories with confidence, minimizing risk and maximizing the potential for growth. As the startup landscape continues to evolve, the role of fractional leaders stands out as a valuable asset in building resilient and successful businesses.

4. Test to understand who you need

In the ever-evolving landscape of startup dynamics, the concept of fractional leadership has become a pivotal tool for companies seeking flexibility and strategic options. Peter Anstey sheds light on the transformative role of fractional leaders, emphasizing the importance of testing and understanding how to leverage their expertise.

According to Peter, the beauty of engaging fractional leaders lies in the test run it provides. Companies are presented with the option to assess whether working with agencies or continuing with fractional leadership aligns better with their goals. This approach injects a sense of optionality, giving companies the freedom to explore different avenues without committing to permanency. 

The idea is always that the fractional leaders are interim, a stock gap. It's about not going down the permanency side and it just gives you way more choices on what you want to do,” Peter notes. 

An intriguing aspect of the conversation centers around the right time to consider a more permanent executive role. Peter suggests that the surprising answer is often much earlier than expected: The key lies in recognizing when the test run provided by fractional leadership has achieved its objectives and when transitioning to permanency becomes a strategic move.

In conclusion, the impact of fractional leaders goes beyond filling temporary gaps. It's about navigating choices, testing strategies, and understanding the unique advantages they bring to the table. As startups and industries continue to embrace this model, the ability to test, understand, and strategically leverage fractional leaders becomes a powerful tool in shaping the trajectory of a company's success.

5. Rule out redundant hiring

In the realm of startup scaling, the approach to structuring roles plays a pivotal role in determining a company's success. 

According to Peter Anstey, a seasoned expert in the field, the key consideration for any job role is understanding the impact on the company if that position remains unfilled. 

“The way I consider fractional leadership or start-up scaling in general is whenever I'm structuring a role for a company. My idea of the baseline of the job is how the company dives if you don't get this person,” Peter notes. 

The crux of early-stage hiring, as he suggests, lies in avoiding over-hiring and the associated high expenditures.

Fractional leadership emerges as a strategic solution to this challenge. By carefully assessing the essential roles and functions within a company, startups can rule out redundant hiring. Peter's perspective is clear: unnecessary roles and excess personnel not only consume valuable time but also significantly impact the financial runway of a startup. 

“Nothing is going to cost more time than the people you hire and nothing will cut into a runway faster than the salaries that you're paying for,” he notes. 

In the fast-paced world of startups, where every resource is precious, avoiding the pitfalls of over-hiring becomes crucial for sustained growth.

Fractional leaders, by their very nature, address this challenge by providing targeted expertise without the commitment of full-time hires. Startups can tap into the skills they need, precisely when they need them, without burdening their budget with unnecessary salaries. This approach allows for a more strategic allocation of resources, ensuring that every team member contributes meaningfully to the company's objectives.

In essence, fractional leaders offer startups the flexibility to scale efficiently, focusing on roles that truly move the needle for the business. By ruling out redundant hiring, startups can optimize their operations, preserve their financial runway, and position themselves for long-term success in the competitive startup landscape. 

6. Free up your time for more important tasks 

In the startup world, where time is a precious commodity, the concept of lean and mean operations takes center stage. Peter Anstey, a proponent of efficiency, highlights the critical role of fractional leaders in freeing up valuable time for more crucial tasks. 

Talking about another situation which can prompt the need for a fractional leader, Peter notes: “When is the right moment to consider a fractional leader? This is like asking the question: “When are you panicking about a certain thing that should be happening or when is your time demand going into a relatively low value activity or something, you're just not super sure how to do?” 

Peter zeroes in on the scenario where CEOs find themselves entangled in tasks that fall outside their core strengths, such as headhunting, reviewing CVs, or navigating the intricacies of hiring processes. He argues that the time spent on these activities does not align with the high-value contributions CEOs should be making to their companies—contributions that can amount to significant daily values.

“I worked with CEOs whose value to their companies today is probably somewhere between 10 to 20,000 pounds per day. If you're spending your day headhunting or reviewing CVs or setting up relationships with recruiters or figuring out which ATS systems to buy or whatever it may be, it's not 20,000 pounds a day. The reality is to go out and find someone who costs between 400 pounds a day to 600 pounds a day,” he adds. 

According to Peter, this way you are trying to stop the CEO doing a job they are neither good at nor probably like doing. While they're busy doing it, they miss on a number of things, including acquiring customersworking on the product and taking their company forward

“It's very common that a company will ground to a halt in particular in hiring activities whilst they're doing it. So why are you doing this? Are you the best person to do it? Is there a reason nobody else can do it? The answer is always no,” he concludes. 

This scenario is not unique to talent acquisition but extends to roles like CMOs and CFOs, where the CEO's expertise might not align with the specific tasks at hand. Peter suggests that replacing oneself becomes a strategic move in scaling a company, emphasizing the importance of bringing in individuals better suited to specific roles. Besides, that allows CEOs to focus on tasks that drive the company forward insteading of being the bottleneck. 

In essence, the moment to consider fractional leaders arises when CEOs find themselves bogged down in tasks that hinder their ability to contribute maximum value to their companies. The rise of fractional leaders signifies a shift toward optimizing productivity and strategically utilizing expertise, ultimately propelling startups toward scalable and sustainable growth.

7. Carry out specific tasks without hiring 

It's very uncommon for startups up to about Series B to hire consistently. These often experience hiring patterns characterized by rapid bursts of recruitment followed by periods of dormancy.

Fractional leaders step seamlessly into this scenario, offering a tailored approach that aligns with the sporadic nature of startup hiring. Instead of engaging in continuous hiring efforts, startups can bring in fractional leaders under a specific banner to address targeted needs. “I think it's just a system that works quite well for that version of a company,” Peter notes. 

These leaders become catalysts for success in a particular area, whether it be talent acquisition, marketing, or financial management, and then seamlessly transition out when their expertise is no longer the immediate focus.

The beauty of this system lies in its efficiency and adaptability to the unique rhythms of a growing company. Startups can leverage the expertise of fractional leaders precisely when needed, avoiding the commitment and costs associated with continuous hiring. This model aligns with the natural hiring cycles of startups, allowing them to navigate periods of rapid growth without the burden of maintaining a constant workforce.

To sum up, fractional leaders become specialized agents of progress, entering the startup ecosystem to carry out specific tasks with precision and expertise. The success of this approach extends beyond talent acquisition and proves effective across various divisions. As startups embrace the flexibility and efficiency of fractional leadership, they position themselves to thrive in the ever-changing landscape of the business world.

8. Test for trust 

With all its benefits, fractional leadership is still less common than permanent hiring, at least in roles like CFOs or fractional GTM leaders.

Peter Anstey pinpoints trust as the critical challenge in the adoption of fractional leaders. 

I think that's a really critical challenge you would face in hiring anyone for a fractional role in your company. Who is this person? Are they any good? Will they care about your business as much as you do? That's the big challenge that any fractional leader is going to face in working with a startup,” Peter notes. 

According to him, you need camaraderie in building a startup. Startups thrive on a shared mission, the idea that it's "us against the world." “Everyone wants us to fail, all of our major competitors have more resources. They have better positioning than us, better prices than us,” he adds. 

The challenge lies in bringing someone into this fold who isn't perceived as fully committed to the company's mission. The skepticism arises from the perception that fractional leaders are here to do a specific task and then move on. The fear is that they may not invest the same level of care and dedication as the rest of the team. 

“Why would I want someone in the business, who isn't fully on it like the rest of my team? I think that's the most critical thing for you to overcome,” Peter notes. 

Peter also thinks the issue often lies in the common narrative of startup teams around the perception of commitment. “Of course, you've got to then go get the proof that you can actually bring people in who care about the company as much even though they're not going to be grinding away at 9pm at night, which is not an uncommon story for a sales team, development team, product team where the early hiring is done for startups.”

In this context, Peter emphasizes, the real test lies in proving that fractional leaders can indeed be trusted to care deeply about the company, even without the conventional markers of dedication. It's about finding individuals who align with the startup's mission in a cerebral way, contributing their expertise with a genuine commitment to the task at hand.

In conclusion, building trust becomes the litmus test for startups contemplating the adoption of fractional leaders. As the landscape evolves, and proof emerges that these leaders can integrate seamlessly into the fabric of a startup's mission, the hesitancy surrounding trust is likely to diminish. The journey toward embracing fractional leaders is not just about their expertise; it's about aligning them with the heartbeat of the startup's shared vision and mission.

9. Integrate fractional leaders into your culture

The integration of fractional leaders into the fabric of a startup's culture is a nuanced process that requires a delicate balance of trust-building and alignment with the company's vision and values. 

In this context, the onus is on these leaders to effectively communicate the company's mission to potential candidates and align themselves with the startup's vision and values. 

“I think culture is affected by any one or two individuals in a company and any great leader can integrate into the culture. It’s about whether we like them, whether they get on well and understand how to move fast,” Peter notes. 

At the same time, Peter refers to the definition of culture in a startup context, challenging conventional notions of what it entails. According to him, in a startup, culture is less about perks and benefits - like buying a bicycle - and more about a shared sense of purpose and the ability to move swiftly. “What do you mean by culture? I mean, relatively speaking, most startups don't even have a culture: they can say what they are and they can say all the nice things that they want to be associated with their status,” he notes. 

Instead, Peter doesn’t associate culture with necessarily positive things but rather connects it with the pain point and what the company wants that person to do to resolve the problem. 

“Not knowing what you're doing, being in panic a lot - that's how I would describe a startup culture. What is the culture of a fractional leader? They can move the pace, they  know the things you have done, they can make decisions faster than you. That's interesting to me as a culture. Give me that person, that's our brand, that's our culture,” Peter adds. 

Fractional leaders, by their nature, contribute to the culture by bringing in efficiency, decision-making prowess, and the capacity to navigate the fast-paced startup landscape.

The question of integration, then, becomes less about shared meals and more about understanding what matters in the startup's unique journey. Fractional leaders who can align themselves with the pain points, goals, and values of the startup become valuable contributors to its culture. The excitement lies in the undefined nature of early company culture, where everyone plays a role in shaping its identity.

According to Peter, that's where the conversation should start, rather than with all the nice things a company could say about themselves. 

“Every founder is always going to stand by their team and present them as the best team in the industry. But culture in early companies is undefined in a way that's exciting. We all get to be a part of shaping what this is, and we will get to carry those values ourselves. And once we get to 50, 60, 70 people, we're really going to sit down and discuss what we think we are. I think it's not an uncommon culture framing,” he adds. 

In essence, the conversation around integrating fractional leaders into startup culture goes beyond superficial aspects. It revolves around a deeper understanding of the company's values, goals, and the collective journey. As fractional leaders become harmonious contributors to the startup's ethos, the result is a culture that reflects the shared values of its dynamic and evolving team.

10. Use their experience to find right people 

When talking about fractional leaders, one of the common questions is the extent to which they should shape and contribute to a startup's culture, considering their temporal involvement.

Peter Anstey offers a distinct perspective, emphasizing that fractional leaders are not necessarily the architects of a startup's culture. Instead, they are brought in for specific tasks, a targeted expertise that might be beyond the startup's current capabilities. In essence, fractional leaders are catalysts for change, designed to accomplish a particular goal within a defined timeframe.

I think you're buying them for something different. The difference is between the approaches on how you're going to hire someone permanently: Giving them shares and buying into a company's mission is obviously going to change the narrative of what you do with that person. I think a fractionality is there for a different reason. I think it's a very specific thing you probably can't do that you set them up to do,” Peter notes. 

Drawing on the example of a CMO, Peter explains the cyclical nature of fractional leadership: A CMO, brought in for 18 months, may be instrumental in elevating the company's brand and optimizing marketing strategies, however, the unique aspect of fractional leadership is revealed in its final act – the replacement of the fractional leader. 

By the end of the 18 months you really want them to go full-time. You want to fully buy them, which is normally not possible. And one of the other parts of fractional leadership is you're buying people you probably can't afford - it's the nice part of it. You get a day of their time, not every day of their time and they also may not want to work full time. So what's the last thing they can do? Help you replace them,” Peter notes. 

Thus, they become key players in identifying the right person to fill the role they have expertly shaped. The impact of fractional leaders on a startup's culture, according to Peter, lies in their understanding and integration of the company's ethos during their tenure. Their experience allows them to make informed decisions about permanent hires, ensuring a seamless transition when the time comes for them to step back. The enduring influence of fractional leaders extends beyond their immediate contributions, leaving a lasting imprint on the culture and shaping the trajectory of permanent hires.

11. Get results for very specific tasks 

Fractional leadership is a relatively uncharted territory in the business world. As a relatively new approach, there is limited evidence of its success among leading companies. This lack of a proven track record poses a hurdle for startups looking to adopt this method as a scaling strategy. 

Peter encourages companies to pioneer this unexplored terrain but underscores the need for a fundamental understanding of why they are choosing this path: “I think there's not loads of evidence of the best companies in the world using this system as a method of scale -  it's brand new. So any company looking at this almost must be a pioneer and must really understand fundamentally why they want to do this and then how to get the most out of it.”

Thus, to mitigate the risks startups need to first and foremost set clear expectations for fractional leaders and understand what they need them for, as well as scrutinize them in the same way they would for any permanent hire. 

In conclusion, the potential of fractional leaders to bring expertise and efficiency to specific tasks is evident. Still, it necessitates a meticulous approach from startups. Setting clear expectations, scrutinizing potential hires, and understanding the unproven nature of fractional leadership are critical components of ensuring success in this emerging paradigm. By embracing precision and careful evaluation, startups can unlock the full potential of fractional leaders and drive targeted results for their business.

12. Get an expert who can guide you 

The key reason you’re hiring a fractional leader is that you want to acquire an expert who can guide and teach you and your team. However, the risk of the hired expert not meeting expectations or failing to deliver results is ever-present.

To avoid this scenario, Peter indicates some signs that will differentiate real experts from fake ones. Firstly, the best fractional leaders, he suggests, actively contribute to defining success parameters, providing transparency for both parties involved, instead of following only the parameters set by the founders. 

Besides, in an interview, they should be an educator and not just someone only asking questions: “They can say there are five ways to do a thing but recommend only one as a practical solution. So to me an expert should basically say: “Hey, good news, you don't have to make loads of choices because I've walked through this process before. This is how we're going to do it,” he notes. 

According to Peter, this kind of decision aggregation, helping founders understand which corners they should cut and why, and what they should purposefully choose to slant off brings an insane value to the founders. 

In summary, the decision to hire a fractional leader is driven by the desire for expert guidance, but the risk of disappointment exists. Peter's advice emphasizes key signs of a genuine expert, such as actively contributing to success parameters and being an educator in interviews. Genuine fractional leaders bring value by facilitating decision-making and providing practical solutions. By following these criteria, businesses can reduce the risk and maximize the impact of their fractional leadership hires.

Final Thoughts 

In conclusion, the conversation with Peter Anstey sheds light on the growing popularity of fractional leadership, particularly in the context of early-stage startups. The evolving preferences of the next generation of workers, seeking flexible lifestyles beyond the traditional 9 to 5, align with the benefits that fractional leaders can bring. Peter emphasizes the power of choice that comes with a certain point in one's career, enabling individuals to pick positions and roles with consistency - a very powerful and previously non-existent thing that obviously compounds the ability of companies to find great people.

The ability to access top talent on a fractional basis provides startups a crucial advantage, allowing them to structure roles to fit specific individuals and focus on value over time. As startups continue to face challenges and pursue ambitious goals, the flexibility offered by fractional leadership becomes a key strategy for success.

 

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