(This article examines fractional COOs for insurance entities with Steve Genett of SCG 2020 and provides fractional services for the same insurance entities.)
- What prompts organizations to contact a fractional COO?
There’s a bias to action at a lot of small organizations. The reality is that sometimes there are skill sets and backgrounds that founders understand they will have to develop, contract, or hire on-the-fly. I’m speaking with a context of startups or early-stage companies here. In most cases, it is hard to wait until you have talent in every possible role before getting the company started. Founders have big ideas and tons of energy and enthusiasm, and though insurance has a reputation for being slow to change, speed-to-market matters. This is especially true in the entrepreneurial space of startup MGA/MGU operations or scrappy InsurTech operations which can quickly stand a MVP suitable to get sales calls scheduled. . So I think in some cases the prompt to find a fractional COO (Chief Operating Officer) becomes time-based or milestone-based in a founding team’s mind. “Let’s get the MVP stood up and be able to book calls and go out to market for capacity. Then, we’ll have someone come in and help operationalize everything that we just promised we could scale.”
Another common prompt for an organization to bring on fractional talent is the management team’s real-life confrontation of the fractional work that needs to be done. Maybe it’s work they don’t enjoy doing, perhaps they’re not good at it, it’s risky to DIY this particular set of responsibilities by someone who’s never done it before – or maybe the bottom line is that dealing with a certain set of work distracts everyone else from their core work. In startup mode, it’s likely that the CEO could be the COO … and oversee accounting and finance for a while … and manage the vendor and contract negotiations … but after all that has been cleared off their desk, how much time and energy do they have left to focus on the actual CEO work they’re skilled at or passionate about? It’s easy to say “We don’t need a COO” until the body of that work presents itself as a real issue that someone needs to tame, but if we do, by the time they are hired it may be too late.
- What are the most common challenges you may face?
While many are, not everyone is bootstrapping their new venture. But even in the case where funding exists the available funds likely won’t cover everything needed. So, organizations must be mindful and cost-conscious of allocating capital, not just pre-revenue but even through milestone-based funding or early stages of revenue. Adding the expense of an experienced full-time COO hire may not be viable early on in the budget of a new or growing venture – especially if there’s no obvious revenue lift from the hire. Unless the company is larger and more mature, the COO role may not be able to fund its own position through efficiencies or bottom-line improvements.
Also, on the supply side, there is a wide range of risk tolerance for professionals when they consider career choices, and leaving a potentially comfortable, stable job for a role at an unpredictable, risky startup isn’t for everyone. Every “going out of business” story in insurance that shows up in the trade publications makes it harder for new ventures to attract talent. This naturally reduces the market of available candidates who are interested and available for a perceived risky opportunity.
So, being capital-constrained and trying to find talent with a healthy risk tolerance turns into a bit of an economics problem of maximizing the company’s capital for optimal returns with talent resources capable of delivering expert guidance and leadership. Fractional leadership allows the company to benefit from high-level expertise without overstretching its budget.
To further the complexity of this, “fractional” implies less than full-time, so there are some moving pieces regarding the rest of the traditional COO’s time and income. Is the timing right for the best possible COO to join – or is it stuck because a company can only offer the fractional COO 40% of their desired time and compensation? This is where a fractional COO shines as they are not wanting full-time employment and would prefer to work strategically as required.
3. What is the one piece of advice you can give to help solve common issues?
It’s never too early to bring in the outside expertise you need with an insurance venture. There are so many important details and decisions to make at “day zero” of an insurance startup that having an experienced fraction COO help early on, even if on an extremely limited basis, can avoid or minimize some of the technical debt that otherwise may cause problems down the road, be a hindrance to scaling, etc..
Background
Steve Genett, CEO of SCG 2020, LLC, providing insurance operations expertise since 2020.
https://www.linkedin.com/in/stevegenett/
I currently consult with MGAs and InsurTech companies in a mix of different roles ranging from fractional to more traditional hourly/project-based.
About Ben Baker
Ben Baker has been a Fractional Chief Communications Officer, Chief Marketing Officer and Chief Podcast Officer for his clients for over a decade.
"The single biggest problem with communication is the illusion that it has taken place.”
- George Bernard Shaw
We help you fix that problem and make sure you are listened to, understood, valued, and engaged with by internal and external clients, prospects and stakeholders in meaningful and profitable ways.
Nick Lamparelli is a 20+ year veteran of the insurance wars. He has a unique vantage point on the insurance industry. From selling home & auto insurance, helping companies with commercial insurance, to being an underwriter with an excess & surplus lines wholesaler to catastrophe modeling Nick has wide experience in the industry. Over past 10 years, Nick has been focused on the insurance analytics of natural catastrophes and big data. Nick serves as our Chief Evangelist.
