None of us have unlimited budgets, time or expertise. (Wouldn’t life be so much better if we did?)
Clients slow pay, vendors need up front payment and lines of credit get stretched because payroll, benefits and taxes still need to be paid on time and in full.
With that, it makes no sense hiring full-time leadership expertise well before it is needed or have the financial resources to justify. Yes, it would be great to have senior-level, experienced experts that you can rely on full time, but most businesses have not reached the economic level that they can justify the salaries and additional costs associated with having these people in-house.
A startup in the insurance ecosystem knows this problem intimately. Insurance companies pay claims, but not until a policy is sold. So in the early days as the firm is getting ready to launch, can the company justify a Chief Claims Officer (CCO)? The company would likely benefit from having the expertise on staff in the long run, and the CCO could make sure that claims systems (the real product of the insurance company) will function properly when needed. But that is a hefty salary to pay before you have sold your first policy.
So let’s consider the alternative, fractional leadership. You get senior-level, seasoned employees, ready to dive in and drive change and you can utilize them as, and when needed.
However, when hiring fractional leaders, there are many things you need to consider, here are a few of them.
Hourly Rates: Fractional leaders typically charge hourly rates ranging from $150 to $500 or more, depending on their expertise and industry. These hourly rates can be well above the standard rates that you may be currently paying your teams, however, there are a lot of factors to consider.
The first thing is that these are people who have “been there and done that.” They have a wealth of experience from across industries to draw on, over decades, and with that, they know how to get to the crux of the matter and solve problems more quickly, for efficiently and more cost effectively. Yes, you are going to pay them more for the time that they spend with you, however you will receive better return on your investment.
Project-Based Fees: These can vary widely based on project scope and duration, potentially ranging from a few thousand to tens of thousands of dollars.
Some fractionals work on a project based model. They forgo hourly rates and look at projects as a whole, understanding what it will take to assess the situation, develop tactics and strategies, implement and reach goals. It may take them ten hours or fifty. What you need to realize is that you are paying them not for the hours spent, but for results.
Retainer Fees: Some leaders work on a retainer basis, offering a fixed monthly fee for a set number of hours or deliverables.
Monthly fees can work out well for both parties. It enables both you and the fractional leader to budget both money and time and develop a scope of work that can be completed monthly. This allows everyone to have a clear understanding if you are on tract and on budget month to month and allocate funds over a period of time. It also helps to justify spend and set up budgets for following fiscal periods.
Additional Costs: Travel expenses, technology tools, administrative support, and onboarding costs can add to the total expenditure.
It has to be understood that out of pocket expenses need to be reinbursed. If you expect an expert to travel to meet teams, clients, vendors or stakeholders, they will charge for this. This could include time spent in the air, if it is above the monthly allocated budget, flights, hotels, car or uber, food and any additional expenses that may be incurred.
Having conversations with fractional partners at the beginning of the relationship about what is a chargeable expense and what is not makes things easier for everyone as situations come up.
Summary: To sum up, fractional leadership is like having a secret weapon for growing your business without breaking the bank. It’s perfect for companies that need some high-level expertise but aren’t quite ready to shell out for full-time executive salaries. Sure, the hourly rates or project fees might make you raise an eyebrow at first, but here’s the kicker: these fractional leaders have been around the block and know how to get stuff done fast. They’re bringing years of experience to the table, which can save you time and money in the long run. Just remember to hash out the details on costs upfront – nobody likes surprises when it comes to expenses. At the end of the day, if you play it smart, fractional leadership can be a game-changer for your business. It’s all about getting that expert know-how when you need it, without committing to a long-term relationship your wallet isn’t ready for.
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.
