Outbound Fractional Employment: A New Model

Hello to all 13,890 of you! 👋

This week, a co-written article with Andrea Zuppicich, a Senior HR professional with international expertise and a knack for innovation/disruption in the industry. We had a super-interesting conversation on how the nature of work is changing, and how ‘fractional work’ is going to become the norm.

Enjoy!

🚀 Changing Workplace Dynamics

We live in the era of ‘agility’ and flexibility, but work has been stuck to industrial-like dynamics for over 100 years. The 2019 Pandemic has shown how some of these are deeply cultural but not necessarily logical or even useful for the growth of companies and individuals. Think of remote work - it was unthinkable for many to consider letting employees be far from the office, but now (leaving aside some ridiculous Return-to-Office mandates) it’s become the norm. The 40-hour workweek, tailored for industrial work, has also been challenged with 4-day workweek tests and a general pivot to ‘objective’ measurement versus time measurement. These changes have paved the way for yet another potential cultural disruption: what if employment could be ‘polygamous’? 

Instead of working just for one company at a single time, why is it so rare for employees to be able to be lent to different companies?

In today's world, companies don't need a full-time CMO, CTO, or Sales Leader all the time. They need 10 hours, 20 hours, or whatever precise amount gets the job done.  Fractional work makes this possible – it's employment tailored to exact needs and objectives.

✂️ What is Fractional Employment?

“Fractional employment is a hybrid work model where employees work part-time for a company, providing flexibility like freelancing but with greater integration and understanding of company goals. This model is attractive to founders who need specialized expertise without the cost of a full-time hire, and to workers who want the benefits of consistent work alongside the autonomy of freelancing.”

Fractional employment differs from freelancing in its level of integration and impact within a company. Unlike project-focused freelancers, fractional employees are considered team members with a stake in the company's success. They often manage others, handle ambiguity strategically, and have a deeper understanding of the company's direction. This long-term involvement fosters a sense of investment and fulfillment that can be missing in traditional freelance work.

Regular workers in tech are thought to be monolithic; many times it’s a necessary time/focus requirement, but other times it’s not. 

In the last ten years, we’ve seen a rise in ‘fractional management’ figures (CMO, CFO, etc) who have been helping mostly start-ups. 

Looking at Google search trends, the Fractional CFO role has had the highest search volume, with around 4,400 monthly searches in the USA. It’s closely followed by the Fractional CMO at 3,600. Volumes then drop sharply for the fractional COO at 1,000 and fractional CTO at 880.

At a company level, the latest example of the fractional employee model comes from Dirk Ahlborn of Hyperloop Transportation Technologies (HTT), rethinking how companies are built in the first place. Instead of hiring full-time, salaried employees, Ahlborn has decided to crowdsource the labor to part-time workers and offer stock options instead of salary, successfully attracting about 450 workers, based in more than a dozen countries, moonlighting from organizations like NASA and Boeing.

HTT requires crowdsourced labor to commit to a 10-hour workweek to be eligible for stock. “The guys are working for stock options — they’re doing 10 times better job [than paid employees],” says Dirk Ahlborn.

Per Deloitte Insights, 60% of executives agree that fractional work is the most effective way to structure businesses and enhance value for both employees and organizations. This trend is projected to gain momentum in the future.

A significant paradigm shift is on the horizon: 73% of workers are advocating for skills-based practices—a change they believe will markedly enhance their job experience. This data not only underscores the evolving values within the labor market but also heralds a transformative era where skills and adaptability are becoming the new currency in the workplace.

However, it’s in stark contrast that nearly half (49%) of traditional workers — full-time employees — updated their skills more than a year ago or have never engaged in skills development, a fate often seen in things that live on the employee intranets.

On the other hand, 60% of the “alternative” workforce — gig workers, freelancers, independent workers, and crowd workers — updated their skills within six months.

✅ What are the key benefits of Fractional Work?

Economic - For managerial roles, smaller companies/startups don’t necessarily have the budget to hire individuals with this level of seniority. At an Individual Contributor level, things get less complicated, but this still can be a factor at play.

• Companies utilizing fractional teams experience an average cost savings of 20-30% compared to hiring full-time employees for similar roles.

Attractiveness - Startups may have a harder time attracting full-time talent to join their band. By tapping into top-tier talent on a fractional basis, startups gain access to the skills and experience they need without the commitment and financial burden of a full-time hire.

• Forbes found that 72% of CEOs plan to increase their use of fractional executives in the next year

Innovation - A single strategic, fractionally sourced expert can often kickstart lasting business growth by objectively identifying the true bottlenecks at hand and leveraging their own experience to help your team overcome those barriers—and they don’t have to be inside your physical office full-time to do so effectively.

• Organizations leveraging fractional talent report a 35% increase in innovation and creativity within their projects and initiatives.

Productivity & Work-Life Balance:

It’s not just about the employer, but also about the employee. Feeling more productive, learning from other business models and industries has huge advantages:

• Research shows that 72% of fractional workers report higher levels of productivity compared to when they were in traditional full-time roles.

• 82% of individuals engaged in fractional work express greater job satisfaction due to the flexibility and autonomy it offers.

• 68% of professionals engaging in fractional work cite enhanced work-life balance as a key benefit of this employment model.

• Individuals embracing fractional roles have reported a 25% increase in career development opportunities and skill diversification compared to traditional full-time positions.

🗺️ You are already doing it, but you don’t know. 

It may seem counter-intuitive: you are already engaging in fractional work, even if it is not explicitly labeled as such.

Let's take a broader perspective on the daily digital work landscape:

• Collaboration primarily occurs through platforms like Teams, Zoom, and others.

• The majority of communications are asynchronous, such as emails.

• Remote product development is facilitated through cloud services.

Our roles typically consist of various tasks that contribute to larger processes. The increasing accessibility of external solutions via the Internet plays a significant role in every company's technology infrastructure.

The shift in work dynamics is moving towards leveraging external specialized services to optimize costs, workload management, and technology advancement, rather than relying solely on internal resources.

As a result, organizational boundaries are becoming more fluid and less defined. Individuals are recognizing the limitations of sticking with a single employer throughout their entire career, preferring diverse experiences and opportunities for growth.

While job stability remains crucial, especially considering the evolving workforce across generations (X, Y, Z), cultivating a growth mindset is essential to keep pace with AI advancements. 

This entails continuously seeking new knowledge and staying abreast of emerging trends.

The combination of widespread disengagement in the workplace and the quest for meaningful work underscores the need for businesses and individuals to embrace flexible and hybrid work models from an employer's standpoint.

The desire for fulfilling experiences, intellectual stimulation, and varied tasks highlights the appeal of fractional work, which is evolving beyond its traditional association solely with C-level positions.

🗓️ Ok, but when can you use Fractional Work?

Fractional employment can be strategically beneficial in various scenarios. It's helpful to consider two primary models:

Outbound:  Allowing your skilled employees to dedicate a portion of their time to working for other companies.  This is ideal when:

• You have employees with niche or in-demand skills that need to be more utilized within your organization.

• Periods of lower workload leave employees with the capacity to take on additional projects.

• You want to foster employee development and cross-industry exposure, leading to enhanced value upon their return.

Inbound:  Leveraging the expertise of employees from other companies on a temporary or project basis. This is a smart strategy when:

• You need specialized skills for a defined period but want to avoid committing to a full-time hire (e.g., legal counsel, software development for a limited launch).

• Your workload has seasonal peaks or valleys, requiring additional talent without long-term overhead.

• You want to inject fresh perspectives into your projects, potentially preventing stagnation and sparking innovation.

🧭 How to implement Outbound Fractional Work

It is not possible to evolve the way people work without a fair dose of courage and innovation. Usually, the most frequent fears are:

• Losing talent

• Difficult coordination 

• Intellectual property protection 

All of these can be tackled with a focus on:

Transparency and Communication

• Develop Clear Contracts: Establish detailed employment agreements specifying expectations and deliverables.

• Open Communication: Maintain an open dialogue on what skills and knowledge can be shared, aligning with company policies.

Career Path Integration

• Recognize External Stints: Include external fractional work as part of the career development path, highlighting the value of diverse experiences.

• Promote External Experience: Encourage employees to pursue fractional roles that enhance their skill set and bring new perspectives to the company.

Intellectual Property and Trust

• Implement NDAs and IP Policies: Craft specific non-disclosure agreements and intellectual property policies for fractional work.

• Foster Trust: Build a culture of integrity where employees understand the importance of safeguarding company information.

📋 Execution Essentials

• Adaptive Job Roles: Adjust job descriptions to accommodate fractional work without compromising primary responsibilities.

• Continuous Learning: Leverage a learning management system (LMS) for skill tracking and promote cross-functional training.

• Feedback and Engagement: Schedule regular check-ins and feedback sessions for fractional employees to ensure alignment and address challenges.

• Career Support: Integrate fractional experiences into career progression criteria and provide mentorship for professional growth.

• Community and Well-being: Offer support programs and foster communities for fractional employees to share insights and experiences.

• Efficient Technology Use: Use project management tools and AI for talent matching to streamline the management of fractional work.

• External Networks: Establish partnerships with other organizations and engage in consortia to share fractional work practices and resources.

🧭 From People to People

Lastly, we need to take into consideration that this model is based on people.

We can commoditize the usage of skills, and the market is definitely going in that direction, but we need also to prepare for the unexpected and accept a certain degree of fallacy in any experiment.

The fractional employment model offers a unique opportunity to radically transform how we perceive work. 

This revolution goes beyond just economic aspects or corporate innovation; it revolves around putting people at the center. Psychological safety becomes crucial in creating an environment of trust and mutual collaboration. Through transparency in work relationships and the integration of external experiences as an integral part of the internal career path, we can build an organizational culture based on trust and openness.

Successfully implementing fractional work requires courage and innovation, but the benefits it can bring are multiple: from optimal utilization of existing skills to fostering innovation through fresh and diverse perspectives.

In an increasingly fluid and interconnected work world, embracing flexible work models like fractional not only promotes individual and corporate growth but also opens doors to new opportunities for personal development and fulfillment.

All the parties involved must exercise the art of trust to transform the fractional model from a mere transaction to a flexible partnership. 

🛍️ Marketplaces

Here’s a few marketplaces out there trying to solve this:

Talent as a Service agencies - Fracto, Divisonal

Fractional Job Boards - FractionalJobs, GoFractional

Team as a Service - A.Team, SuperFluid (these will put together fractional talents to form ‘liquid’ teams, which deserves a separate deep-dive)

🔮 Where do we go from here

Fractional employment, where individuals work for multiple employers on a part-time, contract, or freelance basis, is set to transform the global workforce, propelled by technological advancements, shifting work preferences, and industry changes. Technological innovations, particularly in remote work platforms, AI, and project management tools, are making it easier for people to manage multiple job commitments efficiently. Simultaneously, a cultural shift towards valuing flexibility, autonomy, and work-life balance is encouraging more workers to pursue fractional employment. This employment model is especially relevant in rapidly evolving industries, where the demand for specialized, adaptable skills is high, allowing companies to remain agile by tapping into a diverse talent pool on an as-needed basis.

The rise of fractional employment holds significant potential for addressing issues like unemployment, underemployment, and the skills gap on a global scale. It offers pathways to sustainable income for those who might struggle to secure full-time employment, facilitating access to the global job market and encouraging continuous skill development to stay competitive. However, challenges such as job security, benefits, and consistent income remain, underscoring the need for new policies and supports tailored to the realities of fractional work. As the world leans into the possibilities presented by this evolving employment model, fostering a supportive ecosystem that emphasizes flexibility, continuous learning, and worker rights will be crucial in realizing its benefits while mitigating its drawbacks.

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