Expertise by the Piece: Fractional Staffing A Growing Trend

Imagine you are the head of a company going through a merger; for the sake of clarity, let’s say your firm is acquiring another. Just inside of the due diligence phase of the transaction, your chief financial officer leaves for a different job, leaving the process rudderless and threatening to scuttle the entire deal.

As unpleasant as that situation sounds, it is far less catastrophic today than in previous eras of business ownership thanks to a growing new trend in the human resources world called fractional staffing. The strategy, which is being embraced by more and more companies, brings companies the C-suite-level expertise they need when they need it for only as long they need it.

In its simplest definition, fractional staffing operates like the temp employees of old who do short-term or project-specific work. Unlike the classic temp or temp-to-hire, which traditionally offered extra hands for overflow work such as data entry or customer service, modern fractional staffing offers an advanced level of expertise and corporate experience. Corporate finance, mergers and acquisitions, operational efficiency, or information technology projects are all examples of things traditionally spearheaded by a full-time company executive that are now falling to hired guns brought in specifically for that purpose.

The trend is a by-product of the gig economy that emerged after the COVID-19 pandemic in which more and more people are shedding the traditional full-time permanent roles that have held sway in the business world for generations.

“Traditional full-time employment is no longer the norm,” Forbes Advisor reported in 2023. “The accelerated change in the workforce over the past few years has driven the rise of the fractional employee. … The fractional model has infiltrated the gig economy, allowing businesses to hire workers for specific tasks or projects within the C-suite roles.”

Unlike other workplace trends that have been criticized as merely kowtowing to the whims of younger generations of workers emboldened by a labor market stacked in their favor, fractional staffing is largely praised as a personnel strategy that is more efficient and more effective than the traditional staffing model.

A recent report by Forbes shows the fractional model can reduce payroll costs by 30 to 40 percent, and McKinsey & Co. noted deploying the right expertise to customer service roles can increase customer satisfaction by 20 percent and revenue by 15 percent. Best of all, fractional staffing allows companies to stay light on their feet, adapting to changing corporate and market conditions much quicker.

Allen Engstrom, owner of CFO Network in North Little Rock, does not see the trend as anything new but merely catching up to early adopters such as himself. Having operated in the space for the past 21 years, he said the business model behind fractional staffing is so radically different from the norm, he considers it its own business segment.

Allen Engstrom

“I actually would not put us in the staffing category. We don’t really place people,” he said. “I’ve got 45 people who are full-time employees of CFO Network, and they remain full-time employees of CFO Network. We just outsource our services to other companies instead of them hiring internal people like bookkeepers, accountants and CFOs.”

The company has created a profitable niche in supplying a range of expertise from the CFO on down, mixed and matched to meet each client’s individual needs, for far less than hiring and keeping such expertise on staff permanently.

“Say your business is too small to have a full-time CFO, which could cost 150 grand a year,” he said. “Even if you had a full-time CFO, you’d still need a bookkeeper, at minimum, or an accountant. You’d need an analyst. You could spend a quarter of a million dollars just to have one of everything you need, and if you’re a small business, you’re like, ‘No way I can afford all that.’

“What we do is we go into a small business, we analyze what they need, and then I go back to my bench of 45 specialists, and I fractionalize all the perfect proportions of bookkeeper and accountant and CFO and analyst to give them a world-class accounting and finance department for a price that’s actually less than what they would expect to pay for one bookkeeper. The client ends up getting dramatically more for a lot less. It’s an overwhelming value proposition.”

The secret ingredient to the company’s success is the makeup of the 45 professionals that CFO Network can deploy. Engstrom said he strives to maintain as much diversity of experience and expertise as possible to give him the most flexibility.

“We have a really good mix of senior, seasoned, experienced professionals and a healthy dose of young talent who are coming straight out of school with cutting-edge skills, things like managing big data, advanced analytics, dashboarding — things like that,” he said. “That makes a really powerful combination.”

The flexibility of the fractional staffing model is also appealing to the employees being deployed to companies on a short-term basis both as means to earn money and to gain experience for landing a permanent job later.

“Since COVID, life has totally changed,” said Brad Hughes, second generation owner of The Hughes Agency in North Little Rock. “It used to be people would walk in, and you gave them a job. Now [companies are] looking at people while they’re in high school, trying to get them involved. They’re trying to start some type of internship or apprentice program to get them to be a part of your payroll. It’s very, very unique in how that works, but it’s how some companies are recruiting young workers to fill the trade pipeline that’s there.

Brad Hughes

“Right now, college students coming out of college for the summer are looking for jobs, but it’s very short term. If a company has a project that needs something to be done right now, this can be a good resource to get a workforce, and you can get them fairly reasonably. Another one is the stay-at-home moms and dads who, once school starts, have time from about 9 to 2. These days, there are call centers that can push calls to their house, which is a great opportunity for that type of worker.”

Hughes said some of the people he comes in contact with are former business owners or executives who may not be looking to jump back into the labor pool full time but have a lot of experience to share that can be valuable to other companies.

“It happens that you have these people who retired too early, and they’re looking for something, and they have the skill set, but they do not want to work full time,” he said. “They want to be very flexible. They’re out there, but a company has to know what they’re looking for and be open-minded.”

Other firms dealing in the fractional space are more specialized, such as Bentonville-based Granted, which hones in on helping nonprofits improve their ability to land grants. Founder Shannon Anastosopolos said while hiring grant writers had been around for many years, his company offers a more comprehensive menu of services.

Shannon Anastosopolos

“When we say grant solutions, a lot of people think of grant writers, and that is part of what we do,” he said, “but the grant writing isn’t the most critical part. The criticality as far as delivering a product and finding funds for these organizations starts with finding the right grant opportunities, a lot of which require partnerships. You partner with other organizations — government sector, private sector — and you collaborate to pursue these grant opportunities.

“A lot of organizations don’t have the leadership capacity, bandwidth, experience — you name it — to be able to research grants, write grants, or cultivate the partnerships and formulate the projects necessary to do all of that.”

Anastosopolos said the company’s expertise also does not limit itself to the operational steps of securing grant funding but digs deeper to help organizations change the way they view the process to ensure time and resources are wisely invested and correctly placed.

“We coined the term ‘strategic advisory.’ I define that as fairly synonymous with leadership,” he said. “We’re giving advice on how you as an organization are struggling to meet the demands of the cost of programs. You need to create program revenue or find some nondiluted funding to do.

“We’re not just coming in saying, ‘Hey, let’s write some grants.’ It’s about how this organization is best positioned to secure these dollars. How can we restructure the mission or restructure how you deliver the mission? How can we identify new partnerships to promote or foster success in what you do? We’re acting as a fractional leader to improve these organizations.”

Another firm operating in the space, SG Performance Group, combines elements of consulting and efficiency improvement along with the operational elements performed for clients, said Ben Barr, founder.

Ben Barr

“Broadly, we’re a finance strategy consulting firm,” he said. “We step in for small and medium-sized businesses; $5 million to $50 million in revenue is probably our sweet spot. We help folks if they’re buying or selling a business or assets, help raise capital equity and debt-type stuff. Then, digging in, there’s another element that I think of as performance improvement, where I go in and review cost structure, revenue model and, ‘Hey, you’re overspending on X, Y, and Z. How can I help you with that?’”

Barr has developed a vast network of professional resources for supplanting or augmenting needed expertise for clients. Partnering with Dallas-based Telostaff, which maintains staffing relationships in the Philippines, Barr said he can provide fractional or ongoing expertise at deep discounts compared to hiring domestically. The business model provides an interesting new wrinkle in the fractional staffing industry.

“I’m basically helping my clients run the process, representing them as a strategic financial buyer where they don’t have a bookkeeper, right, or they don’t have a CFO,” he said. “I see my role as helping organizations become more sophisticated and build better processes for less money, which is huge. It basically comes down to securing very high-quality resources for a very good price.”