Episode 278: Fractional Work: How to Make It Work
It's a wonderful day here on this edition, and hopefully for every edition of around with Randall. When we see challenges inside organization, with personnel, with finding the right people, with adjusting to budgets, there's something new that, at least to me, is approaching the nonprofit space more regularly. And that's the idea of fractional employees. Today, we're going to discuss this concept of where fractional employees might sit, how it works, why it might be advantageous, why it might be a disadvantage.
And then, as always, we hit the tactical end with six things that need to kind of be a part of the conversation. If you're going to make fractional employees or fractional situations work, as we always try to. We start at the top, work our way down. And that's the big picture. So why is this appearing today in our world?
Well, it's not immune to nonprofit space. We're seeing this in the for profit space. And we're talking about usually smaller, more tightly knit groups of people, companies, employees. It's not, you know, Ford Motor Company, they can hire who they need to, although they may use some of this, but it's more aligned with organizations trying to fill certain roles with a limited budget and limited personnel options.
So we're seeing things like and it started with maybe fractional CFOs into HR in health care. We're seeing in small hospitals, fractional companies, maybe a rule based health care doesn't health care organization or hospital doesn't need a full time CMO. We're seeing this with also now moving into philanthropy with chief philanthropy officer. Even gift officers. The great forces that are really pushing this in or in the nonprofit space as well as the for profit space is that they there is a need for expertise, for senior level experience, for talent that might be, needed to execute certain things and experienced personnel and professionals.
They're hard to find. And as we've talked about a myriad of different episodes around with Randall, we talk about gift officers short tenures and they're hard to get. And we got to find the right people. How do we train them? Also, that technology has changed over the past 20 years, the way many jobs are being done. And I'm not even talking about artificial intelligence, which I think will have a great effect on things like accounting and finance and things that are aligned with that, and then maybe moving into other areas of our organizations.
But technology has enabled a distribution of work because it's reduced some level of need of people. And then at the same time, and the pandemic really pushed this, we don't need people sitting in an office. We can utilize talent from various places. The idea of remote work. This has pushed boards and CEOs and organizations to think about where they're most comfortable at, really outsourcing some type of activity, or at least having a fractional employee.
Nonprofits are experiencing the same shift as we see in the for profit world. But there's two additional pressures.
I think that the talent scarcity in the nonprofit world is significant, that fundraising leadership, nonprofit leadership is not always known for being the highest paid. And as inflation in the economy has caused lots of different households and families to consider what they are doing with their finances, I think and I truly believe both anecdotally and if you look at it industrywide, that we're seeing people being forced to consider leaving the nonprofit world to go into probably a for profit position that pays more, which is putting an immense amount of pressure on the scarcity of talent that it's harder to find.
Chief Lee to be officers, chief executive officers, chief, maybe you have an HR or a CFO or whatever. The different areas that experience is becoming challenging to find and that we'll get to the second financial constraints, that we are limited by what we can do. The other thing is, is that we're seeing shorter ten years, and we've talked about this from the CEO's perspective.
We talked about it with gift officer CPAs. We're seeing it in these gaps beginning to become growing. So an organizational leader leaves and all of a sudden the gap to find their replacement is growing. So their tenure is getting shorter is permanent. And the gap to find the replacement is growing. Which means we have these time frames that maybe we weren't used to, where internal people can't substantiate the work.
We can't. We need leadership. We need guidance. We need expertise, we need talent, but we don't need it for incredibly long batches of time. So you could have small organizations, but you could also have the challenge. We'll get small organizations in a moment. Also, the issue of talent scarcity, because of the way in which we're seeing people come and go more frequently.
The second major accelerator when we talk about the nonprofit space or nonprofit sector, is the idea of financial constraints that our budgets are under siege. So we're talking about where this might be seen more often smaller organizations, smaller hospitals, maybe smaller colleges, community based nonprofits that I don't have big staffs. Maybe there's a regionalization of organizational structure. So this might actually be a larger one where, I mean, maybe a university needs a fundraiser or a gift officer in a different part of the country because they have a lot of alumni there, but they don't want someone going back and forth, a kind of fractional person to do that.
Boards and governance organizes a governance. Parts of our organization, our leadership, our CEOs are being pressed from a financial perspective to have less expenses and more or more ROI. And these fractional employees, these fractional opportunities offer access to maybe experience that we couldn't afford, or that we don't need full time, that fulfill a role, but not bring us the full financial commitment.
And so in the nonprofit space, we're seeing two major things to think about. Number one is this idea of talent scarcity. And number two is that the constraints of finance and particularly smaller organizations are pressing us to think about creative solutions to get the right people to do the right jobs. And now we're to kind of where these particular opportunities lie in the nonprofit space.
I think there's two areas that we can break this apart into. And we'll mention the first a couple of different ways and different times, but not focus on them. There are tactical parts of our organization like finance, like HR, that are very regimented, that are more internalized, that may not require the full attention or time span of a person because the work is very forma.
If you're the CFO, there are certain things you do and you are very repetitive in them, and that makes you create what you do. The critical HR is the same way. We have certain protocols and processes. We need in place. That's one part, and I'll come back and mention that in a moment when we talk about tactical solutions.
But that's not what I really want to spend my time talking about. Where the more interesting fractional opportunities lie is in the idea of a chief entropy officer or a major gift officer in front of the philanthropy chief philanthropy officer, how do they fit into the organization? And these are going to become the tactical issues. Is it we're talking about executing strategy, fundraising strategy, and about portfolio management and donor relations and board engagement.
Campaign issues and things going on. That's really hard to implement. The second is the gift officer. And I think there's actually two categories here. I think you can have an opportunity that's a lot easier for fractional employees with annual giving meaning. There is not the relationships that we need over time. There's a lot of more aligned with what the CFO and HR might do.
Very tactical things, whether it's reaching out to lead once inside months, whether it's providing mailing services or outreach or communication you might have for actualization, that's along that line. And kind of the communications piece.
But the gift officer, the major gift officer, the plan giving officer, I think we have questions then that develop into the idea of campaign relationship building or major gift relationship building, which we know takes time or that a leadership vacuum exists and we've got to figure out how to fill it is something in terms of not only the internal gift team, but relationships outside the organization.
There are challenges with this from the organizational perspective. If it's not done correct correctly, there's institutional continuity risk. These donor relations I mean, if you're going through fractional short term leadership or fractional opportunities, too often what you end up with is a situation where you're turning over gift officers almost like they were before, meaning the 18 to 19 months we see is kind of an industry which depletes the thing we need the most, which is trust and continuity and consistency in relationships.
So you have to be somewhat careful for the organization. Now, if it's a long term fractional thing, meaning we're going to commit to this 50%, 40%, 30% employee for a decade. And they have a small portfolio that's not as much of a concern. I think there's also something about expectations. The ROI changes when you reduce the amount of time that a gift officer spends raising money, that we don't want unrealistic expectations and that boards might look at, particularly a fractional CPA.
Well, they can deliver the same results. And I would find that challenging to figure out how to do considering they're not there as often. I think the other thing is, is that major gift work or plan giving or any type of, principle gifts or campaign gifts really require a more, longer timeline for that relationship. And we're back to one of the challenges.
I see another thing that comes up internally for an organization. If it's not handled well, it's kind of the what I would think of a staff organization or staff hierarchy. There's unclear authority, possibly. How long are they here? Unless they're going to be here for a long time. They're not here full time, but I am. So they don't know everything going on there might be divided reporting lines depending on circumstances.
The last thing that organizations may struggle with when we talk about fractional time is this idea of strategic depth. The fractional leaders may not have the full understanding because they're not around as long or as often or in person of the culture, of the politics, of the internal dynamics. These things limit effectiveness. If the role isn't structured carefully for the professional who is going to be the fractional employee.
Maybe this is something you've thought about. Is that time allocation pressures pretty great? Although you may think, well, I'm 50%, 40%, 30%. The organization may think, well, wait a minute, we need deliverables or outcomes. And this creates a real strong tension. Or you want to work only certain times, but they need you. At other times that tension then grow.
So just clarifying that or maybe not clarifying it can cause a great deal of friction in the organization and for the individual influences on that limitation is, is that normally fractional employees don't have as much authority, is a full time and probably justifiably so. But they have limitations. And that may add more time or strife or whatever it might be to the process of raising money or building relationships, because they have to check more often about am I okay to do these things?
We don't have full budget approval. They don't have full signing approval. They're just extra steps. There's also reputational risk that if the organization underperforms, a fractional employee has, it can be blamed much more easily and quickly and removed for the systematic problems the organization has. So if you're that fractional employee, you want to make sure the organization is running pretty well, because you don't want to be the one that's blamed for the problems, even though they may not be useful.
The last thing is, is that for the individual or the fractional employee, we have emotional distance from donors that if you're short term or not around enough, then we can't build the relationships long term that we want. And those shorter engagement windows can weaken those connections. So these are all things that talk about the structure of the organization, the challenges of these fractional roles where they lie, what I want to spend the last 5 to 7 minutes on is really what are the 5 or 6 actual tactical solutions that will help you if you have this scenario?
There's two biggies that I want to just start with generically. And I just mean from a big perspective is number one is, is that you have to do a hard assessment if this is necessary. The scarcity and talent that we were talking about have to really be agreed to, studied. The rationales have to be correct. This is not just, hey, let's go do this, because if you do, you're going to get both the organizational and the kind of the fractional employee tension that is going to prove to be problematic.
So an honest assessment with appropriate feedback from internal employees or maybe saying you've given me 2 or 3 jobs now I can't do all of them, that that honest assessment is important. The second is, and this would be just basically true of anything, is, is that you can't have a conflict of interest. You can't try a fractional employee within with a person who has a job and a competing part of the organization, or a fundraiser who has other fundraising responsibilities, and they might be compromised based upon the relationships they've developed over there that might be hurt, might be hurting you, or hurting that other organization.
So those are just two big things to think about. Honest assessment. No conflict of interest. The tactical six things. Number one is you have to deeply specifically define the scope of the work with immense precision. What is their decision making authority? What is the time commitment when how, how much? What are the outcomes that you're expecting? What's the reporting structure?
How are we going to monitor this? Fractional roles require sharper design than traditional jobs because there's more float flexibility. Unknowns unless we define them well. So number one is if you're going to lead yourself into fractional opportunities either as the employee or the organization, you have to define all of these things incredibly accurately and get them in writing and part of the agreement so that everybody is working from the same baseline.
Number two is to separate strategy and execution. So it's more likely that particularly with gift officers, that we can have fractional employees with strategy, execution and internal leadership, then we do the relationship building process. And we're kind of back to that. CFO H.R internal process, because what we know is that they have very defined responsibilities, which means they can do some more specific things, things like portfolio development in philanthropy would match that leadership strategy or building out communications.
The annual fund process that I mentioned a few minutes ago. If you're doing this with gift officers, this gets a little more challenging because the relationship pieces are really important. One particular example that I mentioned just a few moments ago was the idea of maybe like a university or a mid-sized nonprofit needing someone fractionally in another part of the country where you have a bunch of donors.
Well, if you maintain that for 5 to 10 years and it's a limited scale, I think that's awesome. But if coming and going into this interim leadership into fractional employees is constant, it's going to be really hard to have this work if you keep turning over people in the relationship building process. So you're looking at more internal organizational structure, type activities.
Number three is, is you need to build some safeguards when it comes to continuity. Think about pairing up a fractional employee with a current employee so that they get some type of feel of culture. Staff rhythm, responsibilities, organizational structure, politics. And there has to be access to a shared what I'll call planning process. The CRM, because they may come and go or there may not be the continuity.
You got to know what's going on. You cannot just depend on the office talk, which we shouldn't do anyway. You got to track this. All these data points.
Donors should feel as if the relationship with the organization is continuous, which means fractional employees. If we have to use them, particularly the relationship process, have to make sure that they're documenting what they're doing and how that's affecting the relationship. So that if anybody ever needs to pick that up, they can't. Number four is, is to really define the performance measures.
This goes along with the ethics that we talk about around. We don't get paid by commission. So frankly, if all you measure dollars raised in particular on the fundraising side, you're going to get yourself in trouble. You need to measure things like, are we qualifying new people? Or if you're giving, are we sending out the right communication? Is our lip on silent percentage is diminishing or are we are we seeing more upgrades in the types of gifts?
Is there portfolio performance that we could look at? Number of visits? Is there opportunities to measure other things that aren't fundraising related, like coaching? If they're maybe a CPO and you have to help build up a younger staff member into their new or potential career development. The point is here is, is that all you use is dollars. You're going to you're going to really rue the day you did use.
Other metrics you want to look at are a strong ROI. We believe that. But in this situation, you need other metrics to really quantify what's happening. Number five is building out the strongest communication internally that you can. And I mean why we're doing this. So the staff, the leadership, the board all understands why this role exists and what authority they have to execute it and how these decisions were made in terms of rationale, scarcity of resources, expense, high talent level, right opportunity.
However, you want to put this transparency is really important because transparency reduces organizational friction in question. And if you establish that at the beginning, that means it probably will go much better in the execution of a fractional employee. The final thing is, is to treat fractional employees as transactional things or opportunities. So they might be rebuilding a program of a client that isn't fractional, but per se is doing some of this.
And he was brought in specifically to rebuild a program to rebuild it after there were some problems. They may be you may need a fractional employee to help you prepare a campaign. This all sounds like consulting in that there's a very defined role, and this is what you're going to be doing, or mentoring or stabilizing leadership. Fractional employees might be a great bridge to the organization, figuring out what it wants to be and what it wants to do.
The key here is, is to make it look trans translational in terms of what we're trying to accomplish. Not unless you can have the right circumstance. Gift officer. Another part of the country ten year engagement. That's different. That's not what we normally say. Creating those roles and being really understanding that this isn't about the long term, it's about what we need now, these six thus developing the scope of work with great precision, with separating the idea of strategy execution.
What are the things we need done that are maybe not relationship based building in the donor safeguards? So if there is relationship piece that we have continuity and we're tracking data that we have realistic performance measures that are not just about money, that communicating internally, the rationale, the reasons why, the outcomes we're seeking, what responsibilities there are. And finally, that we treat this as more transactional, the long term and less unique circumstances.
These six will help you do this correctly, both as the employee and also, maybe most importantly, as the organization. Fractional leadership in philanthropy. Fractional work is not a passing trend. I think it's actually going to continue to deepen, which means that we have to figure out how to do this more effectively to find the greatest talent and to deliver the best results.
The real question isn't what's going to happen next in terms of whether this goes up or down, in terms of usage or even a sense of normalcy. The real question is whether nonprofits will design them well enough to succeed, and in the end, that's doable if thought of in the right way. This gives you options to bring in high level talent for less dollars that may deliver you more all right, but you have to structure it in the right way to make it work not only for the organization, but for the fractional employee who you want to see succeed because they help you get to where you want to go.
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And if you'd like to reach out to me, it's podcast, it's links, B.Com. We need philanthropy. We need nonprofit work. Because at the end of the day, this is the gap filler, as I always talk about between for in a for profit enterprise. It doesn't want to do certain things. So don't make any money in government which isn't that efficient.
There's that hole in the middle, and we fill that hole with the organizations that we believe in, their missions, and also the work that we do every day. You matter and what you do every day. You may not see its impact directly at moment to moment, but you, if you're doing your job well, are affecting change and making a difference to the people.
I'll end at the I'll bring it up from the backward side of my normal ending. For people who are wondering what happened because you're someone who makes things happen.
Isn't that what we all want? Isn't that what we want? Wake up every morning thinking I can make a difference today. And you are. People make things happen. People watch things happen. Those who wondered what happened, think about today. In fractional employment, fractional work, either from the organizational or the individual perspective, as well as any other podcast. Knowing that you are using these things that you're learning here to make your world better.
And I congratulate you and I thank you because we need a better world. And philanthropy, a nonprofit can be a huge part of leading us in that direction. So thank you for watching. I'll look forward to seeing you the next right back here on the next edition of Around with Randall. Don't forget, make it a great day.