Recession Strategy: How Fractional Hiring Can Help SMBs

Finding expertise outside your company

The global pandemic continues to disrupt our work and personal lives. This has created both challenges and opportunities for small and medium-sized businesses to get their customers the goods and services they need and want. Those companies that can quickly form effective teams to deploy technology or restructure their business strategy will be in the best position to respond to new opportunities.

Fractional Employees Help SMBs Fill the Gap

Businesses face one of the tightest labor markets on record, and the great resignation has made the market for qualified employees highly competitive. Employee turnover costs are high¹,  and many SMBs find they cannot compete in this market solely on benefits and pay. The good news is that job satisfaction is influenced by employee pay only to a point².  The other factors include respect, training, engagement, company culture, and flexibility³.  These are all areas in which SMBs can excel. And employers who handled Covid-19 requirements effectively saw an increase in employees' desire to stay⁴. 

This has contributed to an environment where fractional experts can be more easily integrated. Fractional expertise can help SMBs fill resource gaps, compete for labor, and capitalize on new opportunities. When SMBs were structured around a set group of people working together in an office, bringing in a fractional employee could be disruptive and challenging. Now, with remote work and flexible schedules becoming the norm, those barriers are significantly reduced. And giving your full-time employees a much-needed lift with the right fractional help can go a long way to raising their morale.

Fractional Hiring Best Practices

The great resignation has made the market for qualified employees highly competitive, and it is now flooded with retired executives looking to apply their expertise⁵. So, contracting a fractional or outsource C-Suite member is often the right solution. But business owners should know it requires a particular mindset to work as a outsource C-Level provider. Being a fractional member of the team means you need to be able to get up to speed quickly and find places to make your influence felt. It means learning to advise and execute, often simultaneously.

Not everyone coming from a full-time, big company background can do that in an SMB environment. You should look for a fractional C-Suite member who has proven they can adapt quickly to the needs of an organization of your size. Don't be afraid to ask for references like you would from any other employee.

Ongoing Solutions for a Tight Labor Market

Challenges in the labor market are not going away, and many SMBs are just beginning to grapple with what this will mean for them⁶.  The first solution is to retain the employees you have, but this can be difficult in today's employment market. As a result, you may be tempted to do whatever you can to keep someone from leaving.

But a discontent or unengaged employee is also a cost to your company⁷,  so it is best to have an alternative. A fractional expert can help you fill a key role and give you a perspective on what you need. You may find you can get by with less or reshape that role with other full-time and fractional resources.

A second solution is to invest in a technology solution. If you can't hire more people, then make the people you have more efficient. Many SMBs have experienced the benefits of reaching global markets and streamlining the ordering process. But businesses are now considering technology solutions that would previously have been out of reach.

But these solutions come with a downside. While they promise dramatic improvements, they may require significant training, support, and customization to deliver your desired benefits. By some estimations, as many as 75% of companies that have taken on one of these implementations see them fail⁸.  Those mistakes can set a company back months or years, or even sink it entirely.

This is another place where outsourced expertise can be of immense value. The solution provider will offer to help with the assessment, planning, and implementation, but they are incentivized by selling you their product in a profitable way. As a result, their solutions sound great in the sales presentation, but there are always unforeseen challenges and costs. You may need an outside, objective perspective to help you design the process, evaluate the technology solution, and implement the one you choose.

Bringing in an outsider with experience in technology solutions can provide invaluable perspective and expertise. While the right technology can give a huge boost to a business, these services will not answer questions you don't know how to ask. And, if deployed too soon, they will only make your confusion and uncertainty worse. Better to work with a team to design the process you need without committing to a particular technology solution. A fractional expert leading this process can make the difference between success and failure.

Strategic Planning and Assessment Mitigate Against Recession

The current environment has created excellent opportunities for SMBs, who can respond more quickly to these disruptions. Inflation and supply chain issues are affecting all businesses, and the talk of recession is increasing. To thrive in this new world, SMBs must have a deep knowledge of their business and market. This may require finding expertise outside their company.

Strategic planning and ongoing assessment are essential disciplines in the face of ongoing uncertainty. That means knowing how the various pieces of your business function, and what ties them together. The first step in creating an effective strategic plan is understanding how money moves through your business. This is essential when resolving issues caused by inflation and supply chains. If you don't have the resources on your team to answer those questions, you should consider engaging with an outside financial expert, such as a fractional CFO.

Once this financial strategy is in place, you can reassess your business strategy⁹. This will require data on each aspect of your business process and projections of the impact of future disruptions. You need to assemble the right team that is prepared to dig into the numbers and talk to people inside the company to find the best answers. An SMB should consider hiring an outside, experienced facilitator to get the most from this process.

A business owner shouldn't have to guess how certain decisions will play out. Your business strategy should give you a set of variables to play with and help you envision the future state of your company. An effective business strategy is both a roadmap for normal times and a gauge to assess new opportunities.

Balancing Your Solutions

In today's unpredictable environment, no one solution will solve all your problems. But certain elements should always be in the mix. Start with your existing team and ask how they can be more productive and engaged. This facilitates an open environment where gaps can be uncovered. Then you can look to outside expertise to fill those gaps. That may be a fractional member of your C-Suite, combined with the expertise of a technology solution.

There have never been more resources available to SMBs. And, when applied effectively, it's a good reason to be optimistic in the face of a challenging future.

References

1. Bolden-Barrett, V. (2017, August 11). Study: Turnover costs employers $15,000 per worker. HR Dive. Retrieved September 22, 2022, from http://www.hrdive.com/news/study-turnover-costs-employers-15000-per-worker/449142/
2. What matters more to your workforce than money. Harvard Business Review. (2017, January 17). Retrieved September 22, 2022, from https://hbr.org/2017/01/what-matters-more-to-your-workforce-than-money 
3. Tina. (2022, January 21). Job satisfaction statistics: Are us workers content in 2022? TeamStage. Retrieved September 22, 2022, from https://teamstage.io/job-satisfaction-statistics/ 
4. Insurance, Investments & Employee Benefits. Guardian. (n.d.). Retrieved September 22, 2022, from https://www.guardianlife.com/reports/inflection-point 
5. The rise of the fractional CFO. FEI. (n.d.). Retrieved September 22, 2022, from https://www.financialexecutives.org/FEI-Daily/September-2021/The-Rise-of-the-Fractional-CFO.aspx 
6. Levanon, G. (2021, December 10). The top trends in America's job market. Forbes. Retrieved September 22, 2022, from https://www.forbes.com/sites/gadlevanon/2021/08/17/the-top-trends-in-americas-job-market/?sh=50d89195c146 
7. Fechter, J. (2022, July 15). What is the cost of disengaged employees? HR University. Retrieved September 22, 2022, from https://hr.university/cost-of-disengaged-employees/ 
8. 2 reasons why ERP implementations have high failure rates. Pemeco Consulting. (2022, August 19). Retrieved September 22, 2022, from https://www.pemeco.com/two-big-reasons-erp-implementation-failure/ 
9. Seth MorganFounder and CEO at MLA CompaniesSeth Morgan. (2022, April 21). The importance of a fractional CFO for startups and SMBS. StartupNation. Retrieved September 22, 2022, from https://startupnation.com/manage-your-business/accounting-finance-funding/importance-fractional-cfo-startups-morgan/

Seth Morgan, Founder and CEO of MLA Companies, is a strategic advisor to several companies, bringing insight and accountability to leaders. He also represents sellers and buyers' sides in M&A transactions. Seth is a sought-after speaker, commentator, writer, and policy advisor. Having served as an elected official at both local and state levels, Seth has a unique perspective on policies, people and the mutual impact they have on each other. Seth has an MBA in Finance from the University of Dayton. Visit https://mlacompanies.com/  Connect Seth Morgan