About 20 years ago, he took on a series of corporate roles before hooking up Sara Daw, co-founder of the CFO Center. “I had to have a fulfilling career and raise a family,” she says. [corporate world]. “After starting as part-time finance director (the UK version of CFO), she couldn't realize that she didn't need her expertise and couldn't realize that she couldn't make a CFO full-time earning,” says Daw.
She currently leads an organization with 800 fractional CFOs in 18 countries, so she is at the forefront of the trend of CFOs opting out of traditional employment and working in a growing portfolio of businesses. Additionally, DAW is the author of a recent book on how C-Suite executives are part of the “access economy.” This is the sharing of assets to optimize use.
I interviewed DAW and discovered what it takes to be successful as a fractional CFO and how large and small businesses can benefit from full-time financial lead alternatives.
What is the profile of a CFO that is usually a fractional CFO?
Being a fractional CFO is for experienced CFOs who want more variety, flexibility and control over their lives. They want to move away from the corporate agenda and make an impact. The most important piece is that we are all very involved in the organizations we work with. We will actively choose to partner with them. We are self-employed so we can choose who we work with.
Many partial CFOs had CFOs coming towards the end of their careers, but were not yet ready to retire. They didn't want the next big job. Half of our fractional CFOs still fit that profile. However, it is a career option that can be viable much faster for CFOs. They want a portfolio. They want diversity. They don't want every day to be the same.
Why is there a change in popularity of career choices for fractional CFOs?
We've passed Covid and a few things have changed. In the “big resignation,” many older workers left the workforce and not all returned. Covid has given people a taste of work-life balance. Gallup polls show that only about 23% of our workforce are engaged. The rest will be released in some way. These are indicators for the workforce and C-Suite [executives] I want more meaning at work, including…the risk of overwork and burnout is absolutely there at the C-Suite level.
As a result, the fractional economy is growing rapidly. More than a third of the US workforce is in the fractional or freelance economy. By controlling your life and your schedule, you can build the flexibility at the top of the list that everyone wants.
Individual CFOs are also attracted to approaching problems that are closer to the decision-making of entrepreneurial organizations. Another advantage is the ability to stay in the swimming lane. In companies, you tend to accumulate many different roles and may go even further from the work part of the CFO you specialize in and love. In the world of fractions, you can become an expert and do more for more organizations.
Not all fractional CFO gigs are the same. For example, what kind of engagement does the CFO Center financial chief assume?
There are two products. One offering is for entrepreneurial organizations. They could be pre-funded startups. That's happening now. Or maybe they're just a normal trading business. But they are entrepreneurs and are growing. Fractional CFOs appear and depending on the size and complexity of the business, some engagements may work one week, two days a week or two a month, one day a day.
Other products are actually geared towards medium to large companies. These organizations have group CFOs. These group CFOs have shopping lists of fees and actions that exceed skill sets and capacity. We will be their fractional CFO team. They draw us closer to create extra pieces, specialised pieces. We call it “CFO of CFOs.” The beauty of that model is that the fractional CFO we bring is not a threat. They don't want that [group CFO’s] work. You can relate to it [the group CFO] We were in that seat so we knew what was going on and there was no need for training or monitoring. This means it's a very flexible and dynamic solution, with no extra personnel or fixed costs. Incredibly agile.
When an organization hires a fractional CFO for the first time, what questions do they ask for you? Have they ever hesitated?
The main question we get is about the availability of individual CFOs. Entrepreneurs are always on, right? They want to feel like the CFO is sitting by their side the whole time. A great CFO in the fractional world is a great communicator, responsive and can create that feeling by quickly returning to CEO. It is very possible for a few CFOs to make a business owner or CEO feel that they are the only business they work for. Fractional CFOs need to be skilled in soft skills such as communication, listening and relationship building.
On the other [common question] From an entrepreneur, how do you do all your work in “X” time? Entrepreneurs don't always know what CFOs do. We are all accountants and we are not knowledgeable enough to know the difference, which confuses CFOs with external accountants and financial managers. We spend a lot of time educating them.
Could you please give us a brief overview of “Strategy and Leadership as a Service” and research in that field? How does it apply to fractional CFOs?
My latest book is about the research I discussed with business owners and the fractional CFOs on how fractional models are part of the “access economy” and how several businesses share the services of CFOs.
Business owners and executives need to work with these paid people to create emotional connections. The problem we have in the future is that more and more parts of the workforce, including fractional CFOs, are becoming freelance. Executives should lead a mixed workforce of stable employees supplemented by fractional C suite freelancers and low-skilled gig economy workers. They are all valuable and essential to the business.
There was a study by Linda Gratton, professor of organizational behavior at the London Business School. Digital nomads have the cutting edge skills needed by businesses, but they don't want to be hired by businesses, so these big companies suddenly have to innovate with these people. I think the same thing is happening in C-Suite.
Businesses and their executives need to make emotional connections with these people, and we are not used to doing that. What I'm talking about in my book is how fractional CFOs and clients develop “psychological ownership.” [the feeling of ownership without actually having legal ownership]. Fractional CFO is [client’s] Organizations, and fractional CFOs, can act in a way that makes the business owner feel like they are part of that organization.
How are full-time CFOs ready to become fractional CFOs in terms of life and work-life changes?
It must be emphasized that becoming a small CFO is a career change. I think most CFOs come to us and it's the same as playing a full-time, employed role. That's not true. They need to manage multiple relationships simultaneously, some are completely remote. They need to learn how to find, win and retain clients. When they start, they need to think of it as an investment of time and money. They are moving into self-employed roles and probably don't have a business to collaborate with from the start, so they need a financial runway. They should allow themselves that financial runway, as it may take a year to assemble the entire portfolio.
It is also recommended that they squeeze their hands before becoming fragmented CFOs. You can't think of this in their way. You need to go to it. While in your current role, we recommend choosing a small startup or a very small organization.
Then I encourage them to put their “close and beloved” on the move. Six months later, “Are you going to do the right job?” Fractional CFO is the right job. As the portfolio moves forward, it's much safer from an income perspective, as you have income streams from five or six businesses. All of these businesses are not running within a day. You will not suffer from restructuring your company and suddenly become no role. It is an effective diversification model.
