The Nuts and Bolts of Fractional COO
In a sea of fractional executives and consultants there’s a recent category making an emergence. Fractional COO, or Chief Operating Officer. We wrote about this a few years back, when the trend was just emerging.
It wasn’t first to the table because it isn’t the easiest to put a box around.
Have you ever tried to put a box around operations?
See – you know EXACTLY what we’re talking about. There are all kinds of flavors of ops. Think up a list and I’m guessing you’ll see everything from manufacturing to sales enablement and from finance to HR.
Operations is simply the ability to operate your business. It tends to focus on making things clear and repeatable so you can rely on what happens to happen — even if you’re not watching over every step.
Every aspect of your business whether it’s selling or delivering requires you to have a clear system in order for it to perform it consistently and at a level of quality you as the business owner want and need it to in order to thrive and grow past a certain point.
No wonder ops is tough to confine to a single definition.
We spend a lot of time talking to business owners. Some we can help, some we can’t, but even when we can’t, we spend a lot of time helping them understand how to put a box around this infamous category of work because without that box, it’s hard to know if you are hiring the right person for the job, and even harder to set them up for success.
So, if you’re thinking about hiring a fractional COO, you are in the right place. We’ll give you the playbook to get clear on what you need and how to ask for it.
Decision #1: Do you need leadership or support help?
Hopefully you have a good idea of your pain points. But before you engage in any hiring discussions, start by jotting down the top 3 things that are keeping you up at night.
- Do you have a team that can help you with these things or are you starting from square one?
- Are any of these things you or your team can solve today?
- If no, is it because you or they need mentorship, or arms/legs capacity to implement?
A fractional executive (no matter what the discipline) is going to extend YOUR capacity as a business owner. Not your teams. They are too expensive to utilize on the work your team already knows how to do.
If arms and legs is what you need, then either reprioritize the work they are doing so it can get done, or hire the help.
If you are missing clear direction, your team is missing subject matter mentorship, and you are missing the capacity and/or skills to oversee implementation, you need leadership support. So keep reading…
Decision #2: Is Operations management the right focus area for you?
There’s a reason Fractional COOs were late to the game.
The need for a CFO (as an example) is clear. “I need someone to manage my numbers. They aren’t adding up and I don’t know what to do.”
But what happens when you don’t know if you can afford a CFO, or your CFO highlights information in your numbers and asks you to make a strategy or spending call you can’t make because you aren’t sure on the right call?
At that point you have a couple of choices. You can call in a business advisor. They may walk you through your options and how to think through them. But they require some sales work.
So you go a Fractional Sales Executive who tells you they would be happy to help, but you need marketing support.
Now you the costs have 4 expensive consultants pointing you to each other. And you are sitting there in your chair trying to figure out how to improve your bottom line.
If you KNOW what you need. You will always be better off hiring that expert vs. an operations person.
Otherwise, there are four indicators in which operations management makes sense:
- You have difficulty getting the right work done at the right time and you don’t know why
- You have a skinny leadership team (you, yourself, and you) and you don’t have the budget to bring on leaders from each discipline you need
- You aren’t sure which executive you need to hire – so you need someone who can look at all the inputs and sort through it
- You don’t have processes and systems to get work done. You rely on individuals doing their best, a hope, prayer, wish, and maybe some finger-crossing
Decision #3: Should you go fractional for your COO?
Part time is not the only way to go.
Here are the factors that would drive you to choose a part time contractor over a part or full time employee:
- You need access to a lot of seniority and experience that you can’t afford the salary for
- You are in a turnaround situation. Consultants can push harder than team members and bring a large breadth of outside-in knowledge you can apply
- You are trying to bridge a gap. You aren’t big enough for a full time hire.
- You need someone to get to know your company and what it needs, then recommend what to hire for and how to hire it
Here are the instances we recommend hiring:
- You have ongoing hands-on work that will continue that you want to combine with someone who is good at putting systems in place – a great mid-level
- You need deep industry expertise and want them to stay with you for the long haul
- You are not planning on growing extensively
- You want someone to grow with you and stick around
- You know what you’re hiring for
Decision #4: How do you know a Fractional-COO is the right fit?
You’re looking at a few things when you hire for a COO:
- Sweet spot: What types of companies do they serve or specialties do they have. Are you, your company and your needs encapsulated by that? If they can’t crisply describe this in terms of size or industry or specialty, stay away. If they can’t organize their own biz and focus on the right things, how will they organize yours? For example. We serve <$1M or <10 employees (micro-businesses). Any larger and we are cautious because we aren’t built or engineered to serve outside of that group.
- Owner chemistry: Let’s face it, you are the most important person in this equation. Conversation and problem solving should flow naturally and they should be a yin to your yang. You feel better after every conversation with them.
- Clarity: Operations is all about clarity and organization. Every conversation you have with them should be well documented and they should be able to synthesize what you say into a solution or action plan and write it down. They aren’t afraid of talking budgets and crunching numbers.
- Team Fit: If you have a team, they need to hit it off with this person. The quality and fulfillment and happiness of your team will ultimately decide how successful you are.
- Additional resources: Are they going to rely on your team to back them up or do they bring a team to the table? Many Fractional COOs are independent contractors. But some organizations operate like ACThoughtful and bring operations staff and additional COOs to the table so you have backups to keep things moving no matter what happens, at different rates so you get the most bang for your buck.
I always recommend not writing a job description. If you are that clear on what you need, you should be hiring. The most experienced consultants bring a distinct way of working to the table and they are past the job description era of their lives and careers. You are hiring that level of knowledge. Make them use it.
Decision #5: How do you scope a Fractional-COO engagement or write the job description to be successful?
- You should always have an out. A good consultant who is in high demand doesn’t want to be locked into a relationship that is not working anymore than you do. Make sure you have the ability to get out with a reasonable notice.
- Start with a small up-front engagement. Your first engagement with your fractional-COO should be concrete and defined and should solve a very specific problem you have. By their nature, a fractional-COO should be detail-oriented and should not have a problem breaking up the work into bite size pieces for you. Common places to start include:
- Developing a process improvement roadmap: Looking at what you have today and determining what to develop and improve in what order to solve your biggest problems and free up staff to do other things.
- Designing your organization: Map who you have today, what they do, how to organize your team for growth and where to hire and cross-train
- Developing the business case for growth: A great COO can wear a skinny version of the CFO hat until you confirm you can afford to hire one. They should be comfortable doing high level modeling and creating basic processes to keep it maintained and take action on it.
- Prioritizing service/product launches (or) pricing them: You have a lot of ideas. A COO helps you analyze them and decide the ones that have the best shot of working if you move them forward.
- Be clear on what it looks like if you renew after that initial engagement. You should know the budget, how you will engage with them etc. so you can plan for what’s next assuming you like the fit. It’s fine if they give you a range, but they should be able to describe their billing model (retainer, fixed or hourly). If there is variability to it, make sure that all scope and costs above the base is approved in advance.
- Talk through how they allocate time to clients. Most fractional executives allocate 1-2 days a week to a client, or several half days. They need to be recurring in order for them to manage all of their client workloads. Does that type of model work for you? Our model involves a total hours p/wk which we spread out as needed. That means we can be talking to 5 clients on a single day. We get less deep than a traditional model, but we can be more nimble to business needs as they arise, and can cover more ground at a lower rate. Something our smaller, budget conscious clients appreciate. Determine how predictable your needs will be and use that to guage what model is best.
- Know where they will be and how to reach them. Do you want this person to be onsite or virtual? How frequent the visits if onsite? Have you budgeted for travel expenses? If you want them onsite frequently, you are best served tapping your local community. Check local networking groups or chamber of commerce groups to get connected. If virtual, do you have their cell phone? What is their standard turnaround times for being available for urgent situations?
Decision #6: What should I pay for a fractional COO?
Fractional COO rates can vary greatly depending on the country you are in, the experience you are looking for, and where you are hiring from.
If you are getting committed results/scope – a monthly fixed package has little to do with hours because they will do what it takes to get the job done.
If you have more flexibility in your relationship and how to scope it, then you will generally have an hourly component or a retainer.
When you break it down to hourly, rates can range from $125-$750. The most common rates for smaller business owners looking for more generalist skills are $150-$175.
The more niche the skills you need, or the more than is on the line and you need a strong executive presence that can hold their own in difficult experiences, the more the rate will increase.
Fractional COO packages typically start at $5K per month and can go upwards of $25K per month.
However, sometimes you’ll find a hyper fractional model, like ours at ACThoughtful, that starts at $1,000 p/month with most of our customers spending $1,500 per month.
If you decided you are hiring a Fractional COO you are hiring their ability to organize the details of growing your business and make it happen.
That means if you share your top 3 pain points, they should be able to ask a number of questions and get you a detailed and clear plan on how they would get you from where you are to where you want to be.