5 Ways Your Startup Can Benefit From Fractional HR Leadership

If you’re building a startup or growing a small to mid-sized business, you’ve likely wrestled with how to access the expertise you need to scale smartly without completely blowing your budget on payroll and benefits costs.

Rather than hiring full-time executives, companies are increasingly turning to fractional leaders. A fractional leader is someone a company engages in a part-time, interim capacity and for a “fraction” of what it would cost to hire a full-time executive. Fractional leaders are experts in their fields and typically have led their respective functions in past positions.

For years, companies have used Fractional talent to lead their accounting or finance functions. But as the world of work evolves at near lightning speed, and workers demand more and more from their employers, a new type of “gig worker” is quickly gaining popularity; the Fractional HR or People Ops Leader.

Here are 5 ways your startup can benefit from Fractional HR leadership.

1. Fractional HR leadership enables you to focus on growth

Finding the time to work on the business when you’re so tied up working inthe business is an age-old challenge for entrepreneurs. But, at some point, you have to extricate yourself from the day-to-day operations, selectively hand over certain functions to those around you, and lean on the expertise they bring to the table.

It’s been said that unless you’re planning on being the best at something, it probably doesn’t make sense to build it yourself. And this holds for building your HR or People Ops function.

Just because you could muscle your way through it yourself doesn’t mean you should — Especially when things like employment law and compliance concerns are involved. Fractional HR leadership frees you up to spend less time working in the business and more time working on the business by taking some of the “people stuff” off your plate. Fractional HR leaders can field employee questions, maintain momentum on high-priority people projects, and function as an extension of your leadership team.

2. Fractional HR leadership protects your investment in recruitment

If you’re anything like most fast-growing startups, you’ve invested significant time and resources in recruitment. For many of my clients, hiring was the only thing their HR team was focused on back in the early days.

Imagine that your talent acquisition team has been on absolute fire, hiring new talent left and right. You’ve doubled or tripled your headcount YoY, but how much thought have you given to what comes next? What are those bushy-eyed new hires walking into on day one?

Suppose they’re walking into a haphazardly-designed onboarding process or an employee experience that’s been largely left to chance. In that case, the excitement of their shiny new offer is all but guaranteed to wear off quickly. Before you know it, you’ll be posting their position and re-recruiting for it all over again. This is expensive, typically estimated at 1.5–2x the person’s annual salary.

As someone who began their career as a Recruiter, I can’t tell you how frustrating it is to finally fill a difficult role only to have that person walk out the door mere months later because their onboarding plan was nonexistent, or their manager didn’t take the time to train them, or — you get the picture.

While your talent acquisition team is fighting to keep-up with your hiring plans, Fractional HR leaders have the strategic experience needed to design an overall employee experience that fits your unique culture and delivers on the promises being made to new hires, protecting your investment in recruitment.

3. Fractional HR leaders can develop your managers into leaders

We’ve all come to understand that “people leave bosses, not companies.” According to Gallup, the manager alone accounts for 70% of the variance in employee engagement globally. If your managers don’t know how to lead and engage their people effectively, your company will become a revolving door for top talent.

You may know how to lead others, but there’s only one of you. How confident are you that your direct reports can lead their teams as effectively as you can? Furthermore, how many of your managers are first-time managers? If your ranks look like most of my startup clients, most of your managers are first-time leaders. So, unless you’ve given them some leadership development training or ongoing coaching, they’re winging it and learning as they go.

To a certain extent, we’re all learning as we go. But the question eventually becomes, how many people are you willing to churn through while a manager fumbles through learning how to be a leader?

When it comes to people leadership, Fractional HR leaders have had a front-row seat to good, bad, and downright ugly leadership abilities or lack thereof. They come with the expertise needed to provide ongoing coaching and development to your team leaders, helping them become more effective leaders and minimizing unnecessary turnover.

4. Fractional HR leaders can clean up your people policies

Just last week, I was reviewing a client’s new hire onboarding process and came across a small but problematic statement they had included in their onboarding instructions to new hires:

Return your completed I-9 along with a copy of your Driver’s License and Social Security Card.

*Cringe*

This is illegal. Legally, an employer cannot dictate which identification documents a new hire supplies for I-9 purposes, and requiring specific documents could be discriminatory. Now, this client was lucky enough that we caught it in-house. But, had they ever been audited, this could have resulted in a lawsuit.

Employment law violations can be extremely damaging to your business, both from a monetary standpoint and a PR standpoint. After all, who wants to work for the company that made headlines after being ordered to pay hundreds of thousands of dollars in back pay to their employees?

Nothing about that screams, “this is a great place to work!”

A Fractional HR leader can review and subsequently clean up any existing policies with problematic language. They can also write new labor law compliant policies that won’t need to be “fixed” down the road.

5. Fractional HR leadership signals fiscal responsibility to investors

As the founder of a startup, investors pay attention to the decisions you make and how you run your business. Paul Ford, Founder of DS9 Capital, says that “The most successful startups concentrate on profitability: making a return on investment, saving money where possible, and building a strong foundation with a sturdy, well-knit workforce.”

Ford explains that “cost overrun of salaries” is one major factor he sees inhibit a startup’s ability to turn a profit.

With full-time HR executive salaries averaging around $250k a year, the reality is that most startups simply can’t afford to hire a full-time leader. And yet, they still need to find a way to bring in the people expertise necessary to transform their organization into a great place to work. This is where hiring a Fractional HR leader makes a lot of sense.

Ford explains that when investors see you utilizing unconventional strategies to beef up your leadership team while simultaneously minimizing cost, “they’ll look at you and see planning and fiscal responsibility. They’ll see that you’re thinking like an investor and that you and they are on the same page.”

Years ago, I remember asking a recently promoted leader how their new role was going.

“I had no idea how much of my time would be spent on the ‘people stuff,’” she confided in me.

And, it’s true, the higher up the ladder your climb, the more your success hinges on your ability to leverage interpersonal relationships and get the right talent in the right spots.

Most business owners or founders are not experts in HR or People Operations. And, as the adage goes, “you don’t know what you don’t know.”

The right fractional leader is someone who has “been there and done that.” They know how to handle even the most complex people challenges because they’ve seen something similar in a past life.

A fractional leader can accomplish what it would take an inexperienced HR person a whole week to do in a few hours, and they can save you a bunch of headaches along the way.

And we could all use fewer headaches, couldn’t we?