Many smaller financial services institutions are committing slow financial suicide. They’re building top-heavy executive structures that strangle decision-making and drain resources.
I’ve watched this play out for over 25+ years working within financial services as an employee or as part of a consulting/agency practice. The pattern is always the same.
Companies hire C-level executives without the staff size to justify them. These executives start making decisions to justify their salaries rather than what the business actually needs.
The math is brutal.
Traditional executives cost a fortune. A median CFO runs $558,999 annually plus bonuses. Fractional executives charge $5,000-$15,000 monthly retainers.
That’s savings of 67-89%. But cost isn’t the real problem.
I’ve seen executives in place without significant budgets. They provide input into decisions but have little power to execute. All this does is slow down the organization because these executives need their voices heard even when they’re not adding value.
They become bottlenecks rather than accelerators.
The traditional budget process exemplifies this dysfunction. Companies spend specific budget amounts or face reductions next year. Executives get compensated on company success but not necessarily their own efforts.
They have no motivation to drive change. Company performance can remain unchanged for years without their efforts. There’s no upside to taking risks that create friction.
It’s better for them to play it safe.
I was skeptical of the fractional model until I worked with one. How could a part-time resource do the job of a full-time executive?
But they did. It made me rethink everything.
Fractional executives don’t attend endless meetings or engage in corporate theater. They focus on what needs to get done. This showed me all the time wasted in traditional corporate environments.
The incentive structures between fractional and full-time executives is also completely different. Fractional executives generally have no ulterior motives or political aspirations to take over the company. They’re there for one purpose: help the company achieve goals.
Fractional executives have to overdeliver to justify their existence. Traditional executives become bottlenecks who insist decisions go through them even when they add no value.
Fractional executives measure progress in quarters, traditional executives tend to think annually. Fractional executives constantly chip away at challenges so they have positive progress to report.
The speed difference is staggering. A fractional moves at 4 times the speed of a traditional executive.
They must demonstrate their fee is a wise investment.
Many businesses resist the fractional model because they want someone “vested in the best interest of the organization.” They want ownership and stability.
This thinking is flawed.
These hires become complacent instead of performance-focused. The “vested interest” becomes vested in self-preservation rather than company performance.
You’re paying premium prices for executives who have every incentive to avoid rocking the boat.
Smaller financial institutions are realizing human resources are their most expensive overhead. If they can get executive leadership without the salary and benefits investment, they reduce costs significantly.
The numbers prove this revolution is real. LinkedIn profiles mentioning “fractional” exploded from 2,000 in 2022 to 110,000 in 2024. That’s 5,400% growth in two years.
The fractional model will do to executives what AI is doing to traditional workers. Complete disruption that forces reinvention or obsolescence.
Some executives will become consultants or fractionals themselves. Others may become permanent employees specializing in execution with titles like SVP or Managing Director.
But there will be massive disruption once companies realize they don’t need that significant investment to get executive leadership benefits.
The Bureau of Labor Statistics shows a 57% increase in fractional duties for senior management since 2020. This coincides with 5.5 million new businesses established in 2023.
Smaller businesses are rejecting the traditional executive model from day one.
The business world will look modular going forward. You’ll see executives swapped out on an as-needed basis.
Startups will cycle through different executives based on growth trajectory. One executive to kick off the company. A new one for funding. Another for launch. Different one for growth. New one for maturing the market.
Larger companies will bring in specialists for innovation, entering new markets, or acquiring competitors.
Companies will match expertise and skillset to current objectives. No animosity or layoffs because everyone knows the timeline and objectives upfront.
Win-win. Executives get loads of experience. Companies save money and get continuous talent infusion.
What needs to happen is visibility and awareness of fractional benefits. Once enough small businesses demonstrate tremendous success using fractionals, it will catch on.
The traditional model will be seen as outdated and unable to meet today’s ever-changing business environment.
For business owners still hesitant about abandoning traditional C-suite structures, here’s the reality:
The biggest risk is falling behind all other companies and underperforming with talent that isn’t driven to achieve the way a fractional would be.
You can cling to the prestige of a full C-suite while your competitors move at 4x speed with fractional leadership.
Or you can adapt to the modular executive model and thrive.
The choice is yours. But the clock is ticking.
