Navigating Leadership: Weighing Up Fractional vs Non-Executive Roles

Livingston James Director, Alistair Shaw provides insight on the benefits of Fractional Director roles and how they differ from more traditional Non-Executive Roles.

In the ever-evolving landscape of corporate governance and leadership,  an increasing number of our SME clients are exploring innovative structures to optimise expertise and resources. Historically at Livingston James, we have supported many clients looking to add experienced heads to their board by appointing their Non-Executives (NEDs).

However, more recently I’ve noticed a move towards less formal NED appointments with advisors with strong functional experience being sought, or more Fractional Director appointments. While both involve providing strategic guidance, they differ significantly in terms of time commitment, engagement, and the scope of responsibilities.

I want to delve into the distinctions between Fractional Director roles and Non-Executive roles, shedding light on their respective merits and how organisations can leverage these positions for effective governance.

 

Fractional Director Roles

Flexible Commitment

Fractional Director roles are characterised by their flexibility in time commitment. Unlike full-time directors, Fractional Directors work part-time, bringing their expertise to the table in line with organisational requirements. This flexibility is particularly beneficial for organisations seeking specialised skills without the financial burden of a full-time executive.

Expertise On-Demand

Organisations can tap into the expertise of Fractional Directors for specific projects, initiatives, or during critical decision-making processes. This allows companies to access high-level strategic advice without the ongoing commitment of a full-time executive.

Cost-Effective Solutions

Fractional Directors often present a cost-effective solution for organisations, especially smaller ones or those in need of specialised skills periodically. This model allows companies to benefit from seasoned professionals without the overhead costs associated with a permanent executive position.

 

Non-Executive Roles

Strategic Oversight

Non-Executive Directors (NEDs) are appointed to provide an external perspective and strategic oversight to the organisation. They typically participate in board meetings, offering guidance and ensuring that the company is heading in the right direction.

Independent Governance

NEDs play a crucial role in maintaining independence within the boardroom. Their objective viewpoint supports effective decision-making and ensures that the board is not swayed by internal biases.

Risk Mitigation and Compliance

NEDs are often tasked with monitoring and mitigating risks. Their focus on compliance and ethical standards helps in creating a robust governance framework, instilling confidence in stakeholders.

 

Choosing the Right Fit

Nature of the Organisation

The choice between a Fractional Director and a Non-Executive Director largely depends on the nature and needs of the organisation. Start-ups or organisations undergoing transformation may find Fractional Directors beneficial for specific projects, while established entities may benefit more from the continuous oversight of Non-Executive Directors.

Budgetary Considerations

Organisations with budget constraints may find Fractional Directors more appealing due to their cost-effective nature. On the other hand, larger corporations may prioritise the continuous presence and oversight provided by Non-Executive Directors.

Strategic Objectives

It is important to consider the immediate and long-term strategic objectives of the organisation. Fractional Directors are ideal for short-term to medium projects, while Non-Executive Directors contribute to the long-term vision and stability.

Hiring the Right Person

If you are looking to hire a Fractional Director, you need to take into consideration that they will be more involved in the operational side of the business and ultimately have more touch points with your people, not just the board. Therefore, the role needs to be treated like an executive appointment, not only considering their board experience but also their leadership style and cultural fit.

 

You will need to ensure the Fractional Director has suitable availability within their portfolio to flex where required and ensure clear communication channels and reporting structures are also in place.  The contractual agreement needs to be defined which will include scope of work, compensation and termination clauses and you will need to define how often the fractional director will provide updates, report progress, and communicate with key stakeholders.

This is not always straightforward when first identifying the need for support, so ensure you take the time to define the exact requirements of the role, as well as what its desired impact looks like. I believe we will see more Fractional appointments over the next few years, specifically with scale-ups.

For more established businesses, experienced Non-Executives are invaluable. I bumped into a client recently in Edinburgh, who stopped to shake my hand and express the huge impact the Non-Executive I introduced to them a couple of years ago had made. Seeing the impact our appointments make is the best part of my job, and I hope for more similar encounters, of which a high proportion will likely be for Fractional appointments.

 

If you are interested in hiring your next Non-Executive or Fractional Director and would like some advice, please reach out to [email protected].