Rise of Fractional Executives - Finding Your Suite Spot with Real Rousseau

Hello. Welcome to another episode of the healthy enterprise. My guest today is Real Russo. Real is a business strategist who works with professionals at the operational level as well as executive roles. He has a real passion for business and his extensive experience in helping business owners, CEOs, founders work at building their business, streamlining processes, and positioning themselves to grow.

And he comes with a wealth of knowledge, and he's here to share with us today. So let's take a listen. Hey, Real.

Hey, Heath. Thanks for having me.

Yeah. You're welcome. Thanks for being here. So you're gonna tell us a little bit about fractional management and but give us a little bit of a background on you first.

Okay. Well well, tech my technical background, my education's in engineering. I used to design bridges and roads and that kind of stuff for a living. Seems like a whole other life ago. But the last twenty years or so, I've been involved in in businesses from start ups, entrepreneurship, operational management, executive, leadership development, and more recently, fractional consulting and services.

Alright. So, I mean, lots of people have heard have heard that word, that term fractional. It's not brand new, but it's still relatively new. Like, it's not been around for that long of a time, has it?

No. It hasn't. I think, we probably started seeing fractional at a c suite level, executive level around COVID time. And I think as people got accustomed to working remotely and the tech tech industry exploded, then this concept of having executives involved in a fractional basis became popular.

And and why would any owner or founder why would they be attracted to this type of fractional c suite employment model?

Well, a couple couple reasons come to mind. The first is the obvious one. So you get the expertise of someone at the executive level at the table with you for a fraction of the cost. Right? So it's not a full time executive wage.

Often, it's some kind of a re retainer type of a structure. And the the amount of of the retainer or the structure or how it's set up could be dependent on your budget. That's one reason. It's about cost by getting that

Right.

That expertise at the table. The other reason is I like to use use an example of, let's say, in the health and biotech sector.

Mhmm.

The the founders are typically scientists, and they're really visionary people, strong in the research side of things, product development side of things, but typically wouldn't have that skill set of how to take that product to market where a CMO would or a COO, the business acumen, the financial modeling acumen, like a CFO fractional would.

Right.

So it's actually bringing that skill set to the table where the scientist, for example, wouldn't have that skill set.

Right. And that that comes back actually to a lot quite often, it's like you're just trying to get people who are good at what they do to focus on doing what that is as opposed to, you know, splitting their splitting themselves up between different roles and only being able to do a partial of each one. Right?

Yeah. Yeah. Absolutely. It's about doing what you do best. So, you know, we see it a lot.

I use the the health and the biotech industry as an example, but I've seen that across the board from all kinds of businesses. So the reason the people start the business in the first place is they're maybe good at a certain service or a product idea, and it starts growing. And then they're like, wow. All of a sudden, now they need the org structure. They need job descriptions.

They need all these pieces. Right. And so you can hire a consultant or you can bring in a fractional executive to help you.

Right. Okay. That's a good point. What so what's the difference between that? Like, why why would you choose a fractional c level person as opposed to a contractor as an example?

Yeah. There's a couple subtle differences. So let's say you you engage a consultant. Usually, there's a finite scope. Here's what I want you to do.

And based on that scope, the consultant gives you a price. And then when you vary from that scope, there's, you know, cost creep and and that kind of stuff. And the consultant engagement typically has a start and end date. When you start getting looking at a fractional kind of engagement, it's usually, you know, that retainer model. So what's your budget?

How many days? How many hours? Whatever whatever the structure is. But, also, it's about having some decision making authority and some accountability. And usually, that fractional executive that you bring in is at the table with you talking about priorities, helping you determine the best direction for your business, and getting you ready and growing.

Right? Ready for growth and growing.

Right.

So it's a subtle difference, but it's a it's a big difference. So the the biggest difference is they're engaged. They're part of the team. They're not external, like a consultant advising in. Right.

They're actually within your team. And then they're also usually have have some decision making authority and and accountability.

That makes sense. And they're bringing that sort of that level of experience as they've sat in these roles Yeah. Previously, and they have the experience behind them to to bring that kind of accountability and responsibility that you need at the table at that level.

Yeah. And there there are lots of great consultants who have that expertise and skill.

Right.

But it's just deployed differently.

Right. Right. Right. That makes

sense. Fractional executive is really part of your team, grows with you. Right. Really, at some stage, if they're doing their job helping you grow, you'll either hire them full time or you'll be ready to hire a full time executive.

Yeah. Be in the position to do that. Yeah. And I suppose you do you get you could so you you you're just not having to spend that high end salary for somebody you don't need full time. You just need them for certain aspects to address certain issues and along the way.

And then at such time when you are actually ready to take that plunge, you can go on to actually have that a permanent position for that role.

Sure. And sometimes it's front loaded. And what I mean by that is you might start off as a fractional COO and come in and and help organize performance review processes and and budgets and financial processes, whatever kind of the business needs.

Mhmm.

So there's some upfront work there that you're you're a little bit more involved.

Mhmm.

And then you might move as the business kinda gets that those processes in place. You might move to more of a advisory, sit at the board once a month, you know, coaching, executive coaching type session.

Right.

So the engagement can move and ebb and flow as the business grows.

Right. Right. I guess another scenario would be maybe hiring a junior person. But then again, there's maybe some pros and cons to that as well. Yeah.

Sure. If you're a growing business, budget's a concern. So there's a lot of tendency to hire someone junior. They come in with the often with a lot of energy. He or she, you know, they're gung ho, wanna help.

They're doing their research using chat, figure out what they should be doing. And but there's still a lot of they lack the experience. So Right. You're you're filling the gaps. So as the business owner, part of the objective is to offload some of your workload, right, and also bring expertise in.

So hiring a junior doesn't always accomplish that. You get the energy, but often it comes with some hand holding and and

Right.

Just takes longer.

Right? Little bit of long yeah. It's a long game, that one.

Bit of a longer game. Yep.

Right. Now you've been doing this. You've done this multiple times in your career. So forgive the pun, but what's your sweet spot? Oh.

Get it? Your c sweet spot?

My c sweet spot. That is that is really good. So my c sweet spot. For me for me, it's about I I think I can add a lot more value if I'm sitting at the table as part of a team collaborating and helping owners prioritize and actually really helping them figure out what they do best and and help them figure out their sweet spot.

Right.

Right? Right. And then and then I can come in, help them get structure in place. I like to use some agile methodologies in our strategy work and our our consulting work, which means three month sprints. You know, pick a few items, pick the most important priorities, and sprint those and and actually roll up my sleeves, get things done, add value, help the company get ready for growth.

Mhmm.

So I really like that part of it. I enjoy consulting too. I do a fair bit of that, but it's just a different it's just a different you can help and you can add value, but all you can really do is make recommendations as a consultant. Right? Suggestions, recommendations, and, you know, identify the risks if they don't implement your recommendations.

Right.

But then

Whereas if you brought you brought into the table to sit with the CEO, the CEO, the CFO, the CMO, the CSO, you're sitting with the with the c levels. There is a certain level of accountability, like, and there's, you've been, you know, obviously vetted and you're you're qualified to sit at that level, and and they're gonna listen to you. Right? That's

Right. You all have you all bring you're bringing your certain skill set to the table, and you have a CFO there. And I I would have I weigh weigh heavier on the COO side Right. And and the CSO side and some CEO. But, usually, chief strategy officer would be my wheelhouse where I'm helping an organization figure out their high level strategy, how to align their different business components to that strategy

Right.

And roll that into implementation. And continuous improvement is a big thing. Yeah.

Any is there some red flags that, you know, if a CEO is working away and and what what kind of indicators to a CEO if he's paying attention or she's paying attention would indicate that it's time to look at some sort of fractional support.

I you know, the obvious ones are burnout. Right?

Oh, yeah. Good point.

You're wearing so many hats, and and, really, you're at the stage where where the things you wanna do and the things you know you do best, you're not doing anymore or you're doing very little of. And you can sometimes see that in in sales or if you're slow to deliver on timelines and milestones. You know, if you're in the product development side of things and and you're missing milestones and you're struggling to get your product to market, those are some indicators to watch for. But usually, the conversations I have with CEOs or founders, they're just they're at the stage where it's it's not burnout, but they're feeling a lot of the pain. Mhmm.

And maybe they've tried an operations manager or lower level employee to help them, and it and really, it hasn't worked.

So Interesting. That's good. Yeah. That's good advice to to be aware of for sure. Now on the when you guys are when you're working on strategy work, what what are some examples of some of the strategies that you actually help businesses with?

So, yeah, we've got a few there's a few different levels of strategy. So depending on on the business and where they're at in their growth cycle, often we'll join a business and and they're a year or two in, But they don't really have they haven't really formalized their vision, and they're finding that they're struggling with employee accountability. And so it's about creating this vision and higher level strategic plan.

Mhmm.

Right? Right. And then engaging their employees in that process so that they start understanding the why and why their particular role is important in the big picture of things. So that's a pretty common one. So get some, you know, grassroots vision, strategic plan in place.

Mhmm.

And then we'll we'll often help companies from there with implementation plan or a road map. So like I mentioned before, using some agile terminology, you know, develop a three month sprint and usually developing org structures, job descriptions, performance evaluation processes, those kinds of things are often missing in a fast growing company. Right. Right. Some of the bird note triggers are often associated associated to that because the that executive, the founder hasn't been able to push and delegate the accountability down.

Right. Right.

Right. So putting structure in place to do that Right. Is really common.

And much like parenting, it's almost like you need a you need someone else to come in and dictate some of that stuff and give people tasks to do and and assign responsibilities because they're not gonna listen to maybe the CEO like they would maybe listen to a third party who they they don't know very well, but it's just delivered in a different way, and you come and kinda come at it with a very sort of objective approach. Right?

Right. And I think a lot of founders, you know, they they refer to their business as their family and their employees as family, and it's always harder for a founder. Let's face it. Most of us don't like to have those hard conversations, and change is difficult. So that's where someone like a a a fractional c suite CMO in the marketing side, CSO, COO could come in and help put those standard operating procedures in place and have those hard conversations

Right.

With some of your employees that that maybe you don't love doing or Right. Or you're not great at.

They can take the heat

on your back. Take the heat. You can blame them.

Yep. And they're not emotionally attached either. Right?

That's Yeah. They're there to they're there there to help you grow and do what it takes to grow.

Yeah. So

so that's pretty common, you know, you know, performance setting up performance processes Mhmm. Budgeting. You know, we often come into a business where where there aren't the financial processes in place. So you're executing, executing, executing, or coming up with ideas, and there's no tool to really measure the financial impact of those ideas. Right.

So it's easy come up not easy, but you come up with a great idea for your strategy. We're gonna do this. We're gonna do that. Then it needs to be an attachment to the financial side.

So

what's the cost of that and what are the benefits?

Without that

model planning and budgeting and department performance budgets and those kinds of things.

And it's hard to grow without that stuff. Like, that's the stuff you gotta nail down

Let's

you wanna take it to the next level. Right?

Yeah. Like, at some point, the cash flow will catch up to you. Right?

Right. Yeah.

Yeah. Very common, especially in the tech, you know, apps and tools and AI. Right. It's very common now for so you're a founder. You're building your business.

An employee comes to you says, hey. I'd like to use this tool. It's only $9.95 a month. Yeah. Re recently helped the company figure out their tech stack.

We're still working on this. And the last count I had, they had 65 different tools and apps my god. Throughout their organization. Right? And some of them do the same thing, personal preference.

And and but just over the years, you know, nine ninety five a month here. You know?

That'll add up. Or the cheap $9.95 a month is a cheap one.

Yeah. And some

of them are, like, 600.

And then people share the passwords. Right? And then

they have think of. 65 apps, 65 passwords, 65 logins times, however many staff.

So, like, what is your strategy? What does the financial model look like? What's your tech stack look like? Right? What's the best practices in your industry for tools and processes?

Mhmm.

Those kinds of things. So a fractional CSO, CMO would bring those kinds of things to the table for you.

Mhmm. Awesome.

Yeah.

Man, I I don't see why people don't do this more often.

It's definitely starting to be more popular Yeah. Yeah. With growth businesses.

Yeah. Yeah. And on

the other side either. I I kinda love it, and I think you do get someone at the table who's committed and and feels like they're part of a team.

Well, the other side of that too is, like, for yourself, you're you know, if you're working with, you know, you know, probably a few different companies, maybe half a dozen at the same time or over a period of time is that you acquire quite a range of, skills and knowledge and experiences because you're working with a variety of different people, learning other ways that other organizations are doing things. You're kinda actually collecting quite a bit of intellectual property, you know, along the way, and you can bring that that experience and and those techniques to the table wherever you go.

Absolutely. And, know, often, I'll tell a client at the beginning of engagement, like, they're the subject matter expert in whatever their product or service is, and I'll just sponge off them as much as I can.

Right.

But then I take all my other experiences and with other kinds of businesses And apply it. And apply it.

Yeah.

And a lot of you know, for those who work with me, I think they definitely see a little bit of the engineering approach. It's like process Yeah. Structure, which I think is is important because innovation and creativity is amazing if you put some structure around it. If you don't, I often say creativity without structure is chaos.

Right. Good point.

Yeah. So so that's kind of the angle I like to take when I'm first starting an engagement is let's sponge off each other and and get your business ready to grow.

Yeah. Right on. That's Well, this has been great. Do you have anything else to add that we missed out on, or have we covered pretty much all of it?

I think we covered all of it. I think, you know, depending on the c suite. So like I've I've mentioned quite a bit, the CSO role, chief strategy officer, COO, chief operating officer. The the CMO role is also an important one where, again, if you're a scientist in the biotech industry or you're an engineer running an engineering firm, you don't necessarily need to upscale yourself to become an expert marketer.

Right.

You can bring in a fractional CMO who can help you with your marketing strategy, your brand story, all of those different components and help you implement your strategy, right

Yeah.

From that perspective.

Yeah.

Get your story out there. Get your brand out there. And that's your that's your world.

Yeah. Right? And, again, bringing a bringing a extensive, you know, background of working with a variety of different, you know, people, products, services, industries. Yeah. You you you kinda you can really tap into all that stuff and and bring it along with you.

And you always have some nuggets to to go to rely on and and to work with that tips and tricks and things up your sleeve, yeah, as a marketer.

And I, yeah, and I find more in the marketing side of things than maybe the COO or CSO. You can definitely go to chat, and you can ask chat to give you a marketing strategy for a plumbing business. Sure. And it will give you one. But if you don't have the expertise then to look at that

Right.

And determine whether it's good or what pieces need to be adjusted, then you're you you are just shooting in the dark. Yeah. So

And chat won't roll it out for you.

And chat won't roll it out

for it works and hold people accountable and all that. That's those are like you said, those are that's those are the hard decisions and the hard conversations, but chat ain't gonna do that for you.

Yeah. I you know, AI has its place and it's a great tool and and saves us all time. I'm not I'm not disputing that. I just think where a a fractional CMO can come in is is help you take that Yeah. That strategy and make it a reality.

Implement it.

Yeah. And implement it.

Yeah. Yeah. Yeah. Great, man. Great conversation.

Thanks for being with me today. And, yeah, I wish you all the best.

It was fun. Let's do it again.

Yeah. Okay. We will for sure. Okay. That was super interesting.

The ins and outs and ups and downs of fractional management. I could see that being a very valuable option for a lot of businesses who are, you know, especially in growth modes, you know, not you're not always positioned and ready to take on those types of roles until you can financially sustain it. So this is a great alternative. I think it's I really like the part about where bringing someone on who has worked in several different organizations, maybe at a fractional level, can bring quite a wide range of, experiences, to the conversation. And, yeah.

I think there's a lot of advantages to that. So until at some point, a person actually, yeah, actually need a full time person in that role, but in the meantime, it's a way to to, ease into it, financially and, managerially. That was interesting. I really appreciate Real's perspective. And, one thing I know about Real is he loves business.

So thanks for to him for joining me today. And thank you for listening, and stay tuned for more. Have a great day.