Fractional CXO

Necessity is the mother of all inventions. So, when the startup scene started booming in India and people realised that their small budgets and the space crunch in the country didn’t allow them to have their individual spaces early on in the game, they decided to share their space with their peers, and the concept of co-working spaces was born. And now it comes to light that another sharing concept is taking flight in the ecosystem. Startups in India are now reportedly sharing sharing top executives so as to save costs.

Take the example of 51-years old Sridhar Subramanian for instance. Having had over two decades of experience working in the finance sector, with big shot companies like working Coca-Cola and 3M, he has now decided to take on task of serving as a “fractional” CEO for a number of startups. Subramanian is the go-to person for these startups when it comes to anything associated with accounting or managing compliance. Every now and then, he also help them in structuring their plans.

When asked about what he does as a fractional CEO and why he does it, Subramanian said, “My work is mostly need-based since these companies do not have a constant flow of work. It is financially rewarding and more challenging to do this.”

Startups that are just starting up need as much guidance and help as possible, but their pockets don’t allow them to go out in the corporate world and hire someone full-time, this is where fractional CXOs come in and help fill in their void. While startups get expert advice and save cost at the same time, these fractional CXOs earn good cash and put their time to better usage. Chennai-based OrangeScape, which provides a cloud platform to build applications, has been availing Subramanian’s services as a virtual CFO for about a year now.

Speaking about the arrangement, Suresh Sambandam, co-founder of OrangeScape said, “We don’t have enough work for a full-time CFO as of now. We have finance folks who manage the book-keeping. What we need is a person who makes sure that the obvious things are being done and who can advise us on financial decision making.” Subramanian helps OrangeScape by giving them expert advice on how to deploy excess cash, prepare banks documents, and how to make strategic decisions.

Sectors such as finance, marketing, strategy and sales are some of the most famous sector among fractional chiefs right now.

One of the biggest advantages that fractional chiefs have working multiple jobs is that they get to apply their learnings from one startup to another. Since they’re into the startup ecosystem with multiple organisations all at once, they catch a drift of where the trends, markets and the consumers are heading. According to Masroor Lodhi, who’s currently working with as many as ten startups, “There are soft learnings that you can apply irrespective of the nature of business. How one founder was able to manoeuvre a roadblock, how a founder is setting the culture of the company, or something as fundamental as using a tool to facilitate team dynamics – these aspects are applicable across startups.”

However, everything isn’t as rosy as it seems. There might be times when issues such as conflict of interests or confidentiality might arise. This is where the trust factor comes in the picture. Considering today’s competitive world, many startups now have a confidentiality clause in their contracts for their fractional/virtual chiefs.

According to Sanjay Swamy, managing partner in Prime Venture Partners, while the concept of virtual/fractional chiefs sounds good on paper, there are certain areas where the startups shouldn’t try this method. One of them being a fractional CEO. “Ideally, a founder should be CEO. At Prime, we are happiest if founders scale and learn the ropes of becoming long-term CEOs, as the company progresses. The founder and CEO is the one who brings the passion for the business and is often the first and primary sales person too,” he says.

While right now people might have different opinions on in which areas should the concept be allowed, but one thing is for sure, the trend is going to live and flourish in years to come. HR experts believe that fractional work will be the trend going forward. According to James Agrawal, MD of executive search and leadership development firm BTI Consultants, people no longer want to be tied to a single organisation or be committed full-time. Hence, we might soon find a growing number of people flashing the title of fractional CEOs or CFOs on their business cards.

This development was first reported in the Economic Times.

[Image: Diligent Cxo]

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