Certain roles and positions do not require full-time resources. However, there is a tendency to think you can only fill a role with a full-time person. If there is not enough role-related work for that person, you usually end up with one of two suboptimal scenarios:
• You give the person other work and responsibilities outside their core role. This can expand the person’s horizons but can be inefficient because you do not have an expert to do the noncore tasks.
• The person slow-walks the assignments to fit into a full day’s work.
You can avoid these scenarios with well-managed, on-demand staff.
On-demand, fractional and virtual are all terms used for a part-time person and are roughly interchangeable. The concept has been around for decades and has become more prevalent with the wide usage of office technology (e.g., videoconferencing, messaging, collaborative software, etc.). That coupled with a boom in startups and a shrinking of budgets has led to the rise in popularity and acceptance of on-demand resources.
When Does Full-Time Make Sense?
The easiest case to make for a full-time role is if there is high touch and high frequency. The more a role needs to interact with (touch) other teammates and outside groups, as well as perform a high volume of work (frequency), the more a full-time role makes sense. In my experience, on-demand roles can be 30%-50% cheaper than full-time roles when you take into account benefits, but the economic model breaks down at a certain usage point. When the savings start to disappear, it’s time to evaluate if you should hire someone full time.
Issues With On-Demand
If not managed well, there can be a number of issues with part-time roles. Lack of ownership, poor team connectivity and slow responsiveness are usually the main culprits. The best way to combat these is through scheduling set updates and meetings and setting expectations for responsiveness. Because the on-demand resource won’t be in the office regularly, if ever, setting standard times to connect will put some necessary communication structure in place. Treating the on-demand resource as a regular member of the team will also enhance team connectivity and ownership. Invite them to regular meetings and social events. The best on-demand team members are ones you don’t even realize aren’t full time.
How Does On-Demand Work In Finance?
Finance and accounting are well positioned to benefit from on-demand work. By its nature, most of the work is “lumpy,” which means it’s heavy in specific situations: month close, forecast and budget season, audits, fundraising, and mergers and acquisitions activity. A lot of these activities are timebound to certain times of the month, quarter and year. After they are complete, the workload significantly diminishes. A predictably variable workload is well suited to on-demand because you can scale up or down as needed. You end up avoiding the inefficiency of a full-time person with a light workload.
A good analogy with full-time workers and excess capacity is to think of a factory that can produce 1,000 cars in a day. The most expensive car to produce is the 1,001st car because you need a whole factory to produce just one car. If you can’t find an alternate use for the factory, it’s not worth taking the 1,001st order. Unfortunately, in finance and accounting, you have to “make the 1,001st car” (do the excess work) or you could miss a crucial deadline (e.g., month close).
Creating Your On-Demand Finance And Accounting Setup
While each company is different, four standard finance and accounting roles are common to most companies: CFO, controller, analyst and accountant. Use the following principles when building out your team:
1. Right person, right job, right price: Don’t pay CFO or controller prices when the role can be done by an analyst or an accountant. CFOs and controllers should manage and provide strategy and insight, not line-level work.
2. Architect with senior staff and maintain with junior staff. Have the CFOs build the financial model and the controllers design the processes, and maintain the infrastructure with junior staff supervised by the CFO and controller.
3. Fill in the lower levels with full-time first. The majority of your workload will be high frequency, repetitive tasks. As you expand, your billing and payables needs will grow. These are classic accounting positions that lend themselves to full-time.
4. If you can, separate the CFO and controller positions. They are two separate skill sets, and CFOs usually charge more than controllers.
5. Hire for your specific need, and change up the team for the changing needs. Sometimes you need a CFO with fundraising experience, sometimes with company scaling experience and sometimes with going-public experience. Rarely does one person have all these skills. An on-demand CFO can get you the immediate skill set you need without the issue of hiring for a skill set that will be stale in a year or two.
However you staff your team, with on-demand, full-time or a combination, make sure you get all the key roles filled. If you can afford it, get multiple people so you can set up segregation of duties and proper controls. If you decide to go down the on-demand route, make sure you only hire what you need. Don’t overbuy and hire a CFO when a controller will do.