Why Outsourcing Leadership Roles Is the Best Business Decision You Can Make

Sales team meeting

Many think of traditional leaders as those who sit in board rooms by day and their offices by night. When you think of a leader, you often think of someone who checks in occasionally but otherwise stays stuck in meetings all day or out in the field themselves.

Not anymore. In a post-COVID world that relies on digital solutions more than ever before, there has been a major shift to an outsourced, fractional sales model. More and more, companies are becoming comfortable with an outsourced sales leader, whom they pay for a “fraction” of their time but for the whole scope of work they’d have full-time leaders do.

What is the distinction between the fractional model and the traditional one, then? Fractional executives take on the same strategic and tactical roles as full-time executives — they just do so part-time. They leverage their past meaningful leadership experience to build strategic plans, create company visions, make tactical plans to achieve overarching goals, and manage the teams who work to achieve those goals.

An outsourced CMO, for instance, builds a marketing plan, determines the best tactics and strategies for the firm to use that year, and then helps implement them. Because there aren’t as many operational or logistical hindrances to their work, fractional executives can accomplish their important work in part of the time and with even more of the focus — making them the answer to the question, “How can a small business compete with big business?”

Fractional sales leaders, specifically, take on all the same leadership roles and responsibilities as their in-house counterparts. They hire the salespeople, travel with them, run sales meetings, and conduct weekly individual pipeline reviews. Even though they are physically present only a “fraction” of the time, they make themselves available throughout the week for all tactical questions and details.

All of this sounds great in theory, but the concept of fractional sales leadership still leaves some people with reservations. Why? Start by understanding the differing points of view on the value of generalist versus specialist leaders.

The Generalist vs. Specialist Debate

Fractional sales leadership is rooted in the idea that it’s better to leverage a specialist for sales leadership than a generalist. For example, small business owners usually run their own sales operations. But what if the owner isn’t inherently a sales leader? What if he or she just has great ideas and the ability to implement them from an operational standpoint? In that case, the leader’s time is much better spent overseeing operational issues than focusing on a departmental area that they don’t enjoy and lack the expertise in.

This reflects a broader trend in the evolution of leadership during the age of digital hiring. No longer is the focus only on hiring full-time employees, but rather on finding the right talent for a role, no matter whether they are an employee, freelancer, consultant, or fractional leader. In this way, society continues to distinguish between generalist versus specialist. Why pay a salary to someone who can do a generalist role over a longer period versus someone more specialized? Even if you have to pay that specialist more, he or she is likely to do the job better, more efficiently, and in less time.

The timing has never been better to shift to a fractional model, especially as so many businesses are still bearing the brunt of the pandemic, recession, and the reduced cash flow that resulted from it. Now, the best talent is more difficult to obtain than ever before. Companies, then, have to ensure that their leaders have handled crises in the past and are seasoned, strategic professionals who can also dig their companies out of hardships in the future. Specialists are the best way to do that.

What Are the Benefits of a Fractional Executive?

The benefits of leadership experience are myriad when it comes to handling crises and leading small businesses through even the hardest times. Small businesses benefit from someone who has led large sales teams, been responsible for hundreds of millions of dollars in revenue, dealt with complex sales cycles, and led teams to meet large corporate goals with tremendous pressure on them to do so. They have been “through the fire” before, so managing a less complex business is easy by comparison.

Unfortunately, many small businesses compete with larger corporations that have equally large budgets and can acquire the best talent available. Small businesses are left to compete without the luxury of being able to afford “the best of the best.”

Hiring someone fractionally levels the playing field for small businesses. This approach allows them to acquire top talent and only pay for the amount of time needed — which, because of the size and complexity of the business, is usually less than full-time. You can’t expect a high school basketball team to compete against an NBA team. A fractional leadership model ensures you aren’t trying to do that with your business.

A high-level VP of sales will make $250,000 to $350,000 per year, on average. A small business typically doesn’t have the cash flow to afford that high-priced executive, but it can afford $100,000+ for that same person for a fraction of their time. And given the reduced size of their sales team and the reduced revenue responsibility, an experienced sales leader can lead a small team in a fraction of the full-time capacity that a large corporation would require. These are just a few of the benefits of outsourcing.

Still, it can be challenging for entrepreneurs to understand the timing to make new strategic hires to scale their businesses. In more traditional models, new hires were seen as expenses rather than investments because the hire’s cost typically outweighed the business value they could contribute. That’s why the fractional executive model is such a game changer for small businesses. Now, hiring new sales talent can be a true investment. The new “fractional” leader comes at a fraction of the time and price, giving the entrepreneur more control over expectations for the time allotted and holding all parties accountable for success.

To illustrate the success of the fractional sales model, consider the following case study examples. These are true stories of a manufacturing company and an IT services company (the names of which have been changed) that found success in outsourcing leadership.

Case Study #1: Acme Manufacturing Co.

The Challenge

Acme Manufacturing faced numerous challenges to its productivity. The company lacked leadership and the accountability that comes with it. Without strong tactical leadership, Acme’s sales team became extremely reactive instead of proactive. They lagged in follow-ups with prospects, didn’t enter customer relationship management (CRM) data correctly or on time, and had no metrics, goals, quotas, or forecasts against which to measure their success.

Acme’s leadership knew the sales team was struggling. It wasn’t hitting its numbers, and growth was stagnant. But without a repeatable sales process in place, it was almost impossible for company leaders to figure out what was wrong when a sales process was never conducted the same way twice. Sales were happening differently every time, depending on which sales rep handled the account, and that led to a fragmented system of operations. And without goals or quotas in place, they couldn’t gauge the effectiveness of their sales personnel. Leaders were generally left to rely on their perceptions of salespeople’s success rather than black-and-white results measured against benchmarks.

The Solution

To address these challenges with the sales team, Acme Manufacturing decided to transition its previous sales manager and hire a fractional VP of sales. With an experienced sales leader, Acme could take advantage of the benefits of leadership experience. Because she had helped companies in similar situations before, the new VP of sales immediately knew what to do. She implemented much-needed systems for metrics, goals, CRM customization, revenue forecasts, accountability, and key performance indicators. While the sales team had been complacent in the past due to lack of direction, the new sales leader was committed to motivating them to proactively pursue new leads, track and enter data correctly, and follow leaders through to becoming customers.

The fractional VP of sales developed forecasting tools and methodology, establishing best practices for weekly sales team meetings (one-on-one individual meetings), CRM usage, client follow-up, time-to-quote, and phone and email communication. Specifically, she implemented a team “covenant” describing how each member will work with and treat other members, with an accountability requirement. By bolstering accountability and communication, the new sales leader helped light a fire under the team to perform and communicate better. She also produced Acme’s first-ever Q4 rolling forecast and implemented the company’s first variable compensation plan to better incentivize salespeople.

The Results

In one year, Acme’s business grew from $20 million to $28 million and increased gross margin by 18%. As a direct result of the fractional VP of sales hire, Acme created a highly functioning and effective sales team and even had the resources to hire an additional outside salesperson. It implemented a minimum 30% gross profit model for all products without significant loss of clients or revenue, as well as dashboards for significant metrics that were visible to the entire sales team. Corporate and divisional management adopted a VOIP phone system to track calls and add to the CRM and increase efficiency and accountability.

Once the company hired the fractional VP of sales, the owner was left to focus on what he did best: oversee the manufacturing process. And he acquired top tactical leadership talent to focus on sales for a fraction of the price it would have cost to bring on a full-time sales leader.

Case Study #2: Intelligence IT Services

The Challenge

Intelligence IT Services was suffering from serious underperformance in sales. The company had no sales culture and no sales team, and its consultants thought they knew everything (but their strength was not actually selling). To make matters worse, Intelligence IT was not leveraging its strategic partner relationships, seemingly resigned to stagnant sales numbers and underperforming employees. Beyond that, the company’s approach to sales was entirely reactive rather than proactive, and almost all sales came from the owner and a few consultants.

The Solution

Intelligence IT’s leaders realized they needed to build a foundational model of their own sales team, rather than ask outside consultants and the owner to do more. They needed to control their own destiny by hiring their own sales team and directing their efforts.

Recognizing they didn’t have the expertise to build a sales team from scratch, Intelligence IT’s leaders understood they needed to hire a sales professional with meaningful leadership experience. Unable to afford a full-time sales leader because of the investment they needed to make in hiring three new salespeople, they turned to the fractional sales leadership model. Immediately, the new fractional leader pivoted the team’s sales strategy to focus on software sales that drove their consultant engagement. He created new onboarding processes and forecasting models, built new compensation plans, hired three salespeople, and installed and customized a new HubSpot CRM for the team’s specific sales needs.

The Results

After hiring a fractional sales leader, Intelligence IT grew 50% in revenue in one year — and is on pace to grow 35% to 40% for each of the next three years. The company continues to grow its sales and dive deeper into its new proactive sales strategy.

These examples are proof that traditional leadership is by no means the only way. There has been a significant shift toward outsourcing leadership, especially for small businesses that need the experience of a sales leader who has led teams to success in similar circumstances. They need someone who can take charge of leading strategic growth and change — someone who has done it before in a past life and can apply that experience as a fractional executive in a new role.

These are the situations in which fractional sales leaders shine and make it possible for small businesses to shine, too.

Want to tune up your sales process? Take our Sales Agility Assessment today to see what gaps exist in your current structure. You will receive insights into how to make immediate improvements yourself, or you might consider hiring a fractional sales VP for your organization.