Prioritizing employee experience within your organization is extremely important to overall growth. Your employees cannot thrive without being offered comprehensive HR components, and yet many business owners and HR professionals simply don’t have the time it takes to build out their HR practices. That’s where fractional HR can come in.
What is Fractional HR?
Fractional HR is the process of hiring external human resource professionals to support your business with common organizational and human capital needs. Whether it be compensation, organizational design, compliance, performance management, scaling staff, or diversity, equity and inclusion (DEI) consulting, there are professionals well-versed in these processes who can be hired on an as-needed basis.
Commonly, fractional HR services are offered through either an hourly payout system or a monthly fee for a designated time block, where these professionals will complete the agreed-upon tasks to support your business’s HR needs. It is similar to outsourcing to a full-time HR provider but is more cost-effective as the exact fractional services can be scaled to meet your organization’s needs and supplement the internal staff instead of transferring HR responsibilities entirely.
Fractional HR as a Gap Filler
The first significant benefit of fractional HR is that it is extremely scalable and flexible for your organization. Both large enterprises and small start-ups can benefit from fractional HR and its cost-effective scalability. Even if you have an internal HR team, there may be an opportunity to fill gaps they are struggling to meet through implementing a fractional HR partner.
For Small and Medium Sized Businesses
For startups and small and medium-sized businesses, budget tends to be one of the largest roadblocks when it comes to hiring HR specialists. Many business owners manage aspects traditionally considered HR responsibilities solo as their business grows. However, if you want your business to continue to grow and thrive, you likely cannot do it all at some point. Administrative HR tasks such as payroll and more drawn-out tasks such as reviewing resumes can eat up valuable time for business owners and executive teams. Using fractional HR solutions as a support can help give you some of those hours back, and you can personalize the exact process with the right fractional HR provider.
For Larger Enterprises
Larger organizations benefit from having the liquidity to hire a full-time human resource team and often do. Keeping tasks such as hiring, firing, conflict resolution, and benefits administration in-house often benefits the company, as these aspects need to be personalized to the organization and require a deep understanding of existing staff relations. However, this is not to say that these HR teams can not fall victim to being stretched too thin or not having adequate resources to fill gaps around employee engagement and retention.
Having a third party of experts consult and provide strategic advice can be the first step in guiding an internal HR team toward filling these gaps. The specialized expertise offered by fractional HR advisors can also be temporary. You have the flexibility to reduce the hours or only bring in help when you need support. Conversely, hiring a full-time employee can cost much more, and laying them off during slower months contributes to turnover and sets a bad precedent for company culture.
Fractional HR advisors can also step in when a position on your existing HR team suddenly becomes vacant to ensure that operations continue as usual.
Protecting Against Biases in HR
For every type of company, having an HR representative join the team who is unbiased about the company’s inner workings can also benefit your company culture. It’s widely recognized that HR departments often face a negative perception, seen as the opposition in the “us versus them” mindset arising from unhealthy workplace environments.
Whether this culture has developed over genuine concerns about HR not representing employees’ best interests or not, a fractional HR system can help redirect employee concerns and ensure they are bringing real workplace problems to the attention of higher management. Fractional HR representatives may just be the liaison your team needs to rebuild confidence in internal systems and help develop a culture of accountability.
Overcoming Common Implementation Challenges
A common challenge with implementing a new operational partnership is defining needs. However, it is absolutely essential, as when this step is skipped, your operations may become less efficient due to miscommunications. The negative effects include repeated efforts and duplication of tasks, or tasks falling through the cracks and important deliverables being missed.
To define needs, consider historical data around retention, hiring processes, employee satisfaction, benefits plans and other ailments usually addressed by an HR team to determine where you fall short. Be aware that an HR issue, such as poor retention, often stems from broader problems, such as insufficient employee satisfaction. Try to identify the root cause of your HR strain to help you choose the best fractional HR partner.
With an understanding of your needs, assess the options available. When exploring fractional HR service offerings, determine which company will offer suitable flexibility and specific services for your current needs. Compare and contrast the specialty areas of different HR companies and ask for details about the backgrounds of their consultants and specialists. Include some analysis of future needs and ensure the chosen partner has the right level of adaptability to meet these needs.
As with any partnership, it will take time for the external consultants to understand the culture and processes of your company. To help speed up this process, provide them with materials and documentation that help to paint a clear picture of day-to-day operations, KPIs for employees, overall company vision, and values.
During the transition period, consider giving the external consultants the agency to observe either in-person or online operations by sitting in on leadership meetings and shadowing employees. Observation of current operations can help inform your organization’s strategic direction of exact fractional HR needs.
Measuring Success of Fractional HR Initiatives for Your Organization
With any new initiative, you want to track the tangible results for your organization to know progress is being made and understand where you may need to pivot. Taking benchmark data from before any new implementations and comparing it to results month over month can be a good way of collecting quantitative insights.
Be specific with indicators and consult with your employees. For example, if the overall goal is to improve retention levels through increased employee satisfaction, be sure you get feedback from your employees on any new initiatives launched. Anonymous surveys are a great way to get a pulse on employee attitudes.
Make sure your fractional HR partner offers some type of reporting. Discuss how they will track and measure the efforts performed monthly or quarterly. Determine what success looks like, and communicate this to your HR partner on an ongoing basis.
Implementing a fractional HR model should be a consideration for any business looking to scale and respond to a changing workforce landscape. With the increased digitization of the work environment, the flexibility offered through fractional models is becoming a more feasible option for companies of all sizes.
Despite a changing workforce landscape, the importance of human capital and effectively managing your most valuable resources remains paramount for business success. It can serve as an enhancement to your already-operating HR team. Consider the ways in which fractional HR models can help fill gaps in your organization to support your growing business needs.
Paola Accettola is CEO & Principal Consultant of True North HR Consulting, a nationally recognized HR consulting team in Canada. Paola is an HR leader committed to transforming her deep knowledge into helping companies find smart and simple HR solutions. She aims to help clients by providing these solutions to inspire their people skills and drive measurable business growth.
