04 Feb Fractional COO – Taking a Closer Look at What It Entails
What is a fractional coo? A fractional coo is a company that has appointed one individual to be its CEO and five people to be the directors of that company. The CEO is called a “chief operating officer,” while the five directors are called “vice chairs.” This detailed take on “What Does a COO Do?” as written by clube.com should shed light on the various responsibilities of a COO.
The term “fractional” was first used in 1980 by the Canadian government as part of a plan to stimulate small businesses in the country. Why would a company choose to use a “fractional chief operating officer” instead of a full-time director?
The reason that many companies make this change is because they do not wish to pay a CFO to manage their business. Typically, the fees that the CFO charges are extremely expensive. On top of that, the duties of a CFO include overseeing a number of different individuals and departments and managing an enormous amount of information.
If you are running a growing business, you may be able to save a great deal of money by avoiding hiring a CFO. What is a fractional chief operating officer? A fractional executive is just what the name implies: a person who is paid a portion of the profits that your company makes.
Generally speaking, if a business makes two million dollars in profit in a year, then it will pay the CEO and five other members of the board a total of forty thousand dollars. In Canada, this figure is reduced to thirty thousand dollars for the purposes of taxation.
This can work out to savings for a company in a number of different ways, including lowering the overall cost of doing business. What is a fractional coo defined as? A fractional coo is a CFO who is employed on a part-time basis.
This means that she or he works less than forty hours in a week, while at the same time, receives a part-time salary. A part-time chief operating officer may also work a full-time position at another company. What is a fractional chief operating officer?
If a company uses a CFO as an interim solution to cutting costs, they may want to use a fractional consultant as a permanent solution. A CFO is generally a four-year degree holder with a Master’s degree specializing in finance and accounting.
However, many companies use a fractional consultant with a higher educational background, such as an MBA from an accredited business school. A fractional consultant can work with a large or small corporation, but their services are more geared toward smaller companies who may not have the budget to train their own CFO.
What are the benefits of hiring a fractional coo? The primary benefit is that a company can cut costs and maximize efficiency with minimal risk to its balance sheet. Since a CFO works for a company for a limited amount of time, they are not likely to experience the same type of performance issues as a full-time operations executive.
A portion of the consulting fee will go toward their continued education, which will benefit them in their role as a CFO for a long-term contract. How does a fractional coo benefit a company?
As a CFO, a company has the ability to control costs by reducing the number of direct labor hours necessary to complete projects, which decreases the overall project cost. In addition, a CFO can implement quality management programs and resource allocation programs, which allow a company to better utilize its resources.
With the help of a fractional consultant, a company is able to establish a standardized method for project management, which is beneficial to its employees. What are the disadvantages of hiring a fractional executive?
Although it may seem like a great idea at first, it is generally a bad idea to hire a fractional executive for a growing business. First, a company should only hire experienced professionals who have been certified by the CFO institute.
Second, a CFO is much more likely to be on the lookout for potential fraud or error, since they are more closely involved in the day-to-day operations of a business.
Lastly, a business cannot expect the CFO to perform a function that a part-time employee would be able to handle; therefore, a CFO needs to either be trained for their position or be highly skilled in a different area.