A different type of CFO model is growing in popularity as companies face high turnover rates.
KEY TAKEAWAYS
CFO turnover has reached a three-year high of 22% as more CFOs retire, leave their positions, or even leave the industry entirely.
When deciding whether to use a fractional vs. traditional CFO, there are a few key considerations health systems should examine.
Sutker-Moran uses a fractional, team-based CFO model that hundreds of companies, including healthcare organizations, like GuideStar ElderCare, have successfully adopted.
As the CFO role becomes more demanding, health systems and hospitals are seeing an exodus of chief financial executives. A recent study put the CFO turnover rate at 22% in 2024, a three-year high.
To address the turnover problem, some organizations are turning to fractional CFOs.
A fractional CFO is a chief financial executive who works on a part-time or project-based basis rather than being a full-time employee, and differs from an interim CFO, who is at the organization for a shorter period of time, usually during a transition. Fractional CFOs can give organizations a cost-effective way to access high-level financial guidance without the expense of a full-time CFO.
FRACTIONAL VS TRADITIONAL
When deciding to go with fractional a CFO vs a traditional one, it all depends on what the health system needs, both in the short term and long term. Weighing direct costs like salaries and benefits against indirect costs such as overhead, training, and opportunity expenses is essential.
Costs
Although traditional CFO salaries vary widely depending on the size and operations of the health system, the average age CFO salary is about $159,000. In addition, typical CFO compensation includes benefits and long-term investment.
It’s critical to examine this direct cost; while traditional CFO positions require more substantial salary costs, with fractional CFOs, health systems can avoid high fixed expenses and pay only for the time needed.
Strategy and Responsibilities
While traditional CFOs provide deep integration and continuous oversight, a fractional CFO can be tailored to include only the necessary strategic tasks, such as financial forecasting, risk management or cash flow analysis.
A flexible financial leadership could allow health systems to scale services during rapid change without long-term commitments. However, if a health system is looking for more of a strategic financial partner who is dedicated to the mission of the organization, continuous collaboration, the culture, and the staff, a traditional CFO hire might be more fitting.
A fractional CFO is not a long-term answer for large complex organizations, but they can bridge knowledge gaps, implement sustainable processes and provide strategic guidance.
KEY CONSIDERATIONS
When deciding to go with a fractional vs traditional CFO, there are a few key considerations health systems must examine including:
-Direct costs: salaries, benefits, overhead costs.
-Indirect costs: onboarding, training, any additional costs that impact health system finances.
– Flexibility and scalability: adjustable service levels based on immediate needs versus long-term commitments.
– ROI and efficiency: measurable improvements in cash flow, profit margins, operational efficiency etc.
Companies can conduct a comprehensive financial leadership cost comparison by focusing on these elements and deciding which is best for the organization
