Coaching - the Business Case

Coaching - the Business Case

For years most organizational pundits have known that it is not how much you know but how well you relate to other people in the organization that really matters. Research by the Center for Creative Leadership has found that the primary causes of derailment in executives involve deficits in emotional competence.

The three primary ones are:

  1. difficulty in handling change
  2. not being able to work well in a team
  3. and poor interpersonal relations.

Effective coaching works with executives and others to develop their proficiency in working with change. It helps them identify when teamwork is important and to use their skills to foster it. Coaching builds skills and capacities for effective working relationships.

Coaching paves the way for decision-makers to create higher levels of organizational effectiveness through dialogue, inquiry and positive interactions. Coaching creates awareness, purpose, competence and well-being among participants. Coaching is NOT another feel-good exercise based in soft skills that has no correlation to the bottom line.

In an article in the Harvard Business Review (Jan-Feb 1998) entitled  "The Employee-Customer-Profit Chain at Sears", by Rucci, Kirn, and Quinn, a model was developed indicating that 5 units increase of employee attitude led to 1.3 unit increase in customers’ positive impression, resulting in 0.5% increase in revenue growth.

One study examined the effects of executive coaching in a public sector municipal agency. Thirty-one managers underwent a conventional managerial training program, followed by 8 weeks of one-on-one executive coaching. Training - which included goal setting, collaborative problem solving, practice, feedback, supervisory involvement, evaluation of end-results, and public presentation - increased productivity by 22.4%. Training and coaching increased productivity by 88%, a significantly greater gain compared to training alone. (Public Personnel Management; Washington; Winter 1997; Gerald Olivero; K Denise Bane; Richard E Kopelman)

Between 25 and 40 percent of Fortune 500 companies use executive coaches, according to the Hay Group, an international human-resources consultancy. According to a survey by Manchester, Inc., a Jacksonville, Florida, career management consulting firm, about six out of ten organizations currently offer coaching or other developmental counseling to their managers and executives. Another 20 percent of companies said they plan to offer coaching within the next year.

Although it was once used as an intervention with troubled staff, coaching is now part of the standard leadership development training for executives in such companies as IBM, Motorola, J.P. Morgan Chase, Hewlett-Packard and many others. Companies such as Merrill Lynch, and sales-based organizations such as insurance firms use coaches to bolster performance of people in high-pressure stressful jobs.

In some cases, the coaching is geared toward correcting management behavior problems such as poor communication skills, failure to develop subordinates, or indecisiveness. More often, however, it is used to sharpen the leadership skills of high-potential individuals. Coaching can ensure the success, or decrease the failure rate, of newly promoted managers.

"People are in a legitimate state of doubt - about galloping technology, globalization, heightened competition and increased complexity,"  says Warren Bennis, who teaches leadership at the University of Southern California. "They need someone to bounce ideas off of and to listen to their existential grousing."

Michigan-based Triad Performance Technologies, Inc. studied and evaluated the effects of a coaching intervention on a group of regional and district sales managers within a large telecom organization. The third party research study cites a 10 to 1 return on investment in less than one year.

The following business outcomes were directly attributed to the coaching intervention:

  • Top performing staff, who were considering leaving the organization, were retained, resulting in reduced turnover, increased revenue, and improved customer satisfaction.
  • A positive work environment was created, focusing on strategic account development and achieving higher sales volume.
  • Customer revenues and customer satisfaction were improved due to fully staffed and fully functioning territories.
  • Revenues were increased, due to managers improving their performance and exceeding their goals.

The Confusion Over What Coaching Is

Coaching means many different things to different people. In many companies and industries coaching is showing up in several ways. One is through the use of external coaches to work with key or targeted individuals (CEO’s, high potential executives, problem managers). Secondly, some companies have hired internal executive and management coaches. Thirdly, they have trained their own management and executive staff in coaching skills. While all of these are valuable initiatives, each has unique implications.

For purposes here, business and executive coaching is defined as an interaction that occurs between people that produces desired performance, change or transformational results by promoting personal and organizational awareness, purpose, competence and well-being.

How coaching is experienced by people in organizations, however, is not always clear. There is a great difference in the coaching experience that depends on whether the person coaching is truly independent or not.

Coaching Without Responsibility, Accountability and Authority

It is easy to mistake a coach for a person (leader, manager, teacher, trainer, mentor, etc) coaching as they both use the same skills; however, the critical issue is that of responsibility, accountability and authority over outcomes. This key differentiation separates coaches from leaders, mentors, managers, teachers, trainers, facilitators and counselors coaching.

The difference is important because it shapes the nature of the coaching relationship. Only with an external coach is the focus solely on the agenda of the person being coached as part of a business or organizational system. When a manager is coaching, or using coaching skills, there is at the very least implicit pressure to change in a direction desired by others. That pressure may also be present when an organization designates internal personnel to do coaching.

With an external coach the focus is on the development of the person being coached. The most effective coaching will help clients identify the relationship between their own development and requirements of the business. There is a natural tension between these two streams that a coach can help clarify. By asking questions designed to examine assumptions and beliefs, the mental models of the person being coached are explored. This leads to double-loop learning (Argyris and Schon) where a person can improve not only performance, but emotional intelligence as well.

A truly effective coaching experience is one that provides long-lasting results. On the surface, coaching sounds like goal setting with accountability and motivational pumping up. The athletic coach comes to mind. Even Ken Blanchard co-authored a book with Don Schula, Everyone’s a Coach. But the truth is, not everyone’s a masterful coach.

The Critical Need for Impact Studies

What is not always clear in organizations is how initiatives of any sort dealing with intangible effects can impact the bottom line. Some examples of the ways that coaching programs affect financial results are as follows.

One study conducted by MetrixGlobal for an executive coaching program designed by The Pyramid Resource Group was impressive. Pyramid coached over 70 executives from a multi-national telecommunications company that included participants in the United States, Canada, Mexico, and Brazil. MetrixGlobal performed an extensive survey of 43 coaching participants that yielded the following results:

  • Coaching produced a 529% return on investment and significant intangible benefits to the business.
  • Including the financial benefits from employee retention, coaching boosted the overall ROI to 788%.
  • The study provided powerful new insights into how to maximize the business impact from executive coaching.

It remains critical to reiterate the need for coaching to demonstrate the impact on the bottom line. Money is acknowledged as an indicator of value in the marketplace. Peter Drucker often refers to profit as the return on invested capital. We must always evaluate the return to our human and financial capital in light of profitability. It is critical to establish measurements before coaching programs are implemented in order to account for the change induced by coaching. Few organizations take the time to do this.


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