When is a Business Coach Worth the Price?

To answer this question, it might be helpful to think of yourself as a professional athlete. If you were a professional athlete (or even a motivated weekend warrior), you would weigh the benefit of improved athletic performance against the cost of the coach.

For most professional athletes, this is a pretty easy calculation. The promise of improved athletic performance (with the associated fame and fortune), almost always outweighs the cost. This is why every professional athlete has one or more coaches in her orbit.

Is the calculation any different for a business owner or executive? For many, it is not. The worldwide coaching industry is reported to generate $9 billion in revenue annually–clearly many business professionals are calculating that improved performance in business outweighs the cost of hiring a coach.

But what are business coaches providing that justifies their cost?

Professional athletes seek coaching to help them break through to the next level of performance whether it be by adopting new training tools or by correcting bad habits (physical or psychological) that limit performance or cause injury. “Business athletes” seek coaching for the same reasons: improved performance for themselves or their organization through the adoption of new tools or the correction of bad habits.

So, do you have bad habits (in your business) or might new tools increase your business performance? Some of the symptoms of bad business habits and old tools that we notice are: 1) underperforming employees staying employed, 2) the best employees being frustrated or leaving, and 3) employees not getting the most important things done.

What is the cost of these bad habits? It depends on the size of your organization and the degree of dysfunction caused by the habits. The only thing we can say for sure is that there are direct costs and opportunity costs (for example, respectively, salary paid to underperforming employees and revenue missed because of one or more underachieving employees).

These direct and opportunity costs accumulate pretty quickly. One recent client, estimated $50,000 in coaching increased his revenue by $2,500,000. A fantastic return on his investment and certainly worth the cost.

What, for example, if coaching helped you or your organization weed out weak or bad employees (the bad habit being to not weed out such employees)? What might the return be on an investment in coaching for this challenge?

One source (Calculating the Dollar Costs of a Bad or Weak-performing Employee by Dr. John Sullivan Jan 6, 2014) suggests the cost of a weak employee is, at minimum, 33% of the average annual revenue per employee (total organizational revenue divided by number of employees) and, at a maximum, 300% of the average annual revenue per employee.

This means, with an average annual revenue per employee of $150,000, weeding out one minimally weak employee would save $50,000. If the weak employee was at the extreme end of weak (lots of absenteeism, several missed sales opportunities or a cause of accidents, etc.), the annual savings would be $450,000 (or $37,500 for every month of continued employment).

Most coaches can help with the process of weeding out weak employees in a couple of hours of work. Thereby delivering another fantastic return on an investment in coaching.

Not all fixes are as quick as this example suggests. For instance, getting employees to focus on the most important priorities takes time to setup and additional time to make part of an organization’s DNA. But, any coach worth her fee, is going to introduce tools and break habits that can improve performance for the long-run.

It’s almost a given that a professional athlete will benefit from coaching when his performance is stalling because of a bad habit (physical or psychological) or because he’s not staying up with the techniques and tools used by his competitors. The same is true of business athletes. In both cases, when performance is lagging, the clear answer is that coaching is worth the price and an investment that, more often than not, brings a fantastic return.

How Organizational Alignment Generates Cash

Improved organizational alignment generates cash by improving productivity and reducing the rate of new hires (because people produce more). Both increased productivity and reduced hiring puts cash in the bank for an organization.

Skeptical? Well, surveys estimate that between 25 and 40% of a worker’s time is wasted in non-productive activities including work toward unclear objectives and participation in ineffective meetings. What impact would you expect to your bottom line if you captured even half of the three to nearly four months wasted every year by your average employee?

So, what can you do to combat wasted time and the cash drain it represents?

You can start by working on setting the priorities for your organization and then getting everyone aligned behind those priorities.

To get people aligned consider four ingredients: clear expectations, progress milestones (metrics), a clear timeline and set priorities for when expectations conflict. In our experience, clear expectations are pretty common. Less common are the metrics that measure progress, a defined review period and a strategy for resolving conflicts between expectations.

When all four ingredients are present, there is tremendous focus and little uncertainty about what exactly needs to be done by when. For example, there is a big difference between the directives: “grow sales” and “your top priority is to make new connections with prospective customers. We expect you to make 10 new connections and to touch base with 25 connections that you have made in the past six months, each week. We expect these contacts to result in two or more sales each week. We will meet every other week to assess your activity and progress.”

This type of focus produces three outcomes: 1) a clear roadmap of how a person needs to behave to be successful, 2) the results you are looking for, or 3) nowhere to hide for the subpar or marginal performer.

The bottom line of this type of focus is ultimately more cash in the bank–put there by the discipline of organizational alignment.

Getting Things Done

Getting things done or “executing” is a kind of grind. It’s not directly exciting or glamorous like a BIG IDEA or a NEW INITIATIVE. It’s not necessarily sexy or the reason why people stand out in meetings (see BIG IDEA).

Perhaps its pedestrian status is the reason getting things done is relatively rare. In any event, getting things done is a skill that can be taught.

If you’ve read, Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charan, then you know one good formula for executing. Our interpretation of the formula goes like this:

  • Know your people and your business–this includes knowing the strengths and shortcomings of your people as well as the opportunities and risks associated with your business.
  • Insist on realism–this means keeping one’s head up and alert. It’s too easy to look at the world through “rose colored glasses” and to ignore critics. Listen to everyone, including employees, customers, potential customers–seek their honest feedback. Remember that people say as much with what they do say as they do with what they don’t say.
  • Identify clear goals and priorities–clear goals are achievable and include the steps that need to be taken along the way to achieving them.
  • Follow-through–who’s responsible, when will a milestone be achieved and what’s the process for reviewing progress? Are these elements clear and is the review frequent enough to stay on top of the progress or lack of it?
  • Reward the doers–intelligently reward behavior that gets things done but don’t over-reward it or ignore the fact that rewarding past behavior should not diminish future desirable behavior.
  • Expand people’s capabilities–invest in your people with training and coaching that helps them meet new challenges.
  • Know yourself–No one person can handle all the complexity of today’s business world. Knowing your own strengths and weaknesses is the first step of seeking the input of others for their perspective as well as their contributions that best compliment your own.

Like with any formula, the formula for getting things done requires attention to all the ingredients. It’s not a hard formula to follow if you really attend to all the ingredients but that is easier said than done. One suggestion is to make a list of all the ingredients listed above and then ask yourself, once a week, if you are including each in your day-to-day work. Try it, you may be surprised how this little exercise helps you really get things done.