Coach's Casebook

The Financial Case for Coaching

The Financial Case for Coaching

Coaching has had a mixed reception in the business and corporate arena.  Although a very powerful and effective approach to performance improvement, there are still some that do not recognize the benefit of coaching for their staff or themselves.

In part, this has been the result of experienced people believing that because they have been successful in business, they can coach people to similar levels of success.  This attitude is admirable, but there is a significant gap between success in business and having the knowledge, skills and ability to coach.  Not  everyone that  ‘hangs up their shingle’ as a coach can deliver the level of behavioural change needed to overcome a hurdle or take you to the next level of performance.

Furthermore, there has yet to be a sound argument that justifies the expenditure on a coach, particularly when the results of some of those poor coaches is less than impressive.

On the positive side, there are a number of highly capable coaches that make a real difference for their clients.  Coaches that turn poor performers into high achievers and take high performers to a level of excellence that makes them stand out from the crowd.
In my humble opinion, Marshall Goldsmith is such a coach and I recommend his Blog for anyone that wants to see the benefit that coaching can bring.

What does a coach do? Well just as you have the ability to unerring judge others and what they could do better, a coach can help you apply that same acumen on your own performance and help you find out what you could do better.

Is it worth the investment?

So is coaching something that provides the Return on Investment you make?

Let us consider a typical situation where coaching can be used to benefit the organisation.  That of a manager or executive that is not performing to the level required.

Individual Performance Shortfall

Consider the case where an individual is not performing at the level required for the post they hold.
Before they were recruited or promoted, they had been identified as someone who had the potential to perform at this level, but it is just not happening.

Your potential options are:

  • Return the person to their previous role (if still open)
  • Fire the person for poor performance
  • Coach the person to achieve the level of performance required and perhaps better than required

If you return the person to the previous role the impact is:

  • Loss of self esteem and credibility for the person with a subsequent impact on morale and perhaps a self induced move from the company
  • You still need to recruit a person for the senior position which could take 6-8 weeks
  • The cost of recruiting can be in the order of 2 month’s salary for the post (say £10000) as you must advertise, sift CVs, interview, induct and then allow the person to grow into the role before they begin to perform
  • Loss of operational performance and revenue while the new recruit is adapting to the new environment
  • Competitors are likely to exploit the drop in capability
  • Customers may be concerned about the change of key roles
  • Shareholders may have concerns about the selection process and judgement of the recruiter

Estimated financial impact: £10000 plus loss of revenue due to reduced performance.

If you fire the person for poor performance the impact is:

  • Concern in the organisation that poor performance will automatically result in being fired
  • Again you will still need to recruit a person for the senior position which could take 6-8 weeks
  • The cost of recruiting will again be in the order of 2 month’s salary
  • There will still be the loss of operational performance and revenue while the new recruit is adapting to the new environment
  • Again competitors are likely to exploit the drop in capability and customers and shareholders may have concerns

Estimated financial impact: £10000 plus loss of revenue due to reduced performance.

Coaching the Individual:

If you engage a coach to support the person, the cost will vary but is unlikely to be more than £500 per day or £150 per hour for individual coaching.
Typically, coaches charge by the hour and so the outlay will be less if the individual only needs a series of one hour sessions.
Behavioural change requires the commitment of the individual and so there is no guarantee of success.  However, if correctly represented to the person concerned, you can  ensure that at least they will be motivated to succeed and commit to the process.

Estimated financial impact: £750 plus some loss of revenue but with improving performance during coaching period.

In summary:

Return the person to their previous role:      £10000 plus
Fire the person:                                         £10000 plus
Coach the person:                                      £150 per hour (approx) for typically 5 hours

There is, of course no guarantee that the coaching sessions will generate the level of performance required, however, if the organisation has seen potential in the person then at least coaching will bring the person closer to that level of performance.  This may be enough of an improvement to justify the coaching, with a view to follow up sessions or q recognition of an acceptable and improving performance as the person gains more experience in the role.

While not definitive in costs, this gives a broad indication of the potential financial benefit that coaching offers.

Dare to Aspire

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