Essential Business Coaching

Averil Leimon, Gladeana McMahon, Francois Moscovici

• Publisher: Routledge
• Year: 2005
• ISBN:
  9781135445911
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Do coaches need to be psychologists, business people or both?

Essential Business Coaching offers a much-needed answer to the question of what makes a good business coach.

The authors draw on 60 years of combined experience to provide an in-depth review of best practice and theory. They provide a thorough examination of the changing nature of work, the need for new sources of competitive advantage and the benefits of investing in coaching. Useful ideas for further reading are found throughout, along with numerous examples of real business coaching situations. The inclusion of interviews with both corporate sponsors and individual clients provide a unique insight into what makes good coaching in practice.

The combination of solid theory and abundant examples make Essential Business Coaching an invaluable tool for all business coaches as well as counsellors, psychotherapists, human resource professionals and senior managers.

1
Introduction: why do we need business coaching?

So what is business coaching and why does it exist? This chapter describes how the business environment has evolved to a stage where coaching has become a source of competitive advantage. It also examines the question of return on investment and takes the view that coaching is probably worth the money spent. The next chapter will deal with definitions, distinctions and questioning frameworks relevant in a business context. At this stage, we will simply argue that business coaching:

• is primarily a process, as opposed to an expertise in content (especially in a business context);
• rests on a deep understanding of how the mind works as well as of the client’s context (again, particularly in a business context);
• is never limited to work issues only, even if organisations would prefer it this way; and
• is never purely remedial or ‘for stars only’; in particular, the perceptions of the sponsoring organisation may well be very different from the reality of the client; other useful keywords include: solution-focused, collaborative, exploratory and implemented.

Historically, coaching had been used in a business context as a remedial process – now sometimes referred to as performance coaching: it was (and still often is) about an individual who did not quite fit the expectations of the business or who had performance or personality ‘shortcomings’.

However, as the corporate sector has come to realise the impact of fully utilising and developing its human capital resource, the benefits of ongoing professional development through coaching have become more apparent and desirable. Coaching for excellence assumes that the individual is already fully functioning and successful in what they do. In a rapidly changing corporate environment even the ‘star’ performer will benefit from having the opportunity to reflect on what works well for them, how to sustain excellence and how to be creative and embrace change in a positive and innovative manner.

The rapid nature of change in society and business has had a major impact on the way that careers are perceived. There is no longer a rigidly defined hierarchy of roles, accompanied by specific training to achieve promotion. Adaptability and flexibility are highly prized yet there is recognition that as humans our natural, spontaneous style of responding to change is often distorted because of erroneous personal beliefs, maladaptive habits or insufficient motivation. Hence coaching has emerged as an accelerated means of learning on the job.

Beyond individual development, organisations have also realised that strategic change programmes are ineffective and fail every time if the people issues – once considered ‘soft’ issues – are not effectively addressed. The reality of maximising success through people is gradually becoming more than an empty slogan in organisations which need to succeed and recognise that their only competitive advantage comes through giving their people that extra edge.

Loyalty is now a fairly outmoded concept. People move jobs more frequently than in previous generations. This can constitute a haemorrhaging of talent and investment. Coaching enables companies to retain the very best talent by ensuring motivation remains high and development is ongoing. It gives the opportunity to unleash potential and lock in new and productive behaviours.

Our changing business world

Companies do not start to spend money in fairy large amounts on a whim, at least not for sustained periods. In order to understand the attraction of business coaching, it is worth tracking key cross-industry changes of the last 10–20 years. This will also constitute a useful roadmap for the aspiring business coach.

The loss of competitive advantage

Companies are forever looking for new and better ways to compete with one another. The key concept penned by industrial economists is that of ‘sustainable competitive advantage’ or the ability to generate superior profits over the long term. This can come from any aspect of the business: superior access to distribution, proprietary technology, influence on regulators, cheaper sources of finance, first mover advantage and so on. This search for a better mousetrap is the essence of business and will never go away. However, three phenomena have eroded traditional sources of competitive advantage in the past ten years or so.

Business process reengineering and the accompanying middle management downsizing have had a major impact on all industries: there is now a ‘best way’ of doing things at every level of every industry which is well documented along with an optimal level of costs and staff. This has been reinforced by the widespread adoption of Enterprise Resource Planning systems (ERPs), specialised software that drives the whole company from sales to manufacturing, to delivery and beyond. These systems have been designed around industry best practice, resulting in all major participants in a given industry to adopt similar processes. This has led to major productivity gains but also to a systematic loss of competitive advantage as whole sectors have become more homogeneous.

The next big change has been the emergence of business process outsourcing: if a company was not ‘best in class’ in a given process, then why keep it in-house? New companies emerged who took over whole departments, initially in non client-facing functions such as finance or payroll administration. We currently observe the next phase of this phenomenon with the outsourcing of customer functions such as call centres to India or North Africa (for French speakers). Again, we see whole industries outsourcing the same processes roughly at the same time. This means that the financial performance of various industry participants will improve roughly at the same time: no long-term advantage there.

The fragmentation of the value chain has been made possible by the widespread adoption of cheap and standardised technology. Few companies today do everything in-house: take for example the supply of domestic electricity: from power generation to transmission to meter reading or sales, the role of the modern electricity distributor is today that of an orchestrator of external suppliers. It may keep in-house core skills such as marketing and billing but it is a very different company from the ‘electricity board’ of only 15 years ago. We are still far away from the vision of totally disaggregated industries linked through the internet, where buyers and sellers continuously negotiate the best deals, but again there is pressure for each industry to adopt a best practice model based on core capabilities. In other words, where there was previously a single participant in an industry, there are now 10 or 20, each helping to make the industry more competitive, but also more homogeneous.

We are therefore now at a stage where near-instant imitation is possible: companies get their finance from the same global capital markets, they often outsource their manufacturing to the same suppliers and buy their patents from the same global databases. Marketing innovations are identified and copied nearly instantaneously: for example, a few years ago a British supermarket chain heard about a new type of washing powder (capsules) in discussions with a manufacturer and was able to bring its own brand version to market ahead of the original!

So where should sustainable competitive advantage come from? Our view is that people represent the last unexploited frontier. The reader may already be convinced, but the point we are making is that the business coach should view their intervention as a way to help create competitive advantage. People are our greatest assets, ‘but only when we are growing’ should run the subtitle ... Staff are often seen first and foremost as costs and what is true at the micro level (the need to recruit or retain the best team) often breaks down at the macro level (aggregate costs). Coaching should therefore pay for itself many times over – as we will see below – and generate competitive advantage. We would urge the business coach to consider the specific characteristics of their client’s industry and think creatively about how to create competitive advantage from having more motivated and effective staff.

The end of apprenticeship

Much has been said and written about multiple careers and the ‘war for talent’. The fundamentals are still here: economic growth means that more managers are needed and the desirable management population of 35–45-year-olds will continue to shrink significantly in the next ten years as baby boomers retire. This means that executives expect to be wooed at regular intervals into new careers. The seminal McKinsey article argued that talented executives were attracted by three things: company ‘brand’ (expressed as culture, values and challenges), an exciting job (autonomy, challenges and advancement) and compensation (relative and absolute pay, location and lifestyle). A business coach has an obvious role to play in improving most of the above and an intervention can usefully be framed both qualitatively and quantitatively as one of the tools of the war for talent.

But if executives change companies regularly, who will invest in their development? Some industries have only a limited interest in developing managers beyond technical training. Investment banking for example is a classic case: owners see no point in developing or retraining when it is just as easy to throw away and replace. However, this does not mean that bankers do not have a need for development. Many end up paying for coaching from their own funds. Beyond this, we see a genuine issue, which we call the end of apprenticeship. When staff stayed in companies for 10 or 20 years, there was ample time to develop them both on technical and so-called soft skills (those intangible and hard to develop skills that trip many managers as they knock at the boardroom door ...). Classic careers with plenty of formal development included brand management, commercial banking and management consulting. Others tended to privilege modern forms of apprenticeship, with limited training but plenty of learning by doing: solicitors, hotel managers or journalists, for example.

The business coach has an important role to play in helping corporations develop these humane skills within the narrower time frame of a fragmented career. Looking at our clients, we see that managers have clearly different needs depending on age and experience: typically managers originate from a specialised area and need help in becoming skilled communicators and people managers. This may be a good time for specific, narrow interventions (e.g. to develop confidence, people handling etc.). As they progress, there is often a need for switching from a specialised delivery role to a more generalist one where influencing and networking skills become more important. Later, having achieved much, some executives may question their long-term role and look for a new challenge. We would encourage business coaches to develop a career-stage focused offering to their clients: it will be easier to sell as a relevant investment and the return will be easier to demonstrate to the sponsor.

Is coaching worth the investment?

If companies are going to create competitive advantage by investing in development through coaching, they need to establish whether coaching achieves a decent return on investment (ROI) and if it provides better value for money than other development approaches. The last question is fairly easy to address: as the reader will see in the various interviews (Chapters 5 and 6), coaching is normally one of a range of interventions. The variables to consider are time, cost and the ‘direction of the information’: the more content needs to be delivered from coach to client, the less appropriate one-to-one work is. An essential, although frequently neglected, variable is that of durable change in behaviour: one-to-one is by far the most cost-effective way to design, install and rehearse desired behaviours. Many HR professionals understand this and make coaching part of a blended curriculum. Examples of mixed interventions are discussed in greater detail in Chapter 4.

The vexed question of ROI

ROI is notoriously difficult to measure convincingly for investments in people. One of the authors spent many months analysing the benefits of web-based HR systems (eHR) for corporate clients and came to the conclusion that it was pointless to create sophisticated case studies, as financial analysts could always challenge assumptions (how do you measure the productivity of executives? How do you measure ‘speed to uptime’ for new recruits?). If even companies notorious for their ability to measure everything, such as Cisco Systems, tell us in interviews that ‘after 18 months, it is probably too early to measure ROI in coaching in a meaningful way’, what should we do?

Below, we examine several attempts at measuring the value of coaching, including our own, and will let the reader conclude. Our take is that coaching is definitely a worthy investment, provided that buyers and clients take the trouble to measure the results. Just because something is difficult to measure doesn’t mean that it shouldn’t be done!

Research from the Association for Coaching

During the summer of 2004, the Association for Coaching carried out a detailed survey on the ROI of corporate coaching. The results were illuminating for a number of reasons: first they showed that very little objective measurement took place; second that coaching was used to improve personal performance (as opposed to developing teams or linked to a specific project) in 3/4 of the cases, making measurement even more difficult. Only four in ten respondents could confidently point to a quantitative benefit, but almost all reported significant improvement in motivation and people management, with 2/3 willing to be coached again.

The six-to-one rule

A review of the literature on ROI points to a convergence of opinion, particularly in the USA, that coaching pays for itself six times over. Here are some examples:

• In 2001, Metrix Global computed a return of 530 per cent based on 43 interviews at Nortel, or 790 per cent taking into account the impact on staff retention.
• PricewaterhouseCoopers has been using coaching worldwide since 1998 and estimates its return at six to one (CA Magazine, March 2004).
• A 2004 survey of 100 coached clients by Manchester Consulting (US) also showed a six times return. Specifically, the biggest tangible business results the coaching yielded were: improved productivity (53 per cent), better quality work product (48 per cent) and greater organizational strength (48 per cent). Intangible benefits were: better relationships with direct reports (77 per cent), better relationships with supervisors (71 per cent), improved teamwork (67 per cent), better relationships with peers (63 per cent), and greater job satisfaction (61 per cent).

The benefit of this six-to-one rule is that even if it is wrong by a factor of three, it still means that coaching earns twice its cost over a short period of time, significantly more than most internal investments a company can make ...

Basic arithmetic

There are several ways to quantify the potential impact of coaching. Here are two examples derived from our experience.

Coaching has a significant impact on staff retention: successful clients can be restless and think that life would be better elsewhere; conversely clients with development needs might have been isolated by their organisation and be expected to leave. In the UK, replacing a mid-ranking executive costs a minimum of £50,000 (recruitment fees and advertising, excluding indirect costs such as loss of business or HR processes). This means that for each coaching intervention resulting in a legitimate retention there is a direct ROI of five times, assuming a cost of £10,000. On a programme of, say, ten clients resulting in two retentions, you would still get all your coaching money back, excluding any other benefit.

Many ROI surveys talk about increased productivity. This is difficult to quantify but it would be reasonable to expect an increase of productivity of 10 per cent across the board, whatever this might be. If we now expect executives to earn on average £100,000 and to generate three times their direct cost in sales for the company, this means that coaching will have an ROI of three – again for an investment of £10,000 per client. One could take the calculation to gross margin or net earnings, but it is not difficult to make a broad arithmetic case for coaching. The difficulty so far has been to measure the direct impact of coaching on specific people.

In conclusion

Business coaching has a long-term role to play in the world of shorter careers, outsourced processes and instant imitation. Although the industry is still in its infancy and has difficulties making its case to those holding the purse strings, it should be seen as a key means of sustainable competitive advantage. In plain language, happy people are more productive and innovative, and this is what is needed to beat competitors day after day.

We now need to examine the theory and practice of business coaching in order to understand where and how this competitive advantage can be created. This is the object of the next two chapters.

2
The theoretical framework of coaching

What are we talking about?

Now that we understand the economic context, it is time to turn to definitions and frameworks. This chapter will position business coaching in the range of other person-to-person interventions, review useful models of coaching and propose the simple model to be adopted for the purposes of this book. It will also clarify the essential distinction between process and content in coaching.

The process of providing definitions can be tedious and many believe that old saying ‘you can’t describe an elephant but you know what it is when you see one’. Coaching however suffers as a profession from being ill-defined and poorly regulated, so it is worth clarifying what coaching does and does not involve. People still seek to understand the distinction between mentoring and coaching and are at great pains to distinguish coaching from anything which smacks of counselling and all its remedial implications.

Coaching now encompasses a very disparate range of applications from the development of specific skill sets, to personal effectiveness, to presentation, assertiveness...