While coaching is not and has never been all about money, the “money is important if only for financial reasons,” as Woody Allen once quipped. Many coaches find setting rates for their coaching services to be a challenge. The conversation about money with sponsoring organizations and clients has to be thoughtful and based on a deep sense of value and respect between the coach and the client. Such value is less about benefits or features-and more about results. So, talking about the 10 different services that will come with the coaching package (a 360 assessment, weekly meetings, quarterly reports, periodic evaluations, etc.), is far less compelling to a sponsor-the person or organization hiring the coach, than what he or she views as essential to the organization-solving the perceived or stated problem.
Some sponsors are very strategic and hire coaches to help the organization and its leaders grow toward a vision; however; most a however, are tactical and come to executive coaches when they identify a pain point. Often, it’s an executive with a behavioral challenge rather than a technical issue. In fact, competency issues are usually easier and faster to solve. A sponsor can buy a particular software system or send the employee to school or for training, and that, along with some experience, usually solves the problem. However, behavioral issues are much harder to solve because they’ve often been ingrained for years and might even remain invisible to the client. If a particular client has been a procrastinator, an arrogant know-it-all, or abusive in his work relationships, he’s often not even conscious of what he is doing or the impact of his behaviors. As the saying goes, “Fish are the last ones to discover water.” As we’ve seen time and again, clients are often the last ones to discover their true behavioral challenges, partly due to lack of awareness, and often because nobody will give them direct and honest feedback.
So, when a sponsor, typically the CEO or HR department, contacts an executive coach about an executive, his or her troublesome behavior has likely begun to interfere with corporate progress, morale, or culture. Alternatively, if it’s not about a problem behavior per se, the CEO might want the client to be coached to get to the next level of leadership. But in either case, there’s a perceived issue or behavior that needs to be changed or developed, either a potential career de-railer or a bottom-line enhancer. This perception precipitates the conversation between coach and sponsor. Often the conversation revolves first around the sponsor describing the employee and the issue surrounding performance. The description might sound like this fictional account:
“Jack’s a great COO, but he has a way of talking down to people that makes them feel stupid and eventually angry. He has a big ego-a smart guy sure-but at times, a lot of time actually, he’s dismissive and comes across as, well, arrogant.”
The coach might ask for some examples and pose specific probing questions to help get a sense of the issue(s). When the sponsor finishes describing the situation, he will invariably ask the coach, “Can you help?”
Here’s where you get to choose the path that will help you seal the deal that’s a win for the sponsor, the client, and the coach. Most coaches will first describe their particular process, which usually involves a number of steps from helping the client through several phases: 1) self awareness and understanding; 2) goal setting and accountability; 3) action learning and execution; and, 4) Evaluation and re-establishing new goals. In such discussions, coaches often will use both hypothetical and real, but unnamed previous clients, as a way of demonstrating how their process works.. In a number of cases, former clients often agree to serve as direct references for the coach, which is even more powerful.
In this article, we’d like to offer you an alternative road to travel because the sponsor may not, at this point, be ready for or interested in the process or the benefits of your coaching methodology. Often, the sponsor may not yet be aware of, or convinced of, the value proposition — the what’s-at-stake-for-the-organization and how you, as a coach, can help.
The Price Discussion
Back to the path more traveled: After much discussion, the question of cost arises. This is the make-or-break point in the discussion and requires keen attention. If all that has been discussed is the problem and the coach’s solution, no matter how clean and effective, a discussion about money can break the deal at this point, unless the coach finds what we’re calling “perfect pitch.” Not pitch like baseball or sales pitch, perfect pitch as in harmonious music. Such a pitch is based on value-first to the sponsor, then to the coach. In marketing, the customer value proposition is the relationship between an offering by a vendor to a customer and the relative worth of the service or product. Simply put, if you come into my store and buy a bag of groceries, you expect that what I sell you is worth the price you pay.
In coaching the value proposition is similar, yet different. Coaches offer experience in the coaching process-the ability to take an executive on a journey of self-discovery and change. In a real sense, it’s the hero’s journey, where the coach acts as trusted guide, not so much wise teacher or even mentor. The coach becomes a trusted partner to whom the client must remain faithful to a promise of self- improvement.
So, what does the coach provide? Answer: A safe place for the client to explore change. Whether on the phone or in a private office, it’s the only place where an executive can come to grips with a challenge that may have plagued him or her for years-something that has likely cost both the client and the company large amounts of time, money, and aggravation. This cost to the sponsor, client, and the organization is one of the center pieces of “perfect pitch.” Remember, pitch in this case is not an advertising pitch, rather it’s tuning into the sponsor’s wavelength to help understand the true value of the coaching experience.
To illustrate where coaches often take a detour from perfect pitch, let’s look at a conversation between a coach (C) and a sponsor (S) after both have spent an hour or so discussing a potential executive client to be coached. Remember the sponsor could be the CEO, the HR department head, or another leader but is not necessarily the person to be coached-the client.
S: So, now that you know about our situation and we know about you, how much will the coaching cost?”
C: I typically only coach for 6 months or longer.
S: OK, what’s your 6-month rate?
C: It’s $X (this number varies so greatly on the executive coach, you can fill in your own number from $5,000 to $100,000)
S: Wow, that’s steep.
C: Remember, I do a 360-assessment, we have regular coaching sessions, I set up an evaluation to determine progress after 4 months, I….
This conversation continues with the sponsor trying to mentally fill his value bag with your itemized coaching offerings. The problem with this approach is that it is coach-focused, not organization-focused or client-focused. Invariably, sponsors try to relate the service to hours invested-like lawyers-which is a broken model for our purposes. Further, such sponsors never seem to fill the bag to their satisfaction largely because they don’t understand the process or have enough experience with it to feel like they’re ever getting the commensurate level of value back. In a sense, the sponsors and coach are on two different levels of pitch-and largely out of tune, even if the sponsor finally, begrudgingly agrees.
The Cost Discussion
So, how do they both get on the same pitch, a perfect pitch? This brings us to the other central piece of the puzzle-the sponsor’s ultimate goal or vision for the organization that is potentially threatened, impeded, or halted by the behavior of the individual being discussed. By bringing the sponsor’s awareness to the positive purpose, the thing the organization is working towards accomplishing, and what that potential upside is worth to the organization, the coach can create the container in which the sponsor can start to see the value. In other words, the sponsor’s or organization’s ultimate goal or vision is the grocery bag itself. The simple answer to creating perfect pitch is to get the sponsor to articulate the organization’s goals and pursuits and to define what the current problems are costing the organization. Start with the organization, not you, the coach. Here’s how that conversation might go:
S: So, now that you know about our situation and we know about you, how much will the coaching cost?”
C: I need some more information to answer that accurately. First, let’s look at what you are trying to accomplish. What is the organization’s major objectives or goals for the next year or two?
S: Well, we have to prepare for the mass exodus of retiring boomer executives, and our goal is successful and seamless succession planning and leadership development for our emerging leaders, plus rapid on-boarding so we can meet our production goals.
C: Great! What’s the potential business outcome of that happening? In other words, when you’ve got leadership bench strength and a strategic succession plan in place to seamlessly transition your retiring leaders out and your emerging leaders into action, what is either the cost savings or bottom line increase that will create for your company?
S: Well, if I had to guess, I’d say a cost savings of about $1.2 million when you factor in the costs of attrition, training, on-boarding, and uninterrupted production schedules.
C. OK, and on the flip side, can you describe in some detail how the problem we’ve been discussing surfaces in the workplace?
S: Jack’s the COO, like I said. He’s often impatient, even brutal with young executives.
C: How so? Can you describe what he actually does?
S: In briefings, he says things like “What stupid proposition.” Or “I can’t believe you said that. Or, what planet are you living on?”
C: What’s the fallout from such encounters?
S: We’re starting to lose young executives.
C: Who and how many?
S: The smartest ones. In the last year 5 of our rising stars have left for other “opportunities.”
C: What’s that costing your company?
S: The HR department calculates roughly 4 times their annual salaries, so in this case about $2 million in the past year.
C: Two million. I see. And this pattern has been going on for how long?
S: Certainly, since I’ve been here, now going on 5 years.
C: So at this point, in just this area, you’re talking about a $10 million dollar loss to the company?
S: I never thought of it that way. But yes, 2 times 5…yes I guess that’s accurate. Wow. $10 million!
C: Now, add onto that your previous estimate of $1.2million dollars worth of cost-savings if you succeed in the healthy transfer of leadership. So, you’re looking at a potential business impact of $11.2 million dollars, is that correct?
S: Yes, that’s sound right. Wow. I never tallied it up like that.
C: Would it be worth it to you to spend a small percentage of that on executive coaching to create a solution that saves the company a good portion of that $11.2 million dollars?
In this case, the coach has helped, in a sense coached, the sponsor to hear himself or herself actually say the words–$11.2 million dollars – and feel the weight and magnitude of that amount. The coach has helped the sponsor quantify the size of the problem. Actually, this conversation might have gone on for a much longer time as the two discussed other impacts in the company of the client’s challenge, for example, Jack’s impact on the board of directors, other senior executives, and even customers. Typically, such a challenge like this in a senior executive gets multiplied many times as it trickles down, then avalanches down throughout an organization.
Think that the $2 million a year cost of such a challenge sounds very high? Consider that many major law firms typically lose roughly 20% of their associates each year, many of whom are salaried at well more than $100,000 a year! It’s become almost an industry standard. The larger law firms are spending their capital at high rates, but consider it a cost of doing business. The cost of customer relations and retention, retraining, and culture adjustment, not to mention reputation has deep impact well beyond even these numbers.
So, then what does the conversation look like once the client has been helped to define the scope and size of the problem? Let’s see:
C: That sounds like a big problem. Last year I worked with a company with a similar problem. It wasn’t easy.
S: So what happened?
C: It took a year. The executive fought the process for the first several months until I said I wouldn’t continue unless we came to an agreement.
S: And he did?
C: Yes, she finally did. We re-started the process from square one. In a year, she wasn’t perfect, but things had begun to change.
S: How did you know that?
C: I conducted an evaluation with senior management, peers, and subordinates. The numbers showed strong forward motion and the number of turnovers reduced.
S: So do you guarantee that?
C: I can’t guarantee change because it’s in the hands of the client. What I do guarantee is that I’ll manage the process, measure results, and will be there for the client. In my years of coaching, I’ve rarely found someone committed to change who doesn’t make significant headway.
S: So, what’s all this cost?
C: For a problem of this size, say $11 million, I charge a flat rate of $X thousand dollars for a year of coaching solutions, which works out to be a very small percentage of the scope of problem you just laid out (calculate and articulate x%). If it is worth that percentage to you to control a problem that could ultimately cost you an extraordinary amount of time, talent and money in your company, then we can look at the process for getting started.
S: That sounds good.
Conclusion: The Perfect Pitch
“That sounds good.” Consider how this is a very different place to enter into the contracting phase of coaching rather than “Wow…that’s steep!” If experienced, knowledgeable, effective coaches are to earn a respectable living, it’s necessary to charge professional rates. In order to do that, coaches will need to frame the customer value proposition in terms of the customer’s needs and the results that will speak to the client and organization. However, often customers have never quantified the size and scope of the problem caused by a destructive or lacking executive behavior. Not having done so denies them the opportunity of conducting a rational cost-benefit analysis relative to the fee structure from an experienced professional coach. The net result is that either the coach bargains down the cost, loses the contract to someone cheaper, or the sponsor over-expects or feels unsure and skeptical. In any case, the starting place is not a realistic, helpful, or healthy one. In such a case, both sponsor and coach are singing a song on two very different keys-and out of tune with each other.
Framing the issue’s size, importance and cost to the organization, starts the discussion at a very different place-a realistic, rational one. Permitting the sponsor to frame the scope of the problem, allows both sponsor and coach to actually “hear” the value proposition as it occurs in the sponsor’s reality. Thus, the two talk with each other, not at each other. It is a collaborative co-creation that utilizes the coach’s best coaching skills. Therefore, sponsors and coaches get to hear each other’s value-based words of relevance, meaning, and true cost of the coaching bottom-line.
Coaches need to learn how to have conversations about money-how to talk with business executives who have strategic, financial, political, and accountability concerns. Coaches have to not only put themselves in the shoes of the corporate sponsors they serve, but also help those sponsors ” hear,” in their own words, the scope and cost of a problem as well as the scope and upside value to the solution. Yes, coaches are there to help, and there is a commercial reality that coaches cannot deny. The value proposition is not only what’s in it for the organization (and sponsor and client), but there is a coach’s side to the value equation as well, and that’s where the money comes in. When coaches are catering to the value of the results that can be co-created in the client’s reality while pricing coaching services professionally and commensurate with the magnitude of the solutions, then there is equal value. Only then can both coach and sponsor get in perfect pitch.