The State of the Coaching Industry

Many of the readers of Great Leadership are probably familiar with the field of executive coaching; in fact, some of my favorite regular readers and commentators are coaches. There’s probably also a good percentage that are only vaguely familiar with coaching, and a few that have never heard of it.

In a nutshell, executive coaching is a series of on-going, regular one-on-one, confidential sessions between an executive and an external (or sometimes internal) expert who specializes in working with seniors leaders.

A few months ago, Harvard Business Review conducted a survey of 140 leading coaches in order to find out more about this mysterious industry. Despite the widespread use of executive coaches, little is widely known about who they are, what they do, and how much they earn.

No matter what your level of familiarity with coaching, I think you’ll find the following summary of the research (and maybe my commentary) to be enlightening.

The Top 3 reasons coaches are engaged:

1. To develop high potentials or facilitate transition: 48%

2. Act as a sounding board: 26%

3. Address derailing behavior: 12%

20 years ago, I had never heard of executive coaching. 10 years ago, coaches were mostly hired to fix obnoxious CEOs or high level executives who knew how to get results, but left a wake of bodies behind them (i.e., Bob Nardelli). It was usually a clandestine kind of work, and certainly nothing you’d want to admit to needing as an executive.

Now, it seems that most companies hire coaches to work with their high potentials, or when an executive is hired or promoted to help them through the transition. I see this as a positive trend and a smarter use of limited leadership development dollars and time.
Invest in your “A” players, and use performance management for your “C” players!

How much it costs:

The median hourly cost of coaching is $500.00 – the cost of a top psychiatrist in Manhattan! Some charge as much as $3,500 per hour – the cost of a high priced Manhattan… well, never mind. For a profession that requires no formal degree or accreditation, I find this to be absolutely mind blowing. The reported length of a coaching engagement is 7-12 months, so we’re looking at about a $15-20,000 tab when all is said and done.

I’m a capitalist, so I have no issues with people being paid whatever someone is willing to pay them. It’s no wonder so many of my colleagues in our field have turned in their training binders and hung out their coaching shingles. Barriers to entry are nonexistent; it requires no equipment, little or no written materials, can be done from your pajamas (telephone), and can be combined with all kinds of other work (writing, consulting, training, presentations, blogging) to make a very decent living.
While it’s a lucrative field, I suspect it’s quite crowded as well – kind of like real estate agents. It take’s a lot of hard work and expertise to build up a clientele. I’ve dabbled in it, and I’ll tell you, it’s not as easy as it looks. I’m just good enough at it to know when to turn to someone who’s really good at it.

Do coaches get involved in personal issues?

1. Are you frequently hired to address personal issues? 97% said No.

2. Have you ever assisted executives with personal issues? 76% said yes.

These two questions and responses get at the heart of one of the most important and controversial questions in the coaching field: should coaches cross the line from work to personal? A lot of coaches I talk to say that you can’t separate the two – in order to get at the root cause of underlying behavioral issues that show up at work, you have to get into the personal side. Others say absolutely not, they draw a clear line between leadership behavioral change and therapy. There’s no clear consensus.

I’m on the “don’t mess with the personal side” side of the fence. A coach should know when therapy might be needed, and when to make a recommendation. But that’s just my personal opinion. Here’s where I have a problem: organizations think they are buying one thing, and coaches are giving executives something else. Many of them probably aren’t even aware it’s happening – they get seduced into a form of psychotherapy without even knowing its happening. It’s even more tempting, albeit less potentially damaging, if a coach has a clinical background. In fact, many companies require their coaches to have psychological training. If a coach has this kind of background, it’s got to be that much harder to ignore their training.

What to look for in a coach

How necessary is certification?
Very: 29.2%
Not at all: 28.5%

How necessary is psychological training?
Very: 13.2%
Not at all: 45.9%

Again, coaches are all over the board on this one. On one hand, it’s useful to use formal certification as a screening tool when selecting a coach. However, there are so many different organizations that issue certificates, it’s hard to tell if they are worth anything (The International Coach Federation seems to be the leader). And some of the best coaches I’ve worked with have no formal certification. They are former executives that are good at developing others.

Here’s what the coaches who were surveyed said companies should look for in a coach:

65%: Experience coaching in similar settings
61%: Clear methodology
50%: Quality of client list
32%: Ability to measure ROI
29%: Certification in a proven coaching method
27%: Experience in working in a similar role as the coachee
13%: Experience as psychological therapist
2%: Background in executive search

This is actually a pretty darn good list; I’m going to use it. However, the most important factor to consider when selecting a coach is chemistry and fit; the executive has to be comfortable with the coach.

Does Coaching work?

When survey participants were asked to explain the healthy growth of their industry, they said clients keep coming back because “coaching works”.
This may be true, but coaches don’t do a very good job of measuring the impact of their work and communicating its value to those paying the bill. While 70% of coaches surveyed said they provide qualitative assessment of progress, fewer than one-third ever give feedback in the form of quantitative data on behaviors, and less than one-fourth provide any kind of quantitative data on business outcome.

Regardless of the lack of hard evidence of its effectiveness, coaching is hot. Most of the leadership development benchmarking and best practice reports I’ve read say that companies use or have started formal coaching programs. I’ve rarely talked to an executive that didn’t rave about the impact and results.

Here’s the bottom line on coaching:

1. It can be a highly effective leadership development methodology, and should be a part of your leadership development arsenal.

2. Buyer beware – it’s the wild west out there, filled with experts and charlatans. Use the recommended selection criteria, get references, and always interview at least three potential coaches.
3. Insist on a way to measure results and a clear start and end point.
4. Know what you’re buying – clarify expectations regarding delving into personal issues.
5. Costs vary considerably, there is no industry standard. Shop around, and don’t be afraid to negotiate.
6. Ask to see the coach’s methodology. If they don’t have one, find another coach.