Dollars and Sense: How Business Coaching Can Increase Your Profitability

March 2, 2021 Maddie Grant

As we talk to prospective clients, we hear a common refrain. It goes something like this, “I know our association is having trouble, but our [board / CEO / executive director / other] (choose one) won’t let us spend the money to hire the coaches we need.”

Of course, some potential clients use that rationale to end a conversation with us about their troubled culture. Others, however, really believe that doing nothing and not spending money to correct fundamental problems will not cost them anything in the long run. I’m talking about problems such as high turnover, rampant absenteeism, recruiting difficulties, communication problems, departmental infighting, and all the other signs your staff has checked out and your association’s culture is on the decline.

We realized the truth of the matter – that bad culture is extremely expensive – was lost in these conversations. If you’re fighting culture problems like these, I would be willing to bet you are not serving your industry or your members as well as you could.

So we researched the issue and discovered some interesting facts about the real costs of a discouraged staff.  Here’s what we found:

The Real Costs of a Discouraged Staff

A recent study, The High Cost of a Toxic Workplace Culture, conducted by The Society of Human Resource Managers (SHRM) found that 20 percent of Americans have left a job because of bad culture in the past five years. The study estimates the cost of that turnover to be $223 billion. That’s billion with a “b.”

Other findings in the study are equally stark:

  • Almost half of employees have considered leaving their jobs because of a bad culture.
  • Most Americans (76 percent) say their manager sets the culture, but a little more than a third (36 percent) think their manager doesn’t know how to lead a team.
  • More than a quarter of employees dread going into work.

SHRM President and CEO Johnny C. Taylor said, “Toxicity itself isn’t new. But now that we know the high costs and how managers can make workplaces better, there’s no excuse for inaction.”

I can hear you throw on the brakes. Yes, $223 billion is a lot of money, but it’s divided among thousands or millions of businesses. My share can’t possibly that much. Or can it?

SHRM estimates that replacing a salaried employee costs an average of six to nine months’ salary, including recruiting and training expenses. For an employee making $50,000, for example, you spend between $25,000 and $38,000 every time you fill the position.

In a Chief Executive magazine article, authors Rachel MK Headley and Meg Manke provide an even easier formula to calculate the cost of turnover based on information from a Compensation Advisory Partners (CAP) study:

  • High-turnover & low-paying jobs making less than $30k a year: 16% of annual salary 
  • Mid-level positions making $30k to $50k a year: 20% of annual salary 
  • Executive positions: Up to 213% of annual salary

These estimations take into consideration the various costs associated with hiring new employees, and start with advertising costs, recruiters’ fees, and screening and interviewing expenses. New employees cannot be highly productive immediately, so the estimates include time lost to training and orientation, as well as the cost of managers’ time to conduct training. If your new employee is like most, he or she won’t be as fast or knowledgeable as a seasoned employee, so sales or customer service might suffer. Include lost sales in the total. And as employees cycle in and out of your association, what damage does their presence do to your culture?

I challenge you to estimate the cost of the last three turnovers in your association. Even at the lowest levels, turnover costs you thousands of dollars, but let’s take a look at what you’ll spend to replace three mid-level managers. If they each make $70,000 a year, you’ll spend $14,000 per employee or $42,000 to replace all three. 

What could you do with $42,000 if you didn’t have to spend this much to replace your staff? What if those three were engaged, productive staff members? Suddenly, carving out space in your budget to facilitate work that energizes your culture and incentivizes behavior that directly impacts your goals seems not only possible, but necessary. Convincing your board or CEO should be an easy sell.

RELATED ARTICLE>>What I Learned From 1.15 Million Culture Data Points

How Business Coaching Can Help

I mentioned earlier that more than a third of employees don’t believe their manager knows how to lead a team. If that’s true, your association may be losing revenue due to any number of problems related to ineffective managers. You may have the resources in-house to train your weaker team leaders, but if you don’t, you’ll need to address their skills gap with outside help or risk having to replace them as the stress of the job makes them miserable, less effective, and ready to find a new opportunity somewhere else. 

For example, you might need to focus on changing specific behaviors related to execution and accountability.

One of our clients had an execution problem that was rooted in a cultural issue: avoidance of conflict. We helped them make a culture shift so they could have their tough conversations, and the next time they ended up with three huge projects happening at the same time, they were able to work through their issues quickly and finished all three projects under budget and ahead of schedule. The scope of our work was clearly defined, and the association could point to specific results that came from our work together.

Our coaches can work either with individuals or with the whole management team. The group process involves a series of monthly calls (and quarterly deep dives) to work through strategic topics. Group level coaching also includes an Align online dashboard tracking and reporting process against goals – so everyone can see their efforts producing results in real time.

You know how expensive turnover can be, so use your budget wisely to help make your staff members and your association successful. Business coaching may be a new, but vital, part of your strategy. It can help improve strategy, execution, and culture – all at the same time.

If you have questions about business coaching, we are here any time. Our culture-driven coaching program gives you actionable strategies you can use today to build a more dynamic and agile learning organization. Find out more about business coaching and the Rockefeller Habits for associations.

 

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Photo by Micheile Henderson

Maddie Grant

Maddie Grant, CAE, is an expert culture designer and digital strategist who focuses on helping organizations unlock the power in their culture and navigate culture change. She has specific expertise in digital transformation and generational differences in the workplace. She has explored the language of workplace culture for several years through her books, co-authored with her partner in business and life Jamie Notter, including Humanize: How People-Centric Organizations Succeed in a Social World (2011), the Amazon category best-seller When Millennials Take Over: Preparing for the Ridiculously Optimistic Future of Business (2015) and the Non-Obvious Guide to Employee Engagement (2019).
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