Control Executive-Coaching Costs, Quality

Cross-departmental partnership helps a company revamp its executive-coaching program

By Pamela Babcock Mar 11, 2014
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NEW YORK—How to select the best executive coach for one-on-one engagements and how much that coaching should cost are contentious issues in many organizations. There can be as many opinions as there are leaders in need of coaching, and the scenario grows even more ambiguous for companies with global staff.

Such was the case for Bristol-Myers Squibb (BMS) until a partnership between its talent management and finance units led to a pragmatic way to rein in costs and control the quality of its executive-coaching program.

“There is a lot of variability in what people think should impact the cost of a coaching assignment,” said Cody Martin, BMS’ head of talent management, after polling attendees of his session at The Conference Board’s March 6-7, 2014, Executive Coaching Conference.

At BMS, inconsistent pricing meant that the global biopharmaceutical company had a difficult time predicting what it was going to spend on executive coaching each year.

The company had a solid group of vendors and coaches, including “some of the best vendors and executive-coaching companies out there today,” Martin said. But pricing was all over the place, and Martin himself didn’t know coaches as well as he wanted to—a factor that was particularly important when executives asked what he knew about a specific coach.

“I didn’t feel like I was really adding value,” Martin admitted.

So, in 2012, Martin reached out to BMS’ procurement and finance groups to devise a way to make the process more efficient, transparent and cost-effective.

“Why not leverage their knowledge and their understanding of these things to get a better result?” Martin said.

Project Planning, Implementation

The cross-departmental team came up with a global rate card that provides a formal method of tracking and predicting spending on executive coaching. It was created after a comprehensive vetting process verified the cost and quality of the cadre of coaches the company was using.

During the vetting process the company reviewed bios of, and acquired rates from, more than 300 coaches, 110 of whom BMS interviewed before it narrowed the field to about 80 finalists.

Martin said he relied on situational interviewing to further winnow down the finalists, asking questions such as, “Tell me about a time when you coached an executive on her executive-presence skills.”

Many who claimed experience were unprepared to tell a story and did not make the cut, he noted.

BMS also audited 18 coaching vendors, including some it was already working with and others that executives recommended. The company involved current and potential vendors early in the process to allow them to compete with one another on pricing.

To vet potential vendors, BMS assessed them on their level of expertise and experience in coaching for:

  • Executive presence.
  • Communication skills.
  • Engagement.
  • Strategic thinking.
  • Change management.
  • Global team leadership.
  • Diversity management.

Setting the Rate Card

To determine price, BMS interviewed vendors and decided on cost variables for coaching at various executive levels.

“We looked at all the spend[ing] associated with the different [types of] coaching,” explained Dia Ganney, BMS senior sourcing associate in global procurement, during the session. “We saw preferred vendors and those that were outliers.”

The company also benchmarked cost structures (using industry data and what it was already paying) and requested the cost by coach, geographic market and level below CEO. It then negotiated a maximum percentage above the midpoint price.

“I learned so many more things [about] how to negotiate price and how to come up with a rate card that I could never have done on my own,” Martin said.

Overall, BMS selected about 80 coaches and amended contracts with about 13 preferred vendors, ranging from sole proprietors to large coaching firms. The company had no targeted total but knew it wanted about two coaches in each of its 20-plus markets across the globe; it needed even more in other areas.

The rate card was created with an Excel spreadsheet, which defines costs based on a typical six-month engagement. It includes information for each of BMS’ preferred vendors, coaches’ names and the market where each coach works (e.g., U.S., China, Germany).

Costs vary depending on negotiated rates for coaching in one of three levels of leadership, since fees typically are higher for top executives. The rate card also includes pass-through costs for items such as travel and lodging, which typically amount to another 5 percent fee.

The rate card provides several benefits, according to Ganney. The company, which has decentralized coaching budgets, can better predict spending by market and vendor. And not having to negotiate each engagement prevents sticker shock and saves valuable time and resources, she added.

Ganney pointed out that the company’s leaders acknowledge that the rate card gives executives a more logical justification for cost, putting financial stewardship in the customer’s mind. And information about coaches provides more transparency and detailed information on everything from coach expertise to rates that are good for a two- to three-year period.

The business units can still choose the coach they want, but “at least [the cost] will not be a surprise as they are going through the engagement,” Martin said. “If they are paying for something, they are going to pay more attention to it.”

Lessons Learned

Martin offered the following advice to others considering a similar project:

“Don’t underestimate how long it will take,” Martin cautioned. He noted that he thought the project could be tackled in three months, but it actually took more than a year, including vendor negotiations.

Martin also quickly learned there were a lot of coaches working at BMS whom his office didn’t know about. While the inclination might be to “kick them out,” he said BMS decided to include them in the initial audit. The result: “Some are now part of the BMS coaching family because they [are] quality coaches.” Thus, he recommends conducting an inclusive audit.

Finally, he emphasized the need for regular communication between the company and its providers. Not having a centralized set of coaches led to potential gaps in message alignment, Martin explained, so BMS has asked preferred coaches to meet with company representatives every six months (in person or virtually) so they can receive updates about key messaging or company initiatives. It helps them “feel more like an internal coach would.”

Pamela Babcock is a freelance writer based in the New York City area.

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