7Jul/140

Seven Powerful Ratios to Start Tracking Now

Posted by WABC

By John Warrillow - Founder of The Sellability Score, a tool business coaches use to help their clients understand what drives a company's value.

Doctors in the developing world measure their progress not by the aggregate number of children who die in childbirth but by the infant mortality rate, a ratio of the number of births to deaths.

Similarly, baseball’s leadoff batters measure their “on-base percentage” – the number of times they get on base as a percentage of the number of times they get the chance to try.

Acquirers also like tracking ratios, and the more ratios a company owner can provide to a potential buyer, the better.

Better than the blunt measuring stick of an aggregate number, a ratio expresses the relationship between two numbers, which gives them their power.

Here are seven ratios to talk about with your clients:

1. Employees per square foot 

By calculating the number of square feet of office space that a business rents and dividing it by the number of employees, the company can judge how efficiently they have designed their space. Commercial real estate agents use a general rule of 175–250 square feet of usable office space per employee.

2. Ratio of promoters and detractors 

Fred Reichheld and his colleagues at Bain & Company and Satmetrix, developed the Net Promoter Score® methodology, which is based on asking customers a single question that is predictive of both repurchase and referral. Here’s how it works: the business needs to survey their customers and ask them the question: “On a scale of 0 to 10, how likely are you to recommend <insert the company name> to a friend or colleague?” Then they need to figure out what percentage of the people surveyed gave a score of 9 or 10, and label that the ratio of “promoters.” The ratio of detractors is calculated by figuring out the percentage of people surveyed who gave a 0–6 score. The Net Promoter Score is calculated by subtracting the percentage of detractors from the percentage of promoters.

The average company in the United States has a Net Promoter Score of between 10 and 15 percent. According to Satmetrix’s 2011 study, the U.S. companies with the highest Net Promoter Score are:

USAA Banking 87%
Trader Joe’s 82%
Wegmans 78%
USAA Homeowner’s Insurance 78%
Costco 77%
USAA Auto Insurance 73%
Apple 72%
Publix 72%
Amazon.com 70%
Kohl’s 70%

3. Sales per square foot 

By measuring annual sales per square foot, the business can get a sense of how efficiently they are translating their real estate into sales. Most industry associations have a benchmark. For example, annual sales per square foot for a respectable retailer might be $300. With real estate usually ranking just behind payroll as a business’s largest expenses, the more sales the business can generate per square foot of real estate, the more profitable they are likely to be.

Specialty food retailer Trader Joe’s ranks among companies with the highest sales per square foot; Business Week estimates it at $1,750 – more than double that of Whole Foods.

4. Revenue per employee 

Payroll is the number one expense of most businesses, which explains why maximizing revenue per employee can translate quickly to the bottom line. In a 2010 report, Business Insider estimated that Craigslist enjoys one of the highest revenue-per-employee ratios, at $3,300,000 per employee, followed by Google at $1,190,000 per bum in a seat. Amazon was at $1,010,000, Facebook at $920,000, and eBay rounded out the top five at $530,000. More traditional people-dependent companies may struggle to surpass $100,000 per employee.

5. Customers per account manager 

How many customers does the business ask their account managers to manage? Finding a balance can be tricky. Some bankers are forced to juggle more than 400 accounts and therefore do not know each of their customers, whereas some high-end wealth managers may have just 50 clients to stay in contact with. It’s hard to say what the right ratio is because it is so highly dependent on the industry. A business should slowly increase the ratio of customers per account manager until they see the first signs of deterioration (slowing sales, drop in customer satisfaction). That’s when they know they have probably pushed it a little too far.

6. Prospects per visitor 

What proportion of the business’s website visitors “opt in” by giving the business permission to e-mail them in the future? Dr. Karl Blanks and Ben Jesson are the cofounders of Conversion Rate Experts, which advises companies like Google, Apple and Sony on how to convert more of their website traffic into customers. Dr. Blanks and Mr. Jesson state that there is no such thing as a typical opt-in rate, because so much depends on the source of traffic. They recommend that rather than benchmarking the business against a competitor, benchmark it against itself by carrying out tests to beat the current opt-in rate.

They suggest that the easiest way of increasing opt-in rate is to reward visitors for submitting their e-mail addresses by offering them a gift they’d find valuable. Information products – such as online white papers, videos and calculators – make ideal gifts, because their cost per unit can be almost zero. Using this technique and a few others, Conversion Rate Experts achieved a 66 percent increase in the prospects-per-visitor rate for SOS Worldwide, a broker of office space.

7. Prospects to customers 

Similar to prospects per visitor, another metric to keep an eye on is the efficiency with which the business converts prospects – people who have opted in or expressed an interest in what the business sells – into customers.

Conversion Rate Experts  recommends that businesses monitor the rate at which they are converting qualified prospects into customers and then carry out tests to identify factors that improve that ratio. Conversion Rate Experts more than doubled the revenues of SEOBook.com, the leading community for search marketers, by converting many of SEOBook’s free subscribers into customers. Techniques that were found to be effective included (perhaps counter=intuitively) restricting the number of places available; allowing easier comparison between SEOBook and the alternatives; communicating the company’s value proposition more effectively; and simplifying its sign-up process. The trick is to establish the benchmark and tinker until it improves.

More than just raw numbers, ratios give you a more insightful way to analyze your client’s business.

John WarrillowJohn Warrillow is the founder of The Sellability Score, a tool business coaches use to help their clients understand what drives a company's value. John is the author of Built to Sell: Creating a Business That Can Thrive Without You. Between 1997 and its acquisition by The Corporate Executive Board (NYSE: CEB) in 2008, John Warrillow led Warrillow & Co., an advisory firm providing marketing advice for reaching the Small & Medium Business (SMB) market segment to companies such as American Express, Apple, Bank of America, Dell, eBay, Google, IBM, Microsoft, RBC Royal Bank, Sprint, VISA, and Wells Fargo. John has been recognized by B2B Marketing as one of the top 10 Business-to-Business marketers in the United States.
If you wish to reproduce this article in any material form, you must first contact WABC for permission.
3Nov/130

What does an executive coach really do? By Heather Bordo

Posted by Heather Bordo

blog-logo.gifFor those who have never worked with an executive coach - and even for those who have - the work of an executive coach can be perceived as somewhat nebulous and difficult to describe or quantify in any real way.  Some I've talked to assume that an executive coach is simply a paid sounding board for executives and senior leaders who can't - because of the roles they play - bounce their ideas off their key stakeholders or staff.

While active listening is certainly a critical coaching skill, the role of an effective executive coach calls for a number of demonstrable and tangible skills, some of which include:

  • demonstrating strong knowledge and understanding of the business s/he is working in, the context and role the "coachee" is operating in, the vision, goals and objectives of the organization and its stakeholders and how the organization assesses the coachee's performance and results
  • demonstrating proficiency in systems thinking - the ability to see and help the coachee recognize the broader picture (of his/her role, opportunities and actions), the ability to apply a systems perspective to patterns of activity, recognize interdependencies across people and processes and draw parallels with events and data that are not obviously connected
  • helping the coachee to create and communicate a compelling vision for the future and demonstrate leadership behaviours that support that vision, and
  • facilitating the development and implementation of strategic and operational plans and the development of strategies for leading and managing organizational change.

The Worldwide Association of Business Coaches (WABC) - the leading international association dedicated exclusively to the professional business coach and business coaching - has identified a list of "master-level" professional business competencies that set business coaching apart from other types of coaching.

The business coaching competencies developed by WABC are divided into three areas:

  • Self-Management–Knowing Oneself and Self-Mastery
  • Core Coaching Skill-base
  • Business and Leadership Coaching Capabilities

I would encourage any organization seeking a truly skilled and highly competent business coach and any executive coach seeking to assess their skills against a thoroughly researched and validated benchmark to review WABC's business coaching competencies - they provide excellent insight into what an executive coach really does.

Click here to see the detailed description of the WABC competencies.

Heather Bordo is an executive and strategic coach who helps leaders think differently to clarify their goals, articulate their strategies, focus their efforts and deliver results.  More information about Heather can be found at www.bordoandassociates.com.

If you wish to reproduce this article in any material form, you must first contact WABC for permission.
8Aug/130

Where’s the Evidence? First Steps into the Literature By Dr. Annette Fillery-Travis

Research: Let's take a minute to reflect upon what that word means for us as coaches. Do we think of it as remote from practice, constrained by a set of rules and 'paradigms' that leave us cold, or is it a wonderful opportunity to explore, update and deepen our practice?

As a professional researcher and coach, I have supervised many coaching practitioners during their Masters degrees. Most have started their research with some trepidation and a sense that they were entering into another world, with a new vocabulary and a set of rules about which they knew little. It seems that we, as researchers, have done a good job of mystifying our trade!

Yet, as the coaching profession develops, we are becoming increasingly aware that we need to delineate coaching from other offers in the market; identify the real value we can bring to our clients; and be able to advise the buyers of coaching on which coaching interventions are fit for their purpose. To do this we need to have evidence of what works and how. In effect, we need a thorough grounding in both the theory and practice of what we do and the research which underpins it.

We should be happy therefore that the number of studies and research papers on coaching is steadily increasing. The first research article, which looked at 'coaching' as a discrete activity, was written in the 1930s and focused on coaching in a sales force. Publications then averaged one or two per decade until the 1980s when interest picked up. Since then, there has been a near exponential increase in publications. We now have specific journals for general interest coaching articles and research papers. There has also been a corresponding increase in Doctorate theses on coaching-related subjects. This does not, of course, include the vast range of books on coaching that draw heavily from the research. Although they are of great use to their readers, they generally do not report new research, but draw upon the established research literature. As a consequence, I have not included them in the figures. Within this wealth of text, the most popular type of article is descriptive reporting of a coaching intervention and single case studies, although there is a move to more empirical evaluations of case and group studies.

But are they of equal value and how do we know what is good research and what is not so good? How do we know what should influence our practice and our advice to clients?

One place to start when considering these issues is to identify the research question being asked and whether the evidence presented would convince you enough to change what you do, i.e., what is the purpose of the enquiry/research and the perspective from which it is being asked?

This is not a trivial question so it is worth working with an example. If I was to ask: Does coaching improve the performance of executives?

Then, assuming we are all agreed on what constitutes coaching (which may be a big assumption!), there are still two words in the question that have a variety of meanings depending upon your perspective—these are 'improve' and 'performance.'

From the perspective of an HR professional managing the coaching intervention 'improved performance' may mean:
a) An increase in the scores of the executives on 360 degree feedback
For the manager of the coachee, it may mean:
b) A 10 percent increase in sales
And from the viewpoint of the coach it may be:
c) The perceived satisfaction of the executives that they have addressed the issues identified in the coaching contract

Just from consideration of these three perspectives, I can identify three different ways of conducting this enquiry. For (a) I may consider 360 degree feedback before and after a coaching intervention; for (b) I may look at sales figure before and after; whereas for (c) a series of interviews with coaches after coaching would be one way of hearing their views. For the sales manager, the interviews with the coachees will be of limited value whereas the coach will find them highly informative.

Obviously these are simplifications, but they illustrate just how the particular perspective of the researcher and the end user will define the value of the answer and whether the research has fulfilled its purpose.

In a similar manner, a single case study can provide a rich picture of a particular intervention allowing a deep exploration of the context, attitudes and outcomes for the individuals concerned. But the purpose and perspective of the intervention may be highly specific to the case under investigation and have little to offer another organization in another context.

A reflection on the purpose and perspective of the research we access will often sort the wheat from the chaff and identify what has real value for us in our individual practice. It will nearly always also reveal a wealth of further questions. The old adage in this case is true—our answers only provide for further questions. It is at this point that many of us consider entering the field of enquiry ourselves and undertaking practitioner research. In my next column, I will talk about the real benefits both to practice and the profession of practitioner research.

If you would like to add your comments on this piece or would like to share your favorite research study (we do all have them) then please send them in, and I will be happy to add them to the 'Worth Reading List' below, which will be a consistent feature of this column.

Worth Reading
To get a general overview of the research into coaching and how it has evolved over the years, reading the following article is an excellent start. It is a free download from the web address included here.

Grant, Anthony M., and Michael J. Cavanagh. 2004. "Toward a Profession of Coaching: Sixty-five Years of Progress and Challenges for the Future." International Journal of Evidence Based Coaching and Mentoring Vol. 2, No. 1 (Spring): 1.
http://www.brookes.ac.uk/schools/education/ijebcm/home.html

This article first appeared in Business Coaching Worldwide (February 2008, Volume 4, Issue 1). Copyright © 2011 WABC Coaches Inc. All rights reserved.

If you wish to reproduce this article in any material form, you must first contact WABC for permission.
13Jun/131

Demonstrating Integrity: A Key Characteristic of the Future Global Leader, By Marshall Goldsmith

Posted by Marshall Goldsmith

At a time when shredding documents, creative accounting and ruthless tactics come to light in the media on a fairly regular basis, it's no surprise that the young leaders of today have spotted the need for leaders to demonstrate integrity and ethical behavior. As a matter of fact, young leaders of today believe that demonstrating integrity will become the most important characteristic of future leaders.1

What Is Integrity?
"Integrity is the quality of possessing and adhering to high moral principles or professional standards."2 In other words, it's not enough to simply espouse values; global leaders have the added responsibility of influencing through example.

Indeed, events in the business arena involving companies such as Enron and WorldCom have illustrated how integrity lapses can lead even "benchmark companies" into bankruptcy. These unfortunate negative public examples of integrity violations have clearly made the business case for including integrity as a key quality of the leader of the future.

Demonstrating Integrity
The next question you will probably have is: How do I (or do I already) demonstrate integrity? Following are five significant characteristics of demonstrating integrity as well as some (but not all!) actions you can take to demonstrate integrity.3

One characteristic that demonstrates integrity is to behave honestly and practice ethical behavior in your interactions. You can accomplish this by:

  • Recognizing that you are a model for those whom you lead
  • Being consistent and clear about your ethical standards
  • Providing facts, not smokescreens
  • Speaking up even when it may be risky to do so
  • Challenging any system that encourages dishonesty or rewards unethical behavior

 

A second characteristic that demonstrates integrity is to ensure that the highest standards for ethical behavior are practiced throughout the organization. You can do this by:

  • Being consistent and clear about ethical standards and expectations
  • Encouraging people to express concerns about questionable practices
  • Reviewing ethical concerns with your staff or management
  • Offering open, candid feedback to management and coworkers
  • Recognizing that honesty and fairness in all relations with others is important

 

A third characteristic that demonstrates integrity is to avoid political and self-serving behavior. You can demonstrate this by:

  • Understanding that being competent in your job is the most effective method of achieving success
  • Realizing that organizational politics take many forms; list the tactics you are aware of
  • Sharing recognition; not accepting undue credit
  • Being a team player
  • Combating job politics through objective measurements of performance

 

A fourth characteristic that demonstrates integrity is to courageously stand up for what you believe in. You can do this by:

 

  • Understanding that risk taking plays a part in nearly every decision made
  • Being willing to take risks to achieve excellence and stay competitive
  • Developing a positive attitude when facing objections
  • Working to gain support and cooperation from key individuals in your organization
  • Encouraging and supporting others to speak up and voice their viewpoints

 

The fifth characteristic that demonstrates integrity is to be a role model for living the organization's values. You can accomplish this by:

  • Walking the talk: be an example of what you want your employees to be
  • Being sure your performance reflects the best standards
  • Acknowledging the unique knowledge and talents of others
  • Demonstrating pride in your company
  • Coaching employees to follow your example of performing to high standards

 

People will not follow leaders whom they do not trust. Great leaders, trusted leaders demonstrate integrity and in doing so, achieve the faith and confidence of their workers, colleagues and peers, who then become willing followers, loyal employees and trusted coworkers. This important characteristic is an integral step on the road to success for the great leaders of the future.
1 Goldsmith, M., et al. 2003. Global Leadership: The Next Generation. New Jersey: Prentice Hall. (See pages 311-316 for more about the Global Leader of the Future Project.)
2 Encarta Dictionary [computer software]. 2008. Redmond, WA: Microsoft
3 Goldsmith, M., et al. 2003. Global Leadership: The Next Generation. New Jersey: Prentice Hall.

This article first appeared in Business Coaching Worldwide (June Issue 2008, Volume 4, Issue 2). Copyright © 2011 WABC Coaches Inc. All rights reserved.

If you wish to reproduce this article in any material form, you must first contact WABC for permission.