The Pay for Results Approach

MG Library

September 16, 2013

 

by Marshall Goldsmith

I believe that many leadership coaches are paid for the wrong reasons. Their income is a largely a function of “How much do my clients like me?” and “How much time did I spend in coaching?” Neither of these is a good metric for achieving a positive, long-term change in behavior.

In terms of liking the coach—I have never seen a study that showed that clients’ love of a coach was highly correlated with their change in behavior. In fact, if coaches become too concerned with being loved by their clients – they may not provide honest feedback when it is needed.

In terms of spending clients’ time – my personal coaching clients’ are all executives whose decisions impact billions of dollars – their time is more valuable than mine. I try to spend as little of their time as necessary to achieve the desired results. The last thing they need is for me to waste their time!

The story you’re about to read is the story of how, and why, I came to use a “pay-only-for-results” model in my coaching practice.

Those who know me well know that I have an unusual arrangement with my coaching clients. They only pay me if they get better—meaning they achieve positive, measurable change.

The catch? The client doesn’t determine if he or she is “better.” Their key stakeholders (bosses, colleagues, direct reports, spouses, and others who work with them closely) do. This compensation system gives everyone–coach, client, and stakeholders—an important role in the process.

This “pay-for-results” idea wasn’t mine. It came from Dennis Mudd, my boss 48 years ago. Growing up in Valley Station, KY, we were poor. My dad operated a two-pump gas station. My mom was a school teacher. When the roof on our home started to leak badly, we had no choice but to replace it. My dad hired Dennis and to save some money I worked as his assistant.

It was a blazing hot summer in Kentucky, and this was HARD work! I watched Mr. Mudd as he took great care in laying each shingle. He was patient with me, despite my mistakes. He helped me learn to do the job right. I looked forward to working with Mr. Mudd every day, and my initial begrudging willingness to do the job turned into a deep sense of pride in what we were doing.

When we finished, I thought the roof looked great. Mr. Mudd presented my dad with his invoice and said quietly, “Bill, please take your time and inspect our work. If you feel that this roof meets your standards, pay us. If not, there is no charge for our work.” And he meant it.

Dad looked carefully at the roof, thanked both of us for a job well done and paid Mr. Mudd, who then paid me for my help.

I will never forget watching Dennis Mudd when he asked Dad to pay only if he was pleased with the results. I knew he was dead serious and my respect for Mr. Mudd skyrocketed. I was only 14 years old, but the incident made a huge impression on me. I knew the Mudd family. They didn’t have any more money than we did. I thought: Mr. Mudd may be poor, but he is not cheap. This guy has class. When I grow up, I want to be like Dennis Mudd.

How much would not getting paid have hurt Dennis Mudd? A lot. If my dad hadn’t paid him, it would have meant the Mudds wouldn’t have eaten very well for the next couple of months. Mr. Mudd’s pride and integrity were more important to him than money, and he had enough faith in the quality of his work, and in my father, to make the offer he did.

Dennis Mudd didn’t use buzzwords such as “empowerment” or “customer delight.” He didn’t give pep talks about quality or values. These were unnecessary. His actions communicated his values better than any buzzwords could.

The next time you are working on a project, ask yourself, “What would happen to my level of commitment if I knew I was only going to be paid if I achieved results?” Think about it. How would your behavior change?

Dennis Mudd taught me a lesson I will try to live up to for the rest of my life. What is important is not how much he impressed me. What is much more important is that he could look with pride at the person he saw in the mirror every day.

 

 


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