The Power of Pay for Performance

How would your work change if your pay was based on your performance rather than how much your clients like you or how much time you spend with them?

I believe that neither of these (how much I’m liked or the length time I spend with my clients) is a good metric for them to achieve positive, long-term changes in their behavior.

In fact, 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. My personal coaching clients are 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 if they achieve positive, measurable change.

And there is a catch. It’s not the client who determines if he or she is “better.” It’s their key stakeholders (bosses, colleagues, direct reports, spouses, and others who work with them closely) who make this determination.

This “pay-for-results” idea wasn’t mine. It came from Dennis Mudd, my boss 48 years ago. My family was poor growing up in Valley Station, KY. 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. 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 integrity was more important to him than money, and he had enough faith in the quality of his work to make the offer he did. Dennis Mudd didn’t use buzzwords like “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 going to be paid only if I achieved results?” Think about it. How would your behavior change?