How to improve productivity from 72% to 396% in 2 years – The compound effect
In my research regarding the compound effect of coaching leaders, I came across this very interesting perspective from a UK based consultancy, New Age Leadership. Here is how they presented the concept:
I am going to illustrate the compound effect of leadership coaching, and let me warn you, you are likely to be amazed!
To best illustrate how this work, I am going to use a hypothetical example.
Imagine that I have offered you freelance programming work. You have two options to get paid.
Option 1: small improvements consistently or
Option 2: staying the same
Option 1 is to get paid $10 per week. However, if you improve your skills by 10% a week, your salary will proportionately increase by 10% every single week. This option requires you to improve your skills on a weekly basis. Not a huge jump in the skill level, but small, continuous, and constant improvements.
Option 2 is to get paid a fixed amount of $5000 per month. With this option, there is no need for any improvement in skills. There are no additional increases either – the salary stays the same.
Which option would you choose?
Here is the table detailing the accumulated total salary for both options
The results
At the end of the first month, option 1 would give you a total salary of $51. While option 2 would fetch you a cool $5,000. Months two and three are equally depressing for option 1 – with a total salary of $126 and $235 respectively at the end of months two and three. At the end of 3 months, option 1 will get you a meagrely amount of $235. Option 2 would fetch you a cool $15,000.
At the end of 1 year, option 1 would add up to $15541 while option 2 is still way ahead with $60,000. Still lagging option 2 by a significant amount.
The power of the compound effect However, by the end of the 16th month, option 1 has caught up to option 1 – with $86,762 vs. $80,000 for option 2!
And by the end of the 24th-month option 1 has compounded to a cool $2.2 million while option 2 is lagging way behind with a meager sum of $120,000.
(Tushar Vakil – New Age Leadership)
How does this relate to Leadership Coaching?
Leadership coaching works on the same trajectory. If the program is based on a proven evidence-based framework. In the first few months we establish goals, and a plan, that includes making incremental changes in mindset, behaviour and leadership approach. Due to the accountability of coaching these changes continue and get stronger, while not often seen by others in the first 6-12 months. Us humans may get something cognitively (or internally) but our actions (external what others see) lags. It is the following 12, 18 and 24 months when the magic happens. Mind and behaviours are aligned.
But where it gets really interesting is when you are not just coaching one Leader, but coaching the entire Leadership team.
Let’s make this really simple. How many people do you have in your Leadership team?
Let’s say its 6.
Using the same example above the result after 2 years is 6 leaders x 2.2 million = 13.2 million.
But it gets even more interesting … as there is another compound effect.
Above is the compound effect has only been calculated on the individual leaders being coached. You then get the compound effect on each other of 13.2 million x 6 = 79.2 million AND their direct reports. If they have 5 direct reports that is 13.2 million x 5 direct reports x 6 leaders = 396 million.
396 million! I know it is hard to get your head around that number.
However, if you compare it “doing what you have always done” over the next 2 years of $120K per leader we get 720K.
So using the above example in 2 years your outcome could be 396 million or 720K.
Let’s remove the $ amount and change it % of productivity instead.
In 2 years the number say a productivity improvement of 72% compared to 396%.
Even if we halved the big number to 198% that is still a significantly different outcome for your leaders and organisation.
What kind of a difference does that make to your organisation’s bottom line, or corporate goals over the next 2 years?
But let’s assume it is difficult to attribute a productivity % to every leader.
If we go back the numbers and be really conservative and capture just 10% of the 396 million outcome and make it 3.96 million, that is still a difference of 3.24 million.
The even better news, is that the financial investment for me to work with your 6 leaders in my Happy Healthy Leadership Team program over 2 years is around 5% of that win.
So what are you waiting for? Lets chat.
Kind regards,
Margie Ireland
Leadership Coach (COPS), Registered Psychologist (MAPS)
Margie Ireland is the author of The Happy Healthy Leader – how to achieve your potential even during a crisis. Margie is a registered Psychologist, Leadership Coach and Workshop Facilitator, highly sought after to help Leaders and their teams navigate stress and change with healthier coping strategies, leading to happier, healthier and high-performing teams. For more information visit www.margieireland.com
