A Research Paper By Greg Major, Business Owners Coach, AUSTRALIA
Coaching Effectiveness on Business Owners
Coaching has been recognized as an important tool to help business owners build and grow their own enterprises. As such it presents as a viable target market for many coaches, including myself. Coaching business owners are sometimes coupled with advice or mentoring or may be delivered in a blended format. The combination of content/approaches may be envisaged as advice and mentoring to business owners which focuses on the business itself and coaching which focuses on the competencies, capabilities, and skills of the owner to implement that advice in their role as a leader in their own business. This paper explores the effectiveness of coaching in the small business context and looks at factors that might play a role in driving organizational success.
Coaching on Business Owners
Some recent studies conducted between 2020 and 2023 looked at the issue of coaching in the context of small and medium enterprise (SME) development. These studies have highlighted that coaching can enhance the personal development of business owners and leaders which in turn can help improve various organizational dimensions (Oxcognita LLC & Oxford Review Enterprises Ltd, 2023). This includes:
- Improved Leadership Capability: Coaching empowers leaders with the skills necessary to inspire and guide their teams effectively, fostering a more dynamic and responsive business environment.
- Enhanced Strategic Clarity: Through coaching, business owners gain clearer insights into their strategic direction, enabling them to develop their business goals with actionable plans.
- Better Decision-Making: Coaches help business owners enhance their problem-solving skills, leading to more effective decision-making.
- Increased Customer Satisfaction: With improved leadership and clearer strategies, businesses are better positioned to meet customer needs, thus increasing customer satisfaction.
- Improved Employee Engagement: Effective coaching also translates into higher levels of employee engagement, as leaders learn to motivate and connect with their teams on a deeper level.
It was also noted in this meta-review that coaching as a standalone initiative, had a limited impact on the financial outcomes of business, such as revenue and profitability. This was an important finding of the review, as for most companies, financial success is a major goal and of significant importance to shareholders and business owners.
The review went on to further show that the success of coaching was dependent upon a range of factors including:
- the quality and experience of the coach,
- the willingness and engagement of the business owner, and
- the specific needs at that time of the SME.
It also found that business mentoring and advice in combination with coaching was more effective than coaching alone when it came to securing an improved financial outcome. Although not specifically addressed, this would suggest that a blended coaching approach may also be suitable for targeting financial success for business owners, as opposed to deploying coaching and advice/mentoring in two separate “transactions”.
In slight contrast to the Oxford Review study, a systematic review by Tsai and Barr (2021) found that coaching for SME owners can result in improved revenues as well as improved productivity and employee engagement. They reviewed several studies and found that the success of the coaching program for SME business owners depended on:
- a good fit between the coach and the business owner,
- the establishment of clear goals and objectives for the coaching program, and
- the importance of ongoing support and follow-up.
In many ways, these factors would define the success or otherwise of any coaching program, whether targeted towards an SME business owner or other client type, and are therefore not very surprising. Nonetheless, they are worth bearing in mind during the design of the coaching program for business owners.
Another study by Kroeze (2022) found similar outcomes whereby the effectiveness of coaching for business owners varied depending upon:
- the specific learning outcomes required of the business owner,
- the degree to which a trusting and personal relationship between the coach and the business owner was able to be established,
- the coaching process that was used, and
- what was termed the “coachability” of the business owner, or in other words their willingness to be coached.
The takeaway again here is that the program design and preparation will be important to ensure the greatest chance of success when coaching business owners.
Jones, Devins, and Barnes (2023) found that one of the most high-impact methodologies to create lasting change within a small and medium-sized enterprise was the use of coaching not just for the owner, but across a broader spectrum of employees within the organization. This enabled longer-lasting changes to manufacturing processes and the development of productivity improvements. This was an important finding, in that often coaching involves only owners or managerial staff. These authors identified the importance of including non-managerial staff in the coaching programs to ensure a more widespread and sustained impact. When the desired outcome within the organization is likely to require significant process-level change, this finding will be important to bear in mind for the coach.
Kotte, Diermann, Rosing, and Moller (2021)undertook one further meta-analysis which analyzed the impact of coaching programs for small business owners and supported this with their own direct interviews to enhance the data-gathering process. As for the other elements of research discussed above, they also found a range of factors that will drive the success or otherwise of the coaching program. The two main factors that this group discovered that would drive effectiveness included:
- clarity about the objectives of the coaching program, and
- the need for ongoing evaluation and feedback.
Their findings support that coaching can be very effective for SMEs at the team and company level, but interestingly in their survey of business owners, there was less mention of individual outcomes as a benefit. They found the benefits of the coaching program were explicitly tied to:
- the coach’s experience and expertise, and
- the coach’s own entrepreneurial experience.
They were able to detect improvements for the SME across areas including improved teamwork, changed structures, processes, and business models, and overall improved company performance. This was one study where overall company financial performance was observed to have improved with coaching, however, it is noted that the coach’s entrepreneurial experience here is cited as a factor and one wonders then to the degree to which blended coaching may have been deployed.
Limitations of Coaching for Business Owners
While coaching does seem to offer various improvements in leadership, and management skills and in some cases, has been documented to improve organizational outcomes and even organizational performance, it does appear to have some limitations. Most notably financial performance was quoted in some studies to have been impacted, whilst in many studies the impacts were largely qualitative in scope.
Furthermore, the research would also tend to indicate that on its own, coaching may have some limitations unless applied in combination with either mentoring, advice, or applied in a blended context. This would indicate that those coaching programs by experienced business owners or entrepreneurs are addressing gaps in key business performance dimensions such as customer analysis, sales pipelines, product innovation, financial performance, or management.
Frameworks and Factors for Effective Coaching
From the various research reviewed above, the effectiveness of coaching depends upon a broad range of success factors which might include:
- Business Owner’s Self-Efficacy: The confidence with which a Business Owner can achieve their goals during and post-coaching.
- Trust in the Coach: The level of trust the Business Owner places in the coach’s abilities.
- Learning Orientation: The readiness with which both the Business Owner and coach learn and adapt and the Business Owner’s “coachability”.
- Goal Orientation: The approach the Business Owner takes towards setting and pursuing goals.
- Coach’s Agility: The coach’s ability to adapt their methods to suit the Business Owner’s needs, whether that be based on the business itself or the personality of the Business Owner.
- Motivations: The underlying motivations of both the Business Owner and the coach.
- Interpersonal Rapport: The relationship and rapport between the coach and the Business Owner.
- Feedback Intervention: The effectiveness of feedback during and after the coaching sessions.
- Organisational Support: The support provided by the Business Owner’s (or where relevant other coachee’s) work environment. This may be as simple as getting sufficient time away from work to undertake the coaching program or where non-business Owners are included in the coaching program, the inclusivity of those employees into the coaching program.
- Coach’s Experience and Expertise: The coach’s proficiency in handling issues relevant to the Business Owner, which might include their entrepreneurial experience or overall coaching experience.
- Nature of the Relationship: The dynamic between the coach, the Business Owner, and the organization.
- Coaching Program Design: The structure and content of the coaching sessions and overall program, including the scope of the program across the organization and into teams.
Coaching for Business Owners: Growth and Longevity
In summary, coaching and mentoring are pivotal for the success of business owners. Coaching contributes significantly to personal development, enhancing leadership capabilities, strategic clarity, decision-making, customer satisfaction, and employee engagement. However, the degree to which it impacts directly on financial growth as a primary business goal is less clear. Expert mentoring and advice or a blended style of coaching may be required to fill this gap.
Business owners considering coaching should:
- Recognize coaching as a tool for personal and leadership development rather than a direct means to financial success.
- Seek coaching that encourages business-oriented learning in addition to personal learning
- Complement coaching with mentoring or advice from experienced business professionals to cover the full spectrum of business development and strategic management, or look for a coach who can deploy a blended coaching style.
- Ensure that their coaching program includes elements of feedback and support and can be deployed across and within the organization as required to achieve the greatest degree of impact.
By integrating coaching in this way, the research supports the notion that business owners can develop the necessary skills and insights essential for sustained business growth and longevity.
References
Jones, O. W., Devins, D., & Barnes, G. (2023). Developing SME performance management practices: Interventions for improving productivity. International Journal of Productivity and Performance Management, ahead-of-print(ahead-of-print).
Kotte, S., Diermann, I., Rosing, K., & Möller, H. (2021). Entrepreneurial Coaching: A Two-Dimensional Framework in Context. Applied Psychology, 70(2), 518–555.
Kroeze, G. (2022). Entrepreneurial Coaching: How processes vary to reach entrepreneur’s and investors’ goals in SMEs.
Oxcognita LLC & Oxford Review Enterprises Ltd. (2023). How Effective is Business Coaching for SMEs? Oxford Review.
Tsai, L., & Barr, J. (2021). Coaching in small and medium business sectors (SMEs): A narrative systematic review. Small Enterprise Research, 28(1), 1–22.