1) What are the origins of coaching and how large is the market?

01/01/2011 00:00

    Executive coaching is still in its infancy. It is, however, a remarkably old infant, going to back to Telemachus in Greek mythology (cf. Appendix I). It hit the billion dollar business mark in the U.S. at the turn of the millennium. However that is tiny compared to its big brother management consulting.

    Four of the giants, all of which are active worldwide, including, of course, in Germany, are:

1) IBM with 400,000 employees, of whom about 190,000 are in Global Services, which offers various kinds of advisory and consulting services.

2) Accenture, with 186,00 employees, had revenues in 2007 of $23 billion.

3) Deloitte Touche Tohamtsu, with 170,000 employees, reported 2010 revenues of $26.6 billion.

4) Capgemini, with 91,000 employees, had revenues in 2008 of 8.7 billion €.

    The revenues for consulting in Germany have been estimated at 19 billion € in 2010 by the Bundesverband Deutscher Unternehmungsberater (BDU). The estimate is based on a sample of 500 consulting firms. Interestingly, it noted an increased demand for strategy consulting. The "Big Three" strategy consultancies, McKinsey, Bain, and BCG with (as of 2010) staffs respectively of 9000, 4800 and 2800 had combined revenues of at least $10 billion, a six fold increase from 1990. Pure strategy work probably only accounts for 15% to at most 20% of their billings. However even if it were only 10%, that work would still constitute a billion dollars of business.

    A good way of contrasting management consulting with its young sibling executive coaching is to take a look in the yellow pages of any major city’s telephone book. In 2009 in Munich, for example, about 2,000 consulting firms are listed, any number of which purport to do at least some strategy work, versus twelve executive coaching firms, all psychologically oriented. In 2011 the yellow pages listed 127 coaches (a ten fold increase!) versus about 1975 consulting firms. (Given a tendency to rely on websites and drop yellow page listings, the number of consultancies may be assumed to be constant.) Among the coaching newcomers are business oriented ones, although none of them  emphasize strategy per se.  

    Executive coaching has British and U.S. sports origins, above all in the intensely competitive and extremely lucrative field of professional sports. All countries have their revered Olympics and professional athletes, but very few offer as many “big money” athletic opportunities as the U.S. These include baseball, boxing, car racing, ice hockey and football for men, and for both men and women, basketball, golf, marathons, soccer, tennis, and also track and field events.

    In the U.S. one of the executive coaching initiators was W. Timothy Gallwey of San Francisco, CA. In 1960 he was the captain of the Harvard tennis team. In the 1970s he learned Indian meditation techniques (from Maharaj Ji of the generally dubiously viewed Devine Light Mission). These techniques influenced Gallway´s series of Inner Game books, which he began writing in the 1970s. The best known of them is The Inner Game of Tennis, which has sold over one million copies. Timothy Gallwey was one of the first to move from sports coaching to business, lifestyle and executive coaching.

    Increasingly trainers and coaches of champions, and championship teams, became well known in their own right, just as some Hollywood directors are as well known as star actors. As a result, these coaches began appearing on the public speaking circuit. In the sports oriented U.S., companies also showed interest in the coaching and training techniques in sports that led to championship performance. To what extent could these be translated to the workforce – especially at companies where working in teams was common?

    This development led to the growing popularity of “coaching for business”, or “management coaching”, now generally referred to as executive coaching. At first the orientation was psychological: motivation and leadership. In this “soft” coaching the precise impact is difficult to quantify. However in the past decade “hard” coaching on business, marketing and strategic issues has become increasingly common. Here the impact of the coaching intervention on the bottom line is far easier to measure.


The Market

    Depending on how one defines a business, executive or management coach, the estimates of their number worldwide range up to 100,000, with the U.S. as the market leader. A more conservative estimate, and one which appears realistic, of 50,000 business coaches was made in Bresser´s European Coaching Survey of 2007/8.  Of these 17,000 are in Europe, 33,000 in the rest of the world. After the U.S., coaching is most widespread in the UK, with 7,500 coaches and in Germany, with 5000. Then come France with 1,000 coaches, Italy with 850, and the rest of Europe with 2,650.  In other words in the rest of Europe combined there are about 4,500, coaches fewer than in either the UK or Germany alone!  These numbers are growing as more and more people become coaches; the entry barriers are very low.

    According to Wikipedia there are about three million businesses in Germany, to which one can add other public sector and non-business organizations. As top management is not limited to a single individual in all but the smallest organizations, an estimate of four million people in leadership positions (the target market for coaching) appears reasonable. Eliminating three-quarters of these in one fell swoop still leaves a potential market in Germany alone of one million individuals to be served by 5,000 coaches, or one coach per two hundred decision-makers.

    The Bresser coaching survey cited above estimates that less than two percent of German senior managers have used coaching. In terms of revenues coaching probably has less than one half of one percent of  the advisory services pie, even after excluding legal and accounting services. Interestingly, a Harvard Business Manager article of March, 2008 (p.40) reports that at Daimler and VW almost 10% of the senior managers receive at least some coaching in any given year.

    The extensive use of coaching by such "role model" firms (including Lufthansa) sets a precedent for German SMBs. When management consultancy first began, it was the province of "pioneer" major corporations. When it became "socially acceptable" to use management consultants, their use spread, over time, to SMBs. Naturally these firms resisted paying McKinsey type fees. Hence what evolved was a large number of smaller consultancies providing targeted services to niche market clients. Executive coaching may well evolve in a similar way.

    In any case the future for executive coaching looks bright. In the U.S. the field is booming. England and Germany are setting the trend in Europe. German management and production (quality) are respected worldwide, and especially in continental Europe. The fact that German companies are increasingly using coaching will certainly lead to its acceptance in nearby countries.

    Asia offers another opportunity. India and China, for example, are replete with young entrepreneurs and a new generation of highly educated managers. Their drive, energy and competence make for excellent coaching relationships. Coaches of champions are, after all, working with people of extraordinary talent and tremendous ambition. 


Appendix I: The Greek Telemachus and the French Telemachus1

    Odyssey Telemachus was the son of Odysseus and Penelope. As a young man he went in search of his father, whom he had never met. He is guided ("coached") by the goddess Athena, who can lend to others or assume herself whatever form she wishes. In Homer´s account, suitors for Penelope have taken over her house.  Athena advises Telemachus to eject them, which he eventually does with his father, who shoots them with a bow and arrows.  He spares only Medon, the herald, and Phemios, the minstrel. In later accounts Athena also coaches the marriage ("strategic alliance") of Telemachus to Circe.

    François FénelonLes Aventures de Telemaque (The Adventures of Telemachus) written in 1693/94 and published in 1699. It harshly criticized absolute monarchy, which was the political system in France at that time under King Louis XIV. The book was a European bestseller, translated into the major European languages including Latin.

    From 1689 to 1697 François Fénelon was the tutor of Louis de France (1682 - 1697), the Duke of Burgundy and later Dauphin of France. When Fénelon met the seven year old, the child was a violent brat. Under his tutelage, the Duke learned self-discipline, moderartion and responsilbility Louis de France held respect for Fénelon lifelong, who occasionally fulfilled a coaching role with him as an adult.


1 The source for the Greek mythology is Griechische Sagen, Die schönste Sagen des klassischen Altertumes, Gustav Schwab, edited and extended by Richard Carstensen, DTV, 1954, 1978, pp. 263-274. The source for Fénelon and Louis de France is Wikipedia (2010).


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