What is the compound effect? What does leadership development have to do with the compound effect? Find out how to use the compound effect to supercharge leadership development. Use, Marshall Goldsmith leadership coaching with the power of the compound effect for leadership development for leaders in your organization.
A hypothetical example to illustrate the power of the compound effect
Consider this hypothetical example that illustrates the power of the compound effect. Imagine that I have offered you freelance programming work. You have two options to get paid.
Two options – small improvements consistently vs. 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.
Which option would you choose?
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 meagerly 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.
How does the compound effect relate to our behaviors and leadership development?
Here are a few real-life options to consider.
What if you ate a chocolate bar a day for a year? What if you instead exercised 20 minutes a day for a year?
What if you watched TV for 1 hour a day for an entire year? What if instead, you read 10 pages of a good book a day for a year?
You would get completely different results.
Small choices + consistency + time = significant results
Seemingly small choices made daily don’t appear to make any difference in the short term. But consistently making the small choices add up to drastically different outcomes over time. That is the power of the compound effect.
Read: Leadership practice make you a better leader? Right? Wrong! Deliberate practice does!
Leadership development and the compound effect
Leadership development is no different! Small changes in leadership behaviors applied consistently over 12-18 months add up to extraordinary results!
We offer Marshall Goldsmith’s stakeholder centered executive coaching for leadership development that capitalizes on the principle of the compound effect. Why is coaching important for leadership development? How is it beneficial?
Leadership coaching is the most effective way to ensure that leadership improvement takes place. Executive education and training programs help in creating awareness for change – however behavior change requires customized solutions, consistent follow-up, and accountability.
Executive coaching provides it by design. Marshall Goldsmith executive coaching is one of the best leadership development programs available in India and worldwide through a network of over 3000 certified coaches who provide the same consistent executive coaching process used by many of the Fortune 500 companies for their leadership development coaching programs.
Read: How to become a better leader? What does it take?
What exactly is Marshall Goldsmith stakeholder centered executive coaching?
Here are the key defining points of Marshall Goldsmith’s stakeholder centered executive coaching process.
Help leaders to grow their leadership behavior effectiveness
Leadership behavior effectiveness is making the leader aware of his behaviors and their impact on the team members. Behavior change helps establish better relationships, better employee engagement and improved performance of the team.
It also includes rectifying derailing behaviors. These are the annoying behaviors of otherwise good leaders. Often such behaviors become a hindrance to smooth team functioning.
Marshall Goldsmith stakeholder centered coaching helps leaders improve their own derailing behaviors and change the perception of the team members.
Often people get promoted to a higher role with little support. This is often because of business emergencies like an urgent project or a senior leader leaving the organization.
Leadership coaching helps leaders transition into a higher role. It also helps the leader transition across into another role within the company – when such a need arises.
Through Feedback / Feedforward from Stakeholders on the Job
Feedback allows the leader to realize the blind spots that may act as their leadership bottlenecks. Most leaders have one or more poor leadership behavior that they may not be aware of.
Such toxic leadership behaviors often end up hurting the engagement and the performance of the leader’s team. However, once they receive feedback, most of the focus is on feed-forward. Feed-forward is asking for suggestions from team members (stakeholders) for improvement for the future.
This takes the focus away from the past – which cannot be changed, to the future – which can be improved if the leader acts of stakeholder’s suggestions.
Coaching the executive and improving on poor or toxic leadership behaviors creates effective teams and organizational culture that promotes employee engagement and performance.
As acknowledged by the stakeholders
Stakeholders are the leader’s team members who interact frequently with the leader. They are at the receiving end of the leader’s behaviors.
They are the “customers” of the leadership product. No one else is in a better position than the stakeholders to assess whether the leadership behaviors are good. They can also assess whether the behaviors are improving. In the Marshall Goldsmith stakeholder centered executive coaching process, as the name suggests, stakeholders are at the center.
Ultimately, they decide whether the leader has improved her behaviors. This is done through an anonymous survey. We consider a leader has improved, not because the leader says he has improved, or the coach says he has improved, but only when the stakeholders (through an anonymous survey) confirm that the leader has improved!
Using a well-defined process/system for 12-18 months
Marshall Goldsmith’s stakeholder centered executive coaching process is a well-defined and tried and tested process. We design it to appeal to the leader’s ways of thinking and leverage it to help the leaders improve. It is also a process that has been used to coach over 400,000 executives in over 60 countries – including executives from 150 of the Fortune 500 companies. The process is highly effective. In a survey of 11,000 leaders on four continents, over 95% of the leaders using the stakeholder centered process improved. Marshall Goldsmith stakeholder centered executive coaching usually lasts from a minimum of six months up to a year and a half.
The compound effect of Marshall Goldsmith Stakeholder Centered Leadership Coaching
Day by day and week by week, small changes in the leader’s behaviors – based on the suggestions given by stakeholders – don’t seem like much, but compounded over the period of 12-18 months, they help the leader significantly improve her leadership effectiveness. That is the power of compounding applied to leadership coaching using the Marshall Goldsmith stakeholder centered leadership coaching process!
Here are some features of the Marshall Goldsmith executive coaching program
- Guaranteed, measurable leadership growth as assessed–not by us–but by the leader’s own stakeholders.
- In addition, unlike leadership training or executive education programs, it will involve the entire team while doing their day to day work.
- The leader becomes the coach, and it has a cascading effect on the team increasing team effectiveness and improving organizational culture.
- It is a system for continuous improvement for leaders themselves and their teams – although it is leadership coaching for an individual leader; they realize the benefit of team coaching through the involvement of the entire team.
- In a study of 11,000 leaders on 4 continents–95% of the leaders using this leadership coaching process improved!
- This is the exact same executive coaching process that is used by 150 of the Fortune 500 companies to grow their leaders through CEO coaching and leadership coaching at C-suite levels
- We are so confident of the process we work on a no growth no pay basis (don’t try that with other vendors, lol!)
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