Dev Rangarajan
Do you really believe in your product?

Coaching Incentive Structures

In the past couple months, I’ve interacted with a lot of ‘coaches’. Essentially, these are people who sell programs that are designed to teach you some skill. Just like any space, there are plenty of good and bad performers, but in general it seems like there is a lot of talk and marketing. As an example, my fraternity brought a coaching company in to try and improve at recruitment. This company charged around $5000 for the session, and we flew one of their consultants out for a 3 hour workshop.

Now, here’s the problem: fraternity recruitment is something that generates profit. When a guy signs with a house, he is probably going to pay that house something on the order of 5 figures over his next 3ish years there. More guys = more money. So spending $5000 on a seminar to get better at recruiting makes sense from both a financial perspective and also because that’s the goal of social organizations. However, this coaching company could have done way better.

If the average brother is worth 10k, then why not take a percentage of each new brother? This aligns everyones incentives perfectly, and also puts inherent belief in the product you sell. By taking a flat rate, you undermine the value of your work, and also make less money.

I’ve seen this quite a lot with coaches and coaching programs, and it doesn’t make any sense to me. Either they don’t believe in their product (in which case why buy it?) or they haven’t realized how to align their incentives with their clients (in which case why trust them to be a dynamic educator?). Corporate headhunters and recruiters figured this out a long time ago, why haven’t educators and coaches?

It’s important to note that the opposite is sometimes valuable, like in the case of a personal trainer. Having to pay them a fixed amount of money every week or month makes you more likely to keep going to the gym and see more results, but in that case the incentives are better aligned. I’ve also seen trainers adopt a reverse model where you overpay them and then get money back at each session, which is another creative incentive structure.

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