The Process of Coaching – A Case Study

In my previous blog, I described how the coaching process creates tension that, when resolved, leads to change.  I would like to present a case to help illustrate this process.  The coachee is the CEO of a growing manufacturing business.  He had just won a government contract for a million dollar order.  This was a very exciting, significant piece of business.  It also would require several hundred thousands of dollars of working capital to finance the order.  The company had a stellar credit rating with its bank so the CEO expected to borrow the working capital without any problem.  The loan officer of the bank had worked with the CEO for many years and they had a strong relationship.  So, when the loan officer delivered the message that the bank would not finance the working capital needed for this order, the CEO was livid. This was exacerbated by the loan officer suggesting the CEO, who was also the majority owner, finance the order by putting more equity into the company.  In his coaching session he expressed his frustration and anger toward his bank. He kept asking how they could let him down when he had been a long term, financially healthy company.  He also expressed a desire to change banks.

From a coaching perspective, the CEO was already full of tension. Unfortunately, this tension was aimed at the bank and not resolving his problem. The first step of the coaching process was to redirect the CEO’s tension by refocusing him on how he was going to finance the pending order.  Having some insight about how banks operate, the coach began asking questions about the current loans with the bank.  The company had all of its banking with this bank, including the mortgage of the building which was owned by the CEO and family members, equipment loans, an asset based, unsecured credit revolver loan for working capital, and the home mortgage of the CEO.  Further questioning led to the revelation that all the company and CEO loans resided in the small business loan group. Total interest and fees paid amounted to several hundred thousand dollars a year.  Then the coach asked questions that could, if true, lead to a confrontation with the bank.  “Do you think your total debt is high for the small business section of the bank?   Can you think of any reasons why your bank officer is reluctant to move you into the next level at the bank?  These questions raised serious concerns about how the bank viewed the CEO’s company and a possible explanation of why the loan was denied.  This conversation helped the CEO reframe being turned down for the loan.

Less angry and determined to confront the loan officer, the CEO asked for a meeting and an explanation of why the company was denied the loan.  He got the answer he expected.  The total indebtedness of the company would have required the loan officer to go to a committee that would probably deny the loan or recommend that account be moved to the mid-level lending group.  This could have had the consequence of changing loan officers.  It could also lead to the loss of business for the small business lending group, along with less income for the loan officer.  In a much stronger position, the CEO negotiated a loan, based on his loaning the company a third of what was needed and the bank financing the rest.  The tension was greatly reduced and the banking relationship was back to normal.

Looking back, two important shifts led to the desired outcome for the CEO and for the bank.  First was the shift in tension from anger with the bank toward trying to understand the reasons for the bank decision and focusing on how to finance the pending order. The second shift was in the negotiating power of the CEO.  This was influenced by the coach’s questions and the resulting insights gained by the CEO. In confronting the bank about how its internal politics were affecting his business, the CEO was able to gain concessions that would not have been possible if he had acted on his original frustration and anger.  And, the CEO was able to maintain the relationship with his loan officer who he really liked.