How can you calculate ROI from Executive Coaching?

D B Peterson and K Kraiger, authors of “The Human Resources Program Evaluation Handbook,” (2004) outlined a study by McGovern at al (2001) which examined the ROI of coaching.

Significant organizational and personal benefits were found: organizational benefits for coaching included better productivity (reported by 53% of participants), quality (48%), organizational strength (48%). They also cited improvements in cost reduction (23%), and profitability (22%). Among personal benefits, they reported improved relationships with direct reports (77%), and peers (63%), better teamwork (67%), and increased job satisfaction (61%).

The formula to calculate the ROI of an investment in coaching is as follows: %ROI = Benefits Achieved - Coaching Costs X 100/Coaching Costs

However, investing in people is not the same as investing in a piece of equipment or a new software program. Coaching objectives must be clearly identified upfront. This allows our clients to measure the benefits achieved through the coaching program and then assign a monetary value to those benefits.

We identify the coaching objectives upfront by analyzing the following factors:

  • Client's department, position, level, function, etc.
  • Corporate culture
  • Industry
  • Corporate objectives/challenges/opportunities
  • Client's developmental needs, behavioral challenges, opportunity for advancement
  • Changes in business strategy, required competencies, leadership or ownership.
  • Etc.

The specific areas identified for improvement during the analysis phase are set as objectives. Some examples of coaching objectives include:

  • Communicating clearly and effectively with bosses, peers, reports, customers, investors…
  • Consistently delivering business results that meet or exceed the competition, and/or forecast
  • Managing the team in an efficient and effective manner
  • Providing developmental opportunities and support for others
  • Encouraging and rewarding innovation
  • Demonstrating vigilance regarding costs, quality and customer service
  • Performing in a manner consistent with the company's mission and prevailing ethical standards.
  • Etc.

We can then consider the results that arise from pursuing the objectives. Some results are more "tangible" than others. Examples of tangible benefits from coaching:

  • Increased sales
  • Decreased costs
  • Decreased employee turnover
  • Decreased absenteeism
  • Improved productivity
  • Fewer customer/employee complaints
  • Etc.

Tangible results are easier to translate into monetary value or bottom-line impact. However, intangible changes in the client's behavior can often have a wider-ranging impact than, or may lead to, the more tangible benefits of coaching. Examples of intangible benefits from coaching:

  • Reduced conflict
  • Better teamwork
  • More productive meetings
  • Improved employee morale
  • Improved development of subordinates
  • Increased job satisfaction
  • Better work/life balance
  • Etc.

We use our assessment tools - which we conduct both before and after the coaching occurs - to measure the benefits achieved: individual assessment, culture surveys, 360-degree surveys of the client's bosses, peers and reports (here link to our assessment section). Other vehicles our clients use are climate surveys, surveys of sales, costs, employee turnover and other business results, etc.

Investing in "human capital" is a strategic plan which has proven to generate great return on the organization's core assets. Coaching is part of that strategic investment. Monetary values can be assigned to tangible and intangible results in order to measure this investment in your company's most important asset - its people.

Contact us to clarify your needs and objectives and define the best Coaching Program for you.

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