ROI of Executive Coaching
Omar Saldana April 26, 2022 HR Strategy, Talent Management
Executive coaching continues to grow as a reliable resource for professionals to learn and advance in their careers. Those who have had coaches attest to its value with statements like:
- I gained confidence -was more willing to take risks knowing pros and cons of options
- I learned to ask for feedback and reflect before and after taking action
- I interacted with emotional intelligence
- I broadened my thinking and was able to see opportunities that led to financial results
This last statement is music to sponsors’ ears. In this context, sponsors are the organizations that pay for employees’ (leaders) coaching. Sponsors, like other parts of their enterprise, do well by thinking in business terms such as ROI, return on investment. Whether it’s the CEO, the head of a business unit, or the head of Human Resources, showing ROI data lends credibility and power to the coaching conversation.
So, can the ROI for coaching be measured? Yes, absolutely.
To do so, you must get clarity through assessment at the start, middle, and end of a coaching engagement. At the start, the leader, sponsor, and stakeholders benefit from answering questions such as: What brings the leader to coaching? Why is this important? Why now? What is the impact of change in the areas of focus? Additionally, a short survey on where the leader and stakeholders would rate the leader on the focus areas in the coaching plan, helps to establish a baseline before coaching begins.
The work at the start of an engagement sets the foundation for the measurement of ROI. It is important to get details behind statements -to understand the ripple effect for time, revenue, profit, innovation, expenses, and efficiency. For example:
Q: I see the leader is doing her subordinate managers’ work. What is the impact?
A: The managers are content to let the leader do the work, consequently, the leader does not have time to do her work and is burning out. Work is not getting done.
Q: How much of the leader’s time is spent doing her subordinate managers’ work?
A: 20% of her time. This indicates that there is lost time with the managers as well that could be quantified.
By asking second and third level questions, you learned that 20% of the leader’s time is spent doing the work of her managers. You can also learn what this means for the managers.
A takeaway from the above example is that the sponsor has the information needed to craft a detailed current state and what continuing on this path “costs” the organization. By investing upfront to detail the reasons for coaching and the desired outcomes of coaching, you can build a business case and understand and share the ROI. I can hear some of you saying, well that example was easy. How about a high performer whom the organization wants to prepare for promotion to the next level? Good question.
For a high performer, what are the skills and behaviors required to succeed at the next level? What do assessments identify as the gaps or areas for development for this individual? Looking forward, what would it mean to the organization to promote this individual? What is the value to the leader? To her team? To promote sooner? To promote when the individual is already operating at the next level? To have direct reports step up their skills? What is it worth? Productivity implications? Monetary worth? It is important to document this value upfront because you will come back to it at the end of the engagement.
At the midpoint of a coaching engagement get input from the leader, and stakeholders through interviews and the same short survey questions used at the start of the engagement. In which areas is the leader demonstrating progress toward the desired outcomes? In which areas does the leader need to increase progress? Gain clarity to focus and align priorities in the remaining portion of the engagement. Most coaches provide a mid-point report to sponsors.
Interviews and the survey at the end of a coaching engagement provide data on changes. At the outset, you discussed with stakeholders desired outcomes and what that would be worth to them. At the end of the engagement, you have survey data, and interview data to discuss changes made by the leader -how they are operating, impact, ripple effect.
Leader motivation is critical to successful coaching outcomes. That may sound obvious; however, I’ve been part of conversations like the following. “We want to get a coach for Mike. He is very talented but has pointy elbows and is not aware of how others perceive him, or he doesn’t think it matters given his high numbers.” It may be true that Mike would benefit from coaching, however, if he is not intrinsically motivated to do the work in coaching, the outcomes and the ROI will be less than desired.
Not discussed here, but clearly having value, is the impact coaching has on retaining talent. Recent studies show the number one reason employees leave their jobs is a lack of opportunity for growth and achievement. An organization investing in an individual’s development and success goes a long way for that individual and for communicating the culture of the organization.
There are competing demands for how an organization invests its money. To make a case for executive coaching, you need to demonstrate ROI. You can show ROI by gathering data and involving stakeholders throughout an engagement. This leads to a better understanding of engagements with different levels of ROI and the contributing factors so that you can adjust to increase ROI for coaching engagements over time. Having agreed upon objectives and methods to measure progress also leads to higher quality conversations with stakeholders, leaders, and coaches.
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