Coaching Return on Investment (ROI)
Modern-day organizations actively explore diverse strategies to empower top talent to reach their full potential. Still some organizations and leaders do not invest in coaching. Why? I’ve found the organizations that don’t pursue coaching do so for two reasons: either a strong desire for guaranteed results, or because of a lack of education around what could be gained from coaching. In this insight article I will address both by first exploring what research suggests organizations can expect from their coaching investments. Next, I will provide readers with a means to assess the gains for themselves. Finally, I’ll end with how our organization, CYP Coaching & Consulting, is uniquely equipped to be a trusted coaching partner that delivers results.
What the Research Suggests
According to De Meuse et al. (2009) the research on coaching ROI has found that investment in coaching yields significant financial benefit.
One case study in a Fortune 500 company reported that coaching produced an ROI of 529%. This figure was boosted to an overall ROI of 788% when including the financial benefits of enhanced employee retention. Another study claimed that when calculated conservatively, ROI averaged nearly $100,000 or 5.7 times the organization’s initial investment in coaching. (p. 124)
Return on investment based on cost of coaching is one way to calculate value organizations receive from coaching, another method involves measuring coaching objectives and results.
Most coaching engagements aim to either modify behavior or expand and augment behavior (2009). The extent to which the leader being coached achieves the behavioral objectives of coaching is another way of assessing ROI. One research study designed with this method of ROI measurement in mind “reported that executives realized improvements in productivity, quality, organizational strength, customer service, and shareholder value, realizing an average ROI of almost six times the cost of coaching” (De Meuse et al., 2009, p. 121). To consolidate this information on ROI, I’d like to invite you to participate in a contemplative exercise.
Estimation Exercise
This contemplative exercise will provide a way for you to estimate the potential ROI coaching could bring to you and your organization. When you think of your organization investing in coaching what leader, or leaders, come to mind? Think about this leader. What behaviors could this leader modify, expand, or strengthen that would result in measurable business value to your organization? If this leader were to improve their performance in these areas, what would you estimate the financial value of the performance improvement to be? Use your intuition! Think of the improvements that could be made, what they might look like in terms of new behaviors and actions within your organization. What the change might mean in terms of new or organic revenue gain like new partnerships, reduction of unnecessary costs such as employee attrition or reduced legal or reputational risk, increased effectiveness in operations including optimized processes and teams... Take your time. Get creative! Perfection is not the goal of this exercise, envisioning benefits that could result from investing in behavior change, and assigning relative value based on your own intuition is the aim of this exercise. Now, write down the financial value you estimate could be associated with each of the desired behavioral changes and improvements.
Next, think about this leader’s potential. How much do you believe in them? How much do you believe in their ability to grow and develop into a higher version of themselves? Now, add a highly skilled coach to the equation. This coach is a trusted advisor who brings unconditional positive regard into the coaching relationship. The rapid rapport this coach works to establish with the leader, combined with the coaches values of curiosity, learning, and accountability allow for a partnership that evokes awareness, self-reflection, insight, and that motivates this leader to get curious about what needs to change to move towards this desired future. If this leader were to adapt their behavior and make changes that will benefit the organization — optimistically, what percent of the behavioral change objective do you believe could be achieved in partnership with this kind of coach? Now, write down the percent that comes to mind, when you think realistically about what percent of the total amount of change you estimate this leader could effectively reach/achieve in partnership with a coach.
Repeat the questions for each leader that came to mind at the outset of the contemplative exercise. Additionally, repeat the contemplative questions for each behavior you thought the organization could benefit from if adjusted/adapted for greater effectiveness. Use the equation in Figure 1 to calculate the estimated ROI of coaching for each leader. Next, add the monetary estimates assigned to each leader together, this is your total estimated value gained from coaching. For an ROI calculation that also considers cost of coaching, contact us at info@cypcoachingconsulting.com for a quote.
Figure 1 – Equation for Estimating ROI of Coaching
ROI of Coaching for Leader = ([$ Value of Improved Performance Objective#1] X [Estimated % Likelihood of Behavioral Change Objective#1 Occurring]) + ([$ Value of Improved Performance Objective#2] X [Estimated % Likelihood of Behavioral Change Objective #2]) + …
Conclusion
Whether you are a chief decision maker, Human Resource director, or individual contributor looking to develop yourself, the decision to invest in coaching is like other complex decisions leaders make daily! Decisions are calculated risks. At CYP our distinctive values, rigorous training, signature coaching models, client testimonials, and targeted approach to achieving developmental objectives for leaders and organizations sets us apart. For many courageous leaders and clients, coaching has been a calculated risk they were willing to take. They believe in their potential and ability to grow, and are ready to actively invest in and move towards this desired future. For more information on how to begin either your individual or your organization’s coaching journey visit www.cypcoachingconsulting.com and schedule a free consult.
References
Bower, K. (2012). Leadership Coaching: Does it Really Provide Value? Journal of Practical Consulting, 4(1), 1-5.
De Meuse, K., Dai, G., Lee, R. (2009). Evaluating the Effectiveness of Executive Coaching: Beyond ROI? Coaching: An International Journal of Theory Research, and Practice, 2(2), 117-134.