Return on Investment

As any business leader will tell you, return on investment should be measured in dollars and impact. This is probably one of the most challenging aspects of coaching. When goals are clear from the outset, success can be judged by whether those goals are actually met. However, goals often evolve or change throughout the course of the coaching engagement, or the impact of coaching may be intangible, or the foundation that is being laid for impact will have its effect at some time in the future. How therefore can this be measured?

Certainly, the satisfaction of the coachee and/or client is one measure of success, but does that really gauge the sustainability or long-term success of the impact or merely the success of the coaching relationship?

Can Managers and Executives Really Change?

It’s a fascinating question. In other words, can the Leopard change its spots?

shutterstock_171476837Anecdotally, it is clear that supervisors, managers and executives do change. With a leader at the top of an organisation, for example, even a small positive change in behaviour can have a substantial impact rippling down through the organisation. From an organisational perspective, the simple fact that the leader is trying to change something (and consequently is a role model for personal development) sends a strong message to the organisation itself and could even be more important than what the leader is actually trying to change (actions speak louder than words).

With senior executives, behaviour may be the only leadership attribute that can be changed in a cost-effective manner. It could be argued for example, that at that level, it is usually ‘too late’ for technical, formal or functional education, but not so for attitudinal or behaviour change.

Research Studies

Howard Morgan and colleagues (“The Art and Practice of Leadership Coaching“) asked the question as to whether coaching was really worth the money. They cite at least four studies that highlight “a fairly compelling case for the cost effectiveness of executive coaching” (p 249).

In the book “How the Top 20 Companies Grow Great Leaders,” M Effron and colleagues found that companies with stronger leadership practices outperformed their industry peers in the long term measure of both financial growth and return. One practice that the authors discovered that separated the top companies from others was the use of executive coaching. This study found that 47% of the top companies regularly assign coaches to their high potential employees. On the other hand, just 10% of the remaining 300 firms surveyed made a similar claim.

Further, the book by D B Peterson and K Kraiger, titled, “The Human Resources Program Evaluation Handbook,” (2004) outlined a study by McGovern at al (2001) which examined the ROI of coaching. They examined 100 mid- to senior-level managers at large organisations who participated in coaching. The executives estimated their coaching to be worth 5.7 times the initial investment, based on a conservative formula for estimating ROI by Phillips (1997). Significant organisational and personal benefits were found.

For example, organisational benefits for coaching included better productivity (reported by 53% of participants), quality (48%), organisational strength (48%), customer service (39%), and retention (32%). 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%).

Overall, this kind of evidence for example, suggests that leadership coaching provides a powerful tool to accelerate the performance of successful executives and managers, and in turn, the corporation. Furthermore, the authors recommend that if corporations wish to remain in the forefront, it is imperative that executive coaching be among the developmental tools in a training arsenal.

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Where do we start?

If leaders are to be coaches, where do we start?