The ROI of Executive Coaching

I started coaching leaders in the mid-80s. Back then, the term coaching was eyed a bit suspiciously. Somewhat akin to management consulting, this focused primarily on the skills of the leader. Clients asked me if it was a blend of business consulting and athletic tools? Or therapy? How personal does this get?

Executive coaching was, and still is, an unregulated industry. However, now there are many coaching certification programs and professional organizations to build skills and guide ethics.

The presence of coaching in corporate America has grown tremendously since it came on the scene over 40 years ago. There are currently 20,000 coaches in the US. It is the fastest growing profession in the US second only to Information Technology.

While coaching was initially only a perk for the very top execs of the largest companies, organizational leaders in companies of every size now realize the power of having a personal advocate, thinking partner, strategist, and truth teller to help drive professional growth.

So what is coaching? Coaching is a customized, one-to-one learning method that increases leadership effectiveness.

How do you go about calculating the benefits of coaching? Fortune Magazine reported this study several years ago: “Asked for a conservative estimate of the monetary payoff from the coaching they got, these managers described an average return of more than $100,000, or about six times what the coaching had cost their companies.”

To see how coaching can be quantified to show the impact on the business, here’s an approach I use that incorporates a leadership development goal with a key business metric.

Leadership Development Goal

Choose a focus that the client sees as important, and one that has also been validated by upper level leaders and/or 360 feedback. These are often in the category of “emotional intelligence,” such as self-awareness, communication, conflict management, and the ability to motivate others.

Example: “Increase my ability to develop my people.”

The coach works with the client in making the time for more interaction with their people, helping the client see their role in a more expansive way with exercises like:

• Consistent one-to-one sessions to discuss development apart from tactical or task-oriented meetings
• Thoughtful assessment of each one’s performance
• Balanced and diplomatic feedback on strengths and improvement areas
• Co-created individual growth plan
• Listening skills and empathy training

Key Business Metric

Decide how the client’s growth in developing his or her people will significantly impact organizational performance. Be specific and choose a key business metric. Using the above example: By increasing this leader’s ability to develop their people, it is very likely that their direct report’s performance will improve the bottom line. The leader is asked to make an estimate of how much their own behaviors will impact their direct reports and what metric would be impacted. Let’s say in this case the leader determines it would result in a customer service volume increase of 25% by year-end.

As in any goals, we don’t know precisely how much a behavioral goal will impact another metric, but by tying the goal and the metric together, the client integrates the coaching people part of the role. It’s not a stretch to say that other metrics will be positively impacted such as retention rate, cultural norms, and engagement levels.

Using the discipline of setting informed developmental goals for the individual and tying that growth to a business metric, assures the coaching will facilitate meaningful growth for the learner and provide ROI to the organization.

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