Coaching has been around for quite a while now. Executive coaching as such, is not new. This type of coaching has become more popular as organizations realize that becoming a leader is not second nature. Principles must be taught, and skills must be honed. This is why many organizations have turned to individualized coaching. One-on-one professional coaching is intense and can, at times, be expensive but it produces results that in most cases far exceed the investment…
So what is the Return on Investment (ROI) of executive coaching?
First a definition: ROI is a measure of the monetary benefits obtained by an organization over a specified time period in return for a given investment – coaching.
Existing research on Executive Coaching has proven effective with a strong ROI.
- Companies that have used professional coaching for business reasons have seen a median return on their investment of 7 times their initial investment. (ICF Global Coaching Client Study, 2009)
- ROI on coaching was 6.8 times the initial investment. (The Business Impact of Leadership Coaching at a Professional Services Firm, Merrill C. Anderson, PhD, 2006)
- Three stock portfolios comprised only of companies that spend aggressively on employee development each outperformed the S&P 500 by 17-35% during 2003. (How’s Your Return on People? Harvard Business Review, Laurie Bassi and Daniel McMurrer, 2004)
- Coaching programs earned the company a 5.2 times return on investment and significant intangible benefits to the business, including the financial benefits from employee retention boosted the returns to 7.8 times the initial investment. (Coaching the Coaches, Psychology Today, 2004, and Case Study on the Return on Investment of Executive Coaching, Merrill C. Anderson, PhD, 2001)
- According to a study of senior level executives at Fortune 1000 companies who received developmental coaching, the average return from the programs was nearly 5.7 times the initial investment. (Maximizing the Impact of Executive Coaching, The Manchester Review, Volume 6, Number 1, Joy McGovern, et.al., 2001)
However, by looking at ROI like this, are we sure we can say the benefits (outputs) of coaching exceed the costs (inputs)? Are we measuring all aspects of coaching success? Do we measure:
- Whether coachees liked the coaching or not
- The extent to which the coaches personal objectives were achieved
Organizations are more than just money-making machines, they are social and psychological contexts in which people network, work and relate. Of course, moneymaking is important, but so too are the development, growth, and wellbeing of the people that constitute organizations. One has to think, why are organizations hiring coaches in the first place? Here are a few of the reasons we have found:
- Leadership can be lonely. A trusted advisor outside is a big help.
- The demands on today’s executives are higher than ever before. Change, technology, globalization, new sources of competition, volatility, stress, burn-out etc.
- Coaches typically work on the executives most pressing challenges/problems – hence ROI is higher than most training and development.
- Focus. A great coach cuts through the noise of 1000 emails and competing priorities to help the executive find the 2-3 levers that will impact results the most.
Coaching’s worth is dependent on three dimensions, not just the financial. First, the performance gains it catalyzes. Second, the performance gaps it addresses and finally, the opportunities it can help create in a given environment. After all, if you think competence is expensive…try incompetence!!!
In April 2006, Fast Company magazine reported that many of America’s CEOs and senior executives had embraced the benefits of executive coaching:
- 43% of CEOs and 71% of senior executives had worked with a coach
- 63% of organizations say they plan to increase their use of coaching
over the next five years
- 92% of the executives coached said they plan to use a coach again
In an upcoming blog we will assess the benefits of executive coaching within Canada, with our clients. We want to be able to report on specific organizational and personal benefits received from an executive coaching program.
In the meantime, please tell us your experience or share a story about Executive coaching.
Written in collaboration with Karin Batev & Mike Jackson