When considering leadership coaching, often one of the first questions that is asked is, “How much does it cost?” which is then followed up by, “And what will I get out of it?” What these questions boil down to is really, “What is the ROI of leadership coaching?”
Leadership coaching’s return on investment (ROI) can be a tricky number to nail down, but ROI is essential to justifying the implementation, continuation, and changes to coaching within an organization. The ability to verify the ROI of coaching has a number of benefits like:
- Justify the spending associated with coaching
- Improving the coaching process
- Set priorities; focusing on programs with the highest ROI
- Eliminate/replace unsuccessful programs
- Gain support from reluctant members of your organization[i]
One key aspect needed to measure success is the establishment of objectives. Objectives are used to drive and shape the coaching process so that all parties know what they are working for. “They tell evaluators to what level they will evaluate the coaching process, when they will collect data, and what success should look like.” [i] To determine what objectives you should be setting, the needs of the company need to be assessed. Your needs should include both the business and the performance needs, and once they have been identified then you can focus on learning needs. “When identifying learning needs, the basic question being answered is: What do people need to know in order to change their behavior or actions on the job (performance need) in order to improve business measures (business need)?” [i] Once you have fully explored all of your companies needs, you can clearly define your objects, which will then lead to determining the best ways to meet them.
Your coaching should be structured around your objectives because objectives provide a framework for evaluating the success of coaching and its ROI. Without objectives to structure the coaching process it is difficult to clearly identify or measure outcomes. The better defined the objective, the easier it is to measure the outcomes.
Take all benefits into account
Of course there are aspects of leadership coaching’s ROI that are not clearly measurable, and those implicit benefits and returns often tempt people into thinking that coaching does not have a measurable ROI. Things like improved satisfaction and communication, as well as increase employee morale, do resist quantification. However, they are clearly benefits, or returns, of coaching and, if an employer values these things, they should be taken into account when determining the ROI of coaching. When calculating the ROI of coaching, therefore, it is important to remember that the very real implicit benefits of ROI aren’t going to fit nicely into a spreadsheet.
That being said, some of your objective driven outcomes are going to be things that you can measure and design a spreadsheet around. Things like increases in sales, employee turnover, and savings from the cutting or changing of unsuccessful programs. Without the detailed initial analysis, however, you’re going to be missing critical information needed to determine those benefits. Analysis isn’t just needed to formulate objectives, which provide the framework for your whole improvement strategy, it is necessary if you want to document and present any of the measurable ROI from leadership coaching.
The big picture
Like most important business decisions, leadership coaching isn’t something that should be entered into lightly. If you really want to optimize your leadership coaching experience, and if you want to calculate the ROI in terms other than “Good” or “Great,” you are going to need to put in the leg work to conduct a thorough analysis of your needs and clearly define your objectives.
[i]Phillips, Patricia Pulliam. Phillips, Jack J. Edwards, Lisa Ann. “Measuring the Success of Coaching.” The American Society for Training & Development, 2012.