A Research Paper By Paul Crabtree, Positive Attitude Coach, UNITED KINGDOM
ROI of Coaching
What is the ROI of coaching? Answering this question will help coaches be more effective and able to communicate the value of and sell their services. Per the International Coach Federation (ICF), coaching is a $2bn industry with 47,500 professional coaches, and 99% of client respondees are satisfied with the overall experience. So, why do we even need to measure ROI? In fact, many organizations don’t. Should they? Can they?
What Is the ROI of Coaching?
Why?
Coaching has in the past been susceptible to the critique of being “soft”, not science-based or quantifiable. Indeed, coaching has not historically been ROI-focused. Should we happily continue to ride the wave of largely qualitative self-congratulation? Presumably, any HR budget holder engaging with an external coaching supplier would be quite pleased to justify their Purchase Order with a neat business case that justifies the investment. In fact, for the surveyed HR practitioners, ROI is the second most important criterion for establishing the business case. The case for measurement, though, is clear: As coaches operating in a respected, and still-growing industry, measurement enables management. A closed-loop system in which successes can be celebrated with confidence and failures challenged is a required mindset for the profession’s future evolution.
This paper aims to give coaches an approach on how to measure ROI, and thus create sales arguments to support their marketing activities. The good news is that coaching ROI can be measured. As is the case with most people’s development-related interventions, many factors are at play. Additionally, in a hybrid-working, post-pandemic, well-being-conscious world, the overall benefits of coaching are broader than ever before. Given this wider context, it is useful to consider ROI measures in terms of who and what are we seeking to measure. Before that, some more general challenges:
- Isolation. How can all external factors be eliminated from the causality calculations, or, how can they be allocated in the correct proportion? How can internal factors be addressed – such as the contribution of other team members to an overall department’s performance? As mentioned above, this challenge lies at the heart of many development interactions.
- Statistical validity. A coach or a corporate entity purchasing coaching services may be able to derive some financial and or/soft measures, but the sample size and heterogeneity of the scope of the coaching engagement will most likely render any quantitative results statistically insignificant.
- Self-Reporting. Given the challenges with A and B, coaching engagements often carry a self-reporting element where the client reports on results, both quantitative and qualitative. However, personal biases and subjectivity make such reporting challenging to normalize, calibrate or draw conclusions from.
What
Financial Measures. A business-oriented individual or team coaching engagement might focus on SMART goals aligned with business strategy, line manager directions, and a robust framework of governance measures and controls. This all sounds like reasonably solid ground from an ROI measurement perspective, notwithstanding the general challenges mentioned above. Of course, financial measures may not even feature in the coaching engagement, but it is interesting to examine the link between human and financial factors.
Overall Business Impact. The BetterUp coaching platform posits a fuller picture of the overall business impact of coaching, suggesting an ROI of 3.5x to 5x, covering the areas below:
- Performance. This is incremental value driven by productivity gains, employee growth, and reduced absence.
- Retention. Here, the value is derived from the savings associated with search, selection, onboarding, and time to competence. Professional growth and opportunity factor into this. This applies not only to the coachee but also to that person’s team (people don’t leave jobs but managers).
- Wellbeing. This is a big and increasingly important one, again in the category of savings. Critically, it covers both the professional and personal benefits of coaching. It also impacts the bottom line by reducing stress invaluable team members, well-being, health, and healthcare costs
The latter point here leads neatly to the increasing understanding of well-being as a key asset in all of life’s domains and the need for more holistic assessments of the benefits of coaching. BetterUp has developed a leadership framework called the Whole Person Model, which adds in some elements not normally associated with leadership coaching:
- Physical Thriving
- Social Thriving
- Emotional Thriving
- Cognitive Thinking
These take into account recent phenomena like the Great Resignation and recognize that job satisfaction now depends on the new ways in which we live and work. To that end, and recognizing the link between business performance and well-being, Anthony Grant posits that ROI can be measured using two dimensions of an individual’s state of mind: well-being and engagement. The first may be measured by the Positive and Negative Affect Scale, for example; the latter by the Gallup Q12. The model thus classifies into four quadrants:
- Disengaged and Distressed may show exhaustion, burnout, or cynicism.
- Distressed but Functional show stress or anxiety
- Acquiescent or “Happy non-workers” are not engaged with company objectives and daily tasks
- Flourishing or “Happy workers” benefit from good professional relationships and derive meaning from their work
It’s fast becoming clear that coaching ROI is highly dependent on the context: who, what, and (increasingly) when. Coaches will therefore need to define a set of measures that can be used to demonstrate movement over time and be comfortable that, although imperfect, a solid framework can be derived to ensure guaranteed trust and transparency between the industry and the marketplace.
Bespoke Metrics
Coaches may well, therefore, agree with their clients on their own set of metrics, perhaps blended or weighted to suit the nature of the engagement. Forbes Coaches Council has offered up a number of such metrics which coaches may explore to define their KPI framework. In no particular order, Forbes Coaches suggest:
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|
Metric |
Background |
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1 |
Value add to the Team |
Depending on context and business function, ROI may be highly quantitative and results-driven, for example, sales performance. However, this approach focuses on adding value to the lives of team members, both personally and professionally |
|
2 |
How do you feel? |
It’s key that clients recognize this improvement and its direct correlation with the improvements they are experiencing in their lives through coaching |
|
3 |
Specific behaviors |
Tracking measurable progress for a specific behavior, perhaps with stakeholder 360 feedback, for example, “better recognition and reward of my team members.” |
|
4 |
Progress towards goals |
Clients must recognize their new insights and the progress made during each coaching session |
|
5 |
Pre-agreed KPIs (hard or soft) |
Clients may have hard KPIs (eg % of sales target achieved) or soft such as self-reporting on an agreed behavior. These are agreed upon as part of the overall coaching engagement |
|
6 |
Stakeholder-Centered success |
This is the core of Marshall Goldsmith’s Stakeholder-Centered coaching model. Progress is measured by the client and a group of stakeholders. Their perception is their reality. The client shares the areas being worked on and conducts quantitative monthly and quarterly reviews |
|
7 |
Return on Development (RoD) |
This approach is similar to that of a financial return on Investment, though it lends itself to longer return periods, unlike the annual cadence of financial reporting. This can be a mix of hard and/or soft KPIs, fed into a financial value |
|
8 |
Show me new behaviors |
Consistent and observable demonstration of new behaviors, as agreed with the client. (Similar to 6) |
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9 |
TCQ (Time, Cost, Quality) |
Transpose the improvement derived from coaching across any or all of the 3 TCQ metrics, focusing on tangible results |
|
10 |
Client Session Verbatim |
During, sometimes after, the coaching session. What has benefitted you? |
|
11 |
What matters most? |
What’s the metric the client cares about most and for which you have been hired? Measure and monitor this |
|
12 |
Neuroscience assessment delta |
Compare the outputs of neuropsychological assessments over time to assess improvement across elements of cognitive performance such as learning, thinking, holding attention |
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13 |
Personalized success measure with stakeholder feedback |
Similar to 6, pre and post-assessments with stakeholders with ongoing pulse checks |
Who
There are two elements to consider here: the coach and the client:
From a coach’s perspective, it holds true that the established concepts of coachability and chemistry underpin the success of any coaching engagement. Indeed, some digital coaching platforms support “coach” matching, supporting de-risking of the coaching process.
For clients, is the C-Suite level where the budget should be diverted? According to BetterUp, the answer is no. From an ROI point of view, their research indicates that core managers, two to three rungs below C-suite, at the up-or-out level, is where maximum ROI can be gained, with returns at 3 times that of executives or individual contributors. High performers in general also benefit significantly from coaching.
Technology
The application of digital technology to coaching opens up a new world of human transformation, bolstered by recent steps in Artificial Intelligence. Coaches may drive actions and accountability via WhatsApp or proprietary digital coaching tools, but technology brings tremendous possibilities to the world of coaching. Firstly, scale. Those 47,500 coaching practitioners can only reach a tiny fraction of their potential market, constrained by time, resources,s and, particularly, cost. Digital coaching tools allow coaching to scale up but also be more effective as an accompaniment to face-to-face coaching.
LeaderAmp is a coaching platform, describing itself as “High Touch, Hi-Tech” that uses AI to supplement and augment human-to-human interactions, replacing those awkward WhatsApp “nudges” with AI-based push notifications, journaling capability, and support at the point of need. In fact, the platform measures the application of the outcomes and the associated sentiment, which can be measured by the coach and/or sponsor using a digital dashboard. Critically the tool also allows the coach to practice an upcoming interaction in a safe space, extending the coaching relationship into daily interactions, measuring not the coaching itself but its application – it drives the know-how to show-how, one of the main challenges in coaching, and builds a picture of the client’s “goldilocks zone” – their ideal time or place to interact with the tool.
Team/Group Coaching
The fast-growing area of Team Coaching is a compelling case for increased ROI compared to individual coaching. The ICF’s Team Coaching competencies highlight the challenges presented in this context, mainly around the additional dimension of team dynamics, interpersonal challenges, and communication. From a deployment perspective, coaching supervision is an additional consideration here, aimed at addressing the challenges of a team context. Nonetheless, this modality is a compelling case for ROI, as evidenced by the growth of this sector and the competency development around it.
Measuring ROI in Coaching
Measuring ROI in coaching is indeed very challenging and it is understandable, given the complexities and diverse contexts covered in this paper, that coaches and clients alike may not even attempt to do so. However, it is in the interest of the profession and its clients that some combination of measures is used, as that positive shift in metrics will drive the industry further forward. A number of approaches are outlined in this paper that can support coaches in selecting and agreeing on the success criteria that will work for their clients.
The advent of technology in coaching, particularly AI, suggests that the industry will scale and democratize to a point that benefits more humanity. The challenge for coaches will be to continue to offer high-value, personalized, and relationship-based coaching over and above this foundation. Articulating ROI will be key in making the case for such ongoing practices, partnering with technology solutions where beneficial.
So, why do we even need to measure ROI? In fact, many organizations don’t. Should they? Can they? Yes, yes, and yes.
References
https://coachfederation.org/about
https://www.forbes.com/sites/forbescoachescouncil/2021/11/15/how-to-calculate-your-coaching-return-on-investment/?sh=10b0431b3401
https://www.betterup.com/blog/daily-coaching-daily-dividends-on-the-roi-of-coaching
https://www.betterup.com/blog/whole-person-model-to-build-inspiring-leaders-thriving-teams
https://www.businesscoaching.co.uk/how-to-measure-coaching
https://www.linkedin.com/pulse/what-return-investment-roi-from-coaching-when-money-calvin/?trk=articles_directory
https://www.leaderamp.com/