The ROI (Return on Investment) of Executive Coaching: Useful Information or a Distraction? Part 2
Part 2 of a 2 Part Series by Carol Braddick
This article was first published at www.ukhrd.com in November 2003 and is reproduced with the permission of Fenman Limited. Copyright remains with Carol Braddick.
Part 1 of this 2 part series discusses the high interest in the evaluation of results from executive coaching 1 against the backdrop of growth in the coaching market. Part 2 includes selected findings on results from coaching (including ROI) and insights on developing an approach to evaluating results from coaching.
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With such high interest in the results from executive coaching, it’s timely to:
- Examine the objectives for evaluation and what to evaluate (see Part I of this series);
- Acknowledge what we have learned – and have yet to understand – about the potential results of coaching; and
- Consider how to make sensible decisions on managing this important investment while on a sharp learning curve about coaching.
One More Time: People Management Practices Matter
Surely, coaching deserves inclusion in the set of smart people management practices. And several studies show a link between smart people practices and business performance. These studies do not indicate the impact of coaching, but suggest that coaching is one of many practices that can reasonably be linked to high performing companies.
For example, The CIPD report 'The Case for Good People Management', concludes there is 'overwhelming evidence that progressive personnel practices improve business performance'. Its review of several studies finds linkages between the such practices and business performance, including estimations of how people practices account for as much as 20% of profitability and productivity 2.
I think it is also reasonable to consider coaching an example of the application of the management practices cited in the recent study 'What Really Works' 3. The results of this 5 year study of the management practices that produce superior business results indicate companies will have a greater than 90% chance of sustaining superior business performance if they:
- Excel in the 4 primary practices summarised below; and
- Excel in any 2 of the 4 secondary practices presented in the chart below.
What Really Works |
|
| Primary Practices | Selected Examples |
| Strategy Execution Culture Structure |
Culture Practice: Inspire all managers and employees to do their best Create a challenging, satisfying work environment |
| Secondary Practices | Selected Examples |
| Talent Innovation Leadership Mergers and Partnership |
Talent Practice: Create and maintain top of the line training and development programs Leadership Practice: Encourage management to strengthen its connections with people at all levels of the company. Keep senior management actively involved in the selection and development of people |
For a few of the practices cited above, coaching is an obvious means to the recommended end, e.g., creating top of the line training and development programmes. For other practices, coaching can be a strong support. For example, coaching engagements may be designed to develop managers’ skills in inspiring people to do their best (part of Primary Culture Practice).
Coaching and Business Performance: The Indirect Linkages
The chain of effect appears to be: coaching, behaviour change 4 and broader outcomes that make a difference to business results. Coaching appears to have a positive effect on valued behaviours, e.g. leadership and emotional intelligence behaviours, which, in turn, appear to positively influence outcomes such as employee engagement and organisational climate, both of which are associated with superior business performance.
The Alliance for Strategic Leadership (A4SL) , for example, evaluates coaching through pre and post coaching behavioural feedback from stakeholders of coaching clients. In their work with a group of more than 100 leaders from Agilent Technologies, over 95% of the leaders demonstrated improvements in leadership effectiveness as measured by stakeholder surveys. A4SL offers a straightforward results guarantee: leaders don’t pay until coaching is completed and don’t pay unless peer input confirms improvement in specific leadership behaviours.
From his work with a major media company and a global pharmaceutical company, Hewitt’s Neville Osrin cites improvements in the climate survey results of managers who worked with coaches to address issues raised in the 360 feedback process. Another financial services client found coaching leaders effective in addressing low levels of employee engagement. Osrin’s colleagues in Hewitt’s Talent and Organisational Change Practice, Mark Hoyal and Paul Osgood explain the chain of impact: 'Leaders can influence the engagement levels of employees, e.g., their drive to contribute to the organisation. Coaching can support a leader in focusing on those behaviours that generate higher engagement levels'. Hewitt studies indicate that companies that build higher levels of employee engagement also demonstrate higher average profit per employee and superior shareholder returns.
Mixing the elements of the chain of impact to focus on emotional intelligence (EI), we see that coaching is also establishing a track record in assisting clients in developing EI skills 5 . Margaret Chapman 6 , at the University of Hertfordshire, based on her work with UK Housing Officers, reports that 'there was emphatic agreement among team members on the importance of coaching to developing their EI skills. Team members described the benefits of 1:1 coaching as providing a safe opportunity to reflect on the links among their thoughts, feelings and actions, and to consider the freedoms they had to adapt these'. Chapman’s post evaluation of EI, using the Boston EIQ (Clarke 2000) 7 , showed statistically significant improvements for all team members, particularly in the intrapersonal dimension,i.e., self awareness.
Kerry Bunker, Manager of the Accelerated Program for Executive Excellence at the Center for Creative Leadership , has also verified increases in EI skills through post programme 360 surveys and interviews with clients’ stakeholders. He explains: 'We’re tracking the factors that appear to have had the most impact on EI. One-on-one coaching is certainly powerful in enhancing meta cognition. The group activities are hard hitting opportunities; clients hold each other accountable for their behaviours but also offer peer resources. Through case conferences with coaches, we are also finding how critical the coaches’ own EI skills and modelling of EI are to the client’s learning'.
Coaching Results at Kirkpatrick Level 4 – A Work in Progress
The data available on results at Kirkpatrick Level 4 – business results that are verified but not quantified in terms of financial return on investment - are best viewed as a work in progress. These data exist in the case studies of coaches, surface in the wash up discussions held between coaches, clients and the sponsors of coaching (direct manager of the end user) and are currently in transition from anecdotes to published evidence.
These data are just now becoming available, in part, because companies made a good bet. As one Head of Coaching for a leading global bank explains: 'We first put our resources into bringing some discipline to the coaching process. We’re now at the ‘intentions phase’ of evaluation and have just agreed the results survey that will be conducted among coaching clients and their managers'. Despite the early stage of the results data and the even younger base of empirical research about coaching, reports from coaches and coaching clients are positive. A sample of valuable Level 4 coaching results follows:
| Source | Coaching Situation | Coaching Results |
| John O’Brien UK executive coach |
Global consumer products business restructured to create autonomous country teams accountable for local marketing budgets and plans. The global head of marketing was accustomed to top down centralised structures with authority over country marketing activities. This individual’s style was in direct conflict with the business aims of the restructuring. However, the individual was highly coachable, i.e., ready to face the difficult work of changing styles and convinced of the benefit of the business change. |
Through coaching, this executive developed the influencing skills needed to collaborate with local marketing managers. For example, the client met with country and regional marketing managers to enlist their support in changing her/his 8 work style. The business considered both the implementation (timing, transition phase) and outcomes of the restructuring (achievement of more effective marketing plans) a success. |
| Noel Hadden Learning & Development, Deutsche Bank , UK |
Division uses well designed processes for selecting coaches, matching coaches to client needs, agreeing coaching contracts and evaluation results. Coaches, managers and coaching clients meet periodically during coaching engagements to discuss progress. All members of a sales team undertook individual coaching during a period of intense market competition. |
Significant improvement in business performance for the team at a time when more competitors are entering the market. The team members and their manager attribute the business performance improvements directly to the coaching programme, particularly to its intensiveness and relevance to the particular sales and competitive challenges. |
| Mary Davis US Executive Coach |
Members of a financial services product development team received coaching to assist them in working more effectively in the new process that included: up front expected return analysis; disciplined decision making process for dropping opportunities not meeting hurdle rate; allocation of resources to priority products; launch of a 'ready' product (versus a perfect product) with expectation that user feedback would drive product enhancement | Savings from focus on the “optimal” products and development efforts and giving these full attention for early delivery Savings from cutting the number of development projects Accelerated revenues from launch completed far earlier than historical record of new product introductions |
The Early Days of the ROI of Coaching
By applying the ROI process summarised in Part 1, results such as the following are reported on the ROI of executive coaching:
| Source 9 | Coaching Situation | Coaching ROI Results |
| The Manchester Review 10 | 43 executives working with coaches during 1996-200 in developmental engagements | 5.7 times the financial investment |
| MetrixGlobal 11 | Major telecommunications company; Leadership development programme consisting of coaching, 360 feedback and development planning | 529% (does not include benefits estimated from retention attributed to coaching) |
| Mary Beth O’Neill 12 | Applies to range of client assignments working with management and executive teams to change behaviours and systems to improve business results | Ranges from 6 to 10 times the financial outlay for coaching |
These results, certainly encouraging, represent only part of the learning from ROI studies. To the extent that ROI studies also build actionable understanding of the factors that influence the financial return, the studies contribute to our ability to increase the business benefits of coaching. Each company must judge the degree of evaluation that is 'informative enough' to 1) take action on findings and 2) decline more detailed evaluation or estimates of financial return.
When used to promote coaching, ROI percentages, create noise that distracts from what we really need to understand – what works well in coaching. The practitioners cited have been diligent in describing the type of coaching provided in their ROI studies. However, the subsequent and prevalent use of these return figures by promoters of coaching, particularly on the Internet, creates a misleading picture that this return is potentially replicable across all types of coaching.
What’s Best Practice?
Companies are actively sharing information on practices they are finding effective in managing coaching (e.g., coach selection, matching of coaches to clients). Consultancies, think tanks 13 and professional HR and coaching organisations 14 are contributing to our understanding of both the coaching process (what happens between coach and client) and the management of coaching within organisations. This business based information exchange and research fills a critical knowledge gap in a timely way and reduces the confusion experienced by many buyers. Academics are augmenting the business based knowledge in valuable ways to stimulate a rich feedback loop among theory, research and practice 15.
Even when the coaching knowledge base is much deeper and the profession more actively regulated, the following comments by William F. Jarvis, MD Greenwich Strategic Advisers and Course Instructor, FT Knowledge, will still offer sound guidance:
'Best practices must be owned, and they can only truly be owned if they emerge from a firm’s own culture. If the corporate culture doesn’t adopt it, the most articulate best practices 'package' will be discarded once the consultant has walked out the door with his or her fee….The need for good judgment is more crucial than ever before… Judgment – being able to articulate how you 'know what you know' and to act on it – will mark the truly successful companies that own their own values and culture and are constantly applying an authentic 'best practices' standard to them rather than simply toeing the legislated line' 16.
Businesses cannot wait for empirical research or proven best practices, despite the value of this information. According to Stratford Sherman, senior executive coach at Executive Coaching Network, Inc., their investments in coaching may depend on answers to this question: 'How much do they value collaborative behaviour, learning or leadership? It is the responsibility of the buyer to determine its own values and belief system, and to ensure that it contracts for coaching services in a way that is aligned with those imperatives'.
To make this determination, the authors of What Management Is 17 offer a practical 2-step check: 'Faced with an uncertainty they can’t resolve, good managers ask themselves simple questions: What do we have to believe about X to push forward with this initiative? And then: Are those reasonable things to believe?'.
To push forward with coaching calls for believing that:
- Coaching is an effective means of developing executives;
- Developing executives in coaching engagements underpinned by targeted developmental outcomes linked to business benefits is worthwhile; and
- We can do this well; we have values and processes in our company to guide the use of coaching to ensure its value to the business.
It is clearly reasonable to believe 1 and 2, based on results, albeit embryonic, from coaching. Statements such as the following from Lore Institute are also reasonable: 'Several different measures have been applied to the impact evaluation and the results are universally positive' 18. As companies continue to improve their management of coaching, we can have even more confidence in the results from coaching.
Believing 3 is easier when there is collaboration among end users, coaching sponsors, HR and coaches to make coaching as effective as possible. 'Creating the future is risky business….that’s good news. If there were no uncertainty, there would be few opportunities to create value' 19. It’s been a while, thankfully, since another article warned of the perils and dangers of executive coaching. Was someone expecting safety and comfort in the business world?
Footnotes
1. For the purposes of this series the term coaching is used as follows: 1) consistent with the definition provided by Myles Downey in his book ‘Effective Coaching’ (Orion Business Books): the art of facilitating the performance, learning and development of another; 2) coaching undertaken with managers, leaders and executives for the purposes of improving the client’s business performance and impact on business results.
2. CIPD, The case for Good People Management. A summary of the research. February 2001.
3. Nitin Nohria, William Joyce, and Bruce Roberson. What Really Works. Harvard Business Review. July 2003.
4. The author acknowledges the complexities of the coaching process that precipitate behaviour change, e.g., reframing of situations, increased willingness to experiment with new behaviours, greater awareness of behavioural options, and more.
5. For a useful summary of cases that demonstrate the business benefits of EI, see www.eiconsortium.org
6. Co-Director & Coaching Psychologist, Centre for Human Potential and Performance, Faculty of Health and Human Sciences. These findings were presented at the 1st Australian Evidence Based Coaching Conference, Sydney, July 2003 & at the AMED/Coaching Conference, November 2003.
7. Clarke, R. (2000) A study exploring the link between EI and stress in front-line police officers, unpublished MSc dissertation, Goldsmiths College, University of London.
8. Client identity withheld for reasons of confidentiality.
9. More detailed information on specific ROI methodologies is available from the practitioners. Part 1 includes a summary of the steps in estimating ROI.
10. Maximizing the Impact of Executive Coaching: Behaviour Change, Organizational Outcomes and ROI. The Manchester Review. 2001.
11. Anderson, Merrill C., Ph.D., Executive Briefing: Case Study on the Return on Investment of Executive Coaching. MetrixGlobal LLC 2001.
12. Author of Executive Coaching with Backbone and Heart.
13. For example: Corporate Executive Board, The Conference Board
14. For example: International Coach Federation, European Mentoring and Coaching Council, Association for Coaching, Human Resources Planning Society
15. For a valuable summary of the research see: Grant, A. M. Workplace, Executive and Life Coaching. An Annotated Bibliography from the Psychological Literature. Coaching Psychology Unit. School of Psychology. University of Sydney. 2001; For a valuable discussion of the challenges of conducting research on coaching see: Stober, Diane R. Ph.D. Current Challenges and Future Directions in Coaching Research. Coaching Research Consortium. 2003.
16. By legislated line, Mr. Jarvis refers to the Sarbanes-Oxley Act of 2002 in the US covering public company accounting and auditing. He also distinguishes between compliance with a legal requirement and a cultural commitment to internally developed best practices. His paper is available at www.ftknowledge.com.
17. Magretta, Joan. With the collaboration of Nan Stone. What Management Is. Profile Books Ltd. 2002.
18. Voss, Laurie S., Ph.D. and Pamela Wise, Ph.D., The Case for Executive Coaching, White Paper, Lore International Institute. 2002.
19. Magretta, Joan. With the collaboration of Nan Stone. What Management Is. Profile Books Ltd. 2002.
Carol Braddick is an independent OD consultant and business coach. She works with Financial Times Knowledge Coaching Solutions and is affiliated with Keener & Associates, a consulting firm specialising in business performance improvement. Carol also works with Rita Cashman, a leading US executive coach, coach supervisor and specialist in coach training. She is a member of the Association for Coaching, European Mentoring and Coaching Council and International Coach Federation. Her previous article on coaching, Keeping a Buyer’s Eye on Coaching, was published by www.hrworldclass.com.
Carol can be contacted at csbraddick@aol.com
