Measuring the ROI of executive coaching has bedeviled many coaches. How can you prove to a skeptical prospect, or current client, that you’re well worth the investment they’re making by hiring you as their coach? The key is to prove how intangible benefits such as better decision-making ability, better communication skills, and improved emotional intelligence lead directly to tangible, and measurable, ROI. 
The return on any investment is determined by measuring the cost in relation to the gain. In executive coaching, financial returns are typically an indirect, although closely interconnected, result of the engagement. The more intense and focused the engagement, the more ROI the client might expect.
Research has shown conclusively that executive coaching builds leadership capacity that translates directly to the bottom line in a number of ways. The International Coaching Federation found that “leaders who participated in coaching saw a 50% to 70% increase in work performance, time management, and team effectiveness.” And that’s not all. With well-coached executives, companies increased their agility to scale and grow. They benefited from higher productivity, deeper client engagement, and higher client retention rates, all of which contributed to improved bottom-line results.
As the experiences of many executive coaching clients illustrate, personal growth – an intangible attribute at best – often translates into tangible financial gain. When this type of transformation occurs across an entire team or organization, the gains can be exponential.
Criteria for Measuring the ROI of Executive Coaching
It should be noted that “intangible” doesn’t mean “immeasurable.” When it comes to executive coaching, before and after “snapshots” of certain relevant metrics can vividly demonstrate the value derived by coaching senior leaders to become better at what they do. If CEOs working with personal executive coaches are able to subsequently lead their respective companies to gains in market share, gross sales, and profit margins, those positive improvements might be a result of effectively coaching a CEO to eliminate distractions, improve prioritization, effectively delegate, put the right people in the right positions, and so forth.
The real ROI of executive coaching lies in its ability to enhance leadership acumen, specifically, helping leaders to:
- Drive culture change
- Lead a change initiative
- Increase their emotional intelligence
- Develop or strengthen their executive presence
- Improve situational leadership skills
- Influence key stakeholders
- Navigate political minefields
- Increase employee engagement
- Embrace accountability in themselves, and develop a culture of accountability on their teams and in their organizations
- Achieve business results more quickly
And these benefits can extend far beyond an executive to affect the entire company, significantly multiplying the overall ROI achieved.
When a leader is able to present a clearer vision, equip high potentials to advance, and increase overall employee engagement, it shows in the performance of the team and organization. It’s within this context that the true ROI of executive coaching is found.
Research Backs up the Case for Executive Coaching ROI
A number of research studies have demonstrated the ROI from executive coaching in quantitative as well as qualitative terms. For example:
- A Fortune 500 company wanted to study the ROI of Executive Coaching. They found that 77% of respondents indicated that coaching had a significant impact on at least one of 9 business measures. In addition, they uncovered that overall productivity and employee satisfaction were the most positively impacted areas (which in turn has an impact on customer satisfaction, employee engagement, quality, annualized financial results, and more). In all, their study concluded that Executive Coaching produced a 788% ROI.
- The Manchester Review surveyed 100 executives, most of whom were from Fortune 1000 companies. Their research showed that a company’s investment in executive coaching realized an average ROI of almost 6 times the cost of the coaching.
- According to the International Coaching Federation (ICF), 86% of organizations saw an ROI on their coaching engagements, and 96% of those who had an executive coach said they would repeat the process again. Behind these results were tangible as well as intangible factors.
Tangible factors were areas such as increased productivity, higher levels of overall employee performance, reduced costs, growth in revenue and sales, higher employee retention, and higher engagement of employees.
Intangible factors were increased confidence of those being coached, improved communication, stronger employee, and peer-to-peer, and key stakeholder relationships.
- In their article, “How’s Your Return on People?” (Harvard Business Review, March 2004), Laurie Bassi and Daniel McMurrer note that 3 stock portfolios composed only of companies that “spend aggressively on employee development” each outperformed the S&P 500 by 17 – 35% in 2003.
Other studies indicated positive ROI metrics as well, as reported by the percentages of surveyed executives who reported these improvements, given in parentheses.
- Improved executive productivity (53%)
Improvements in organizational strengths (48%)- Gains in customer service (39%)
- Increased retention of executives (32%)
- Enhanced direct report/supervisor relationships (>70%)
- Improved teamwork (67%)
- Improved peer-to-peer working relationships (63%)
- Great job satisfaction (52%)
Show Them the Numbers
What’s evident from the above research is that executive coaching yields tangible results that more often than not represent excellent ROI for clients. Present these results to prospects who need some reassurance that your coaching fee is a worthwhile and important investment.
How You Might Measure Positive Change
When it comes to measuring ROI for your coaching engagements, there are a few methods you might employ and they include before/after formal 360s, verbal 360s, pulse surveys, and informal behavioral change assessments. Let’s look at these one by one.
Formal 360s are online surveys completed anonymously by raters who regularly engage with the coachee (who will also complete a self-rating). It’s not uncommon for a coaching engagement to begin with a 360 to uncover potential blind spots the leader might have that could be worked on in a coaching engagement. Since most executive coaching engagements go for 6 months or more, you might conduct a second 360 six months after the initial 360 to measure positive change on important leadership competencies by people who are directly impacted by the leader.
A verbal 360 is conducted by the coach through confidential 1on1 conversations with people who regularly work with the coachee. The coach then looks for patterns of feedback in the conversations and presents relevant findings to the client. The coach could easily do another verbal 360 after six months to hear about real change that’s happened and the positive impacts of those changes firsthand. They can then be presented back to the client and any sponsors of the coaching engagement.
Pulse surveys are regularly used by organizations to measure employee engagement and well-being. These can be used by the leadership of an organization to do before and after assessments of whether employees are more engaged and feeling good about their work at said company. These engagement surveys could also possibly be correlated with levels of turnover as they are often connected.
Lastly, in a behavioral change coaching scenario the coachee can create a small group of 3 or 4 supportive people with whom they can have a monthly conversation and ask to what degree they notice positive change. The client is typically looking for scores of 4 or 5 (on a 5-point scale) for 3 consecutive months. That would represent positive change that impacts others.
In the end, it’s entirely possible to measure the ROI of coaching. Be creative and resolute that you will bring rigor to your coaching engagements and make them measurable. By doing so, you are more likely to get repeat business and referrals, which will have a tangible and measurable impact on your practice.
Want to learn more about having an impact? Is the glass half full or is it half empty? In the Appreciative Inquiry model (AI for short), the glass is definitely half full, read our article about Appreciative Inquiry the positive approach to business growth.
Here are more articles and videos about this topic:
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- A sure sign of the impact of coaching
- What will take your coaching to the next level?
- 4 Ways To Measure The Effectiveness Of Your Coaching
YouTube Videos
- How to Measure Your Coaching Effectiveness – Part 1 and Part 2
- 3 Ways to Elevate Your Coaching Skills as an Executive Coach | Executive Coaching Techniques
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