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A Meta-Analysis of Executive Coaching Return on Investment (ROI) Studies

"Return on Investment", or "ROI" comes up often in business conversations, but what does it mean for you and your employees?  For organizational leaders who evaluate employee development spending, how much ROI can be realized through executive coaching?

Fundamentally, ROI is most aptly defined as, "the ratio of money gained or lost (realized or unrealized) on an investment relative to the amount of money invested" (Nikbakht & Groppelli, 2000).

According to the American Management Association (2008), "the subject of the ROI of coaching is [not] well understood and continues to be a subject of debate in the coaching literature."  McCormick (2007) found in a survey of 500 readers of Personnel Today that 44% of respondents believed it was impossible to measure the ROI of coaching at all.  Those same respondents believed that "anecdotal evidence of its effectiveness is all that's possible."

At ALOC Group we approach coaching as a serious business tool.  To that end, we set out to establish what, if any, research could replace sheer "anecdotal evidence" for the benefits of coaching with solid, quantifiable return on investment.

Based on our research, the objective third-party studies referenced below demonstrate how systematic, comprehensive coaching can provide your firm with measurable returns for investing in your most important clients - your employees.

• The Michigan-based firm,Triad Performance Technologies, Inc. (2001) studied and evaluated the financial benefits of a coaching intervention on a group of regional and district sales managers within a large telecom organization. The third-party research study cites a 10:1 ROI, or 1,000%.
• Manchester, Inc., in what may be the most oft-cited coaching study, found a conservative ROI of 5.7:1, or 570% (McGovern, et. al., 2001) when conducting empirical research of 100 executives in the northeastern and mid-Atlantic regions who had completed coaching at their organization between 1996 and 2000.
• Marked ROI can even be seen at public and community-based organizations. An action research study examined the effects of a conventional training program followed by one-on-one executive coaching session with 31 participants in a public municipal agency. Conventional training increased productivity by 22.4%, whereas training followed by coaching resulted in a productivity gain of 88% (Olivero et al., 1997).  This indicates nearly 400% return on training investment when training is backed by individual coaching.
• Further suggesting that sustainable improvement in performance cannot easily be delivered by training and development programs in isolation, the Xerox Corporation carried out several studies, one of which showed that in the absence of follow-up coaching, 87% of the skills change brought about by training or development programs was lost (Preston, 2007).

Olivero and team (1997) also noted,
There is considerable evidence that a critical factor influencing transfer of training is the extent to which the trainee receives the opportunity for practice and constructive feedback.  One-on-one executive coaching can provide this opportunity. Coaching trainees, once they return to the job, can facilitate the transfer of training, especially if the coaching fosters the development and use of knowledge imparted during training. Through coaching, trainees have a safe, personalized environment in which practice and feedback can take place.

Direct and Indirect Results

The Manchester team's methodology also asked both client and coaching provider to look objectively at the experience and see how the investment in coaching dollars brought about a positive change in the client's bottom line through increased income, decreased expenditures, or other areas of increased efficiency. These are the tangible business impacts reported:

• Productivity 53%
• Quality 48%
• Organizational Strength 48%
• Customer Service 39%
• Reduced Complaints 34%
• Own Retention 32%
• Cost Reductions 23%
• Bottom Line Profitability 22%
• Top Line Revenue 14%
• Reduced Turnover 12%
• Other Business 7%

(McGovern et al., 2001)

Similarly, the Anderson study (2001) revealed overall productivity (60% favorable) and employee satisfaction (53%) as the areas most significantly impacted by the coaching. In the Anderson study, employee satisfaction was viewed both in terms of the respondents being personally more satisfied as a result of the coaching as well as being more enabled to increase the employee satisfaction of their team members. Consequently, employee satisfaction was a significant source of intangible benefits. Customer satisfaction (53%) was also a significant source of intangible benefits.

Other intangible results were also reported from coaching clients in the Manchester team's study:

• Improved Relationship: Reports 77%
• Improved Relationship: Stakeholder 71%
• Improved Teamwork 67%
• Improved Relationship: Peers 63%
• Improved Job Satisfaction 61%
• Reduced Conflict 52%
• Increased Organizational Commitment 44%
• Improved Relationship: Clients 37%
• Other Intangibles 31%

(McGovern, et. al., 2001)

The research indicates that coaching very obviously delivers direct increases in job satisfaction.  One could plausibly argue that better relationships with subordinates, peers and superiors, coupled with better teamwork and more positive handling of conflict, would result in indirect increases in job satisfaction. The result? Human Resources Consultancy Kenexa's researchers have "presented statistics showing that companies with higher satisfaction scores had 700% higher shareholder return" (Rockwood, 2008).

With turnover costs often estimated to be at least 150% of a year's salary (Bliss, 2004), it is reasonable to argue reduced turnover alone justifies the cost of coaching.  In fact, the MetrixGlobal study cited above notes that "including the financial benefits from employee retention boosted the overall ROI to 788%" from the previously noted 529% (Anderson, 2001).  Furthermore, 32% of the Manchester study respondents indicated their "own retention" was positively impacted by the coaching and an additional 12% said the coaching helped "reduce turnover" (McGovern et al., 2001).

Internal vs. External Coaching

While some firms may consider it advantageous to recruit high-caliber professionals to perform coaching services internally, there are distinct advantages to the use of external coaches. The study conducted by the AMA advocates multiple strengths of external coaches including greater objectivity, fresher perspectives, higher levels of confidentiality, and greater breadth of experience with different organizations, industries, and business environments (American Management Assoc., 2008).
As Manchester’s research suggests (McGovern, et. al., 2001), ALOC Group coaches implement a tailored collaboration process that includes a pre-coaching needs assessment to set clear objectives and a follow-up assessment protocol. Considerable emphasis is placed on both action planning and achieving measurable results linked to identified business objectives.  Coaching initiatives are buffered with online tracking and collaboration, ensuring that results and investment continue even when coaches are not physically present, further maximizing coaching dollars.

Additionally ALOC Group builds a consistent performance measurement system into the coaching process. As Merrill C. Anderson notes, "Evaluation of coaching should be designed into the process from the beginning to better set performance expectations and open up new learning opportunities for making coaching more effective while the coaching is being conducted." ALOC Group coaching focuses on core issues of development to ensure that business priorities will be met. This structured focus ensures that the evaluation of coaching becomes more than just a measuring stick; evaluation of coaching is a systematic approach that drives measurable business value (2001).

Stated concisely, the Triad study (Triad Performance Technologies, 2001) found that the following business outcomes were directly attributable to the coaching intervention:

• Top performing staff, who were considering leaving the organization, were retained, resulting in reduced turnover, increased revenue, and improved customer satisfaction.
• A positive work environment was created, focusing on strategic account development and higher sales volume.
• Customer revenues and customer satisfaction were improved due to fully staffed and fully functioning territories.
• Revenues were increased, due to managers improving their performance and exceeding their goals.

With concrete goals and effective, properly-sequenced coaching by high-quality practitioners, managers at all levels of an organization can achieve qualitative results, translating into high ROI for coaching expenditures.  ALOC Group coaches are equipped to bring these dramatic results to your organization and stand ready to explore a variety of options to suit your coaching needs.

ALOC Group's consulting process makes use of coaching as part of sequential and intentional ordering of facilitated interventions.  For more information fill out our contact form or call 615-269-6004 to speak to a consultant today.

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References

American Management Association. (2008, May 29). Coaching: A Global Study of Successful Practices. AMA. Retrieved December 6, 2008, from http://www.amanet.org/research/pdfs/i4cp-coaching.pdf.

Anderson, M. C. (2001, November 2). Case Study on the Return on Investment of Executive Coaching. MetrixGlobal. PDF, Retrieved December 6, 2008, from http://www.metrixglobal.net/images/pdfs/metrixglobal_coaching_roi_briefi....

Bliss, W. G. (2004) Cost of employee turnover. The Advisor. Retrieved December 15, 2008, from http://www.isquare.com/turnover.cfm.

Krakoff, P. (2002, August 16). The Business Case for Coaching. PDF, Retrieved December 7, 2008, from http://www.visionquestconsulting.com/newsworthy/BusinessCaseforCoaching.....

McCormick, H. (2007, June 5). Made to measure? Personnel Today, 26-27.

McGovern, J., Lindemann, M., Vergara, M., Murphy, S., Barker, L., & Warrenfeltz, R. (2001). Maximizing the Impact of Executive Coaching: Behavioral Change, Organizational Outcomes, and Return on Investment. , 6(1), 1-9. from http://www.cpcusociety.org/file_depot/0-10000000/0-10000/3267/folder/229...

Nikbakht, E., & Groppelli , A. A. (2000). Barron's Finance, 4th Edition. New York.

Olivero, G., Bane, K. D., & Kopelman, R. E. (1997). Executive Coaching as a Transfer of Training Tool: Effects on Productivity in a Public Agency. Public Personnel Management, 26(4).

Preston, D. (2007, February). Is there a Business Case for Executive Coaching? Retrieved December 6, 2008, from http://www.hda.co.uk/corporate/hda-overview/documents/HDA-BusinessCasefo....

Rockwood, K. (2008, November). Director of Homeland Happiness. Fast Company. Retrieved December 16, 2008, from http://www.fastcompany.com/magazine/130/the-employee-whisperer.html.

Triad Performance Technologies. (2001, October). Impact Evaluation Report on the Coaching.com Intervention for [Client Company]. Coaching.com. PDF, Retrieved December 16, 2008, from http://www.coaching.com/Marketing/Common/images/ImpactReport.pdf.