webpage banner showing ROI

More on Coaching ROI

July 10, 2021

Posted by Alexandra Lamb

Coaching Return on Investment (ROI)

Through our work with organisations around the world, we’ve collaborated on several approaches to measuring coaching effectiveness and ROI. You can see some of our previous observations here. Coaching is growing but still under-utilised because of the gap in empirical evidence into its effectiveness, with both the academic and corporate worlds attacking this problem from different angles. This article continues the conversation on the topic of ROI as a popular but contentious concept in coaching operations.

We broadly observe that very few organisations invest the resources needed to measure coaching ROI (approximately 15% in our experience globally, while less than 10% has been observed in the US, and 19% in the UK according to Hay 2002 and Bosch, 2001). However, those that do benefit from a customized approach. 

Why Is It Hard To Measure Coaching ROI?

To begin with, why is measuring the ROI of coaching so difficult? Because coaching outcomes are not numeric, are frequently intangible, and often ‘emerge’ in the months and years following the coaching engagement. Also, it’s impossible to run a ‘blind’ scientific review of coaching - if we deliver coaching to one group, and not to another group, the participants will of course know which group they’re in (control or treatment) and this implicates the research outcomes. In this sense, it’s impossible to create a numeric ROI that can be compared across companies. However, within a company, we can create test-retest measures to see how coaching correlates with business outcomes. It’s contextual to the organisation. 

So as a company, which measurements should you choose? Philips (1997) built on Kirkpatrick’s (1977) model of training evaluations, adding the ROI by enabling the client to construct a hypothesis regarding which variables they want to measure, and calculating accordingly. We agree with this model, and work with companies to define the metrics that make sense within their business. We then establish a baseline of data collection, reporting, and ongoing measurement to ensure continuous improvement and understanding of the coaching interventions.

What Alternatives Do We Have?

As an alternative to ROI, Leedham (2005) proposed a ‘coaching scorecard’ which we often bring to life through our ROI reporting. It includes categories of the client’s selected value metrics, such as:

1. Foundation factors - process, coach attributes etc

2. Inner personal benefits - e.g. motivation

3. Outer personal benefits - e.g. skills and behaviour

4. Business benefits - results

What Are The Challenges Of Traditional Coaching ROI?

Challenges in this model arise from:

Inaccurate individual measures: For example, some of our clients have tried to build metrics of overall engagement and wellbeing into their ROI scorecard, but we’ve often found based on the measures for coaching they have in place, this is a hard metric to provide direct evidence for at the individual level. Although we can ask questionnaire style questions about wellness and engagement of individuals undertaking coaching, it’s very hard to measure empirically for each individual coachee.

Variations in coaching technique: Once the business purpose for coaching is established, our clients identify coachees, we match them with coaches, and the dyad then defines the goals and commitment of the coachee, before confirming the best coaching methodology for the case. These variations in case methodology are precisely what makes coaching so powerful because it’s completely personalised, however from an ROI perspective we’re not measuring apples with apples.

Points of ROI data collection: A formative evaluation of the coaching engagement happens when Lanterne Rouge and the client checks in on the progress of the coaching engagements at least three times - beginning, middle and end of the engagement. Each of these points is an opportunity for data collection, however as the impact of coaching can often be evident months and years post the engagement, our true ‘tail’ of ROI is not captured here. Also, as coaching programmes may be adjusted as we capture this formative data, the true ROI may be impacted at any tweak of the engagement, without our ability to isolate the cause of the improvement.

Source of data: most coaching ROI measures we observe focus on coachee sentiment and outcomes, however clients are starting to see the need to involve not only coachees, but the manager, coach, and other stakeholders in the process. Because coaching is subjective, the coachee’s experience only gives one lens, albeit probably the most important one, but nevertheless only one perspective on coaching efficacy. To truly build a robust coaching ROI we need more input from a variety of sources, over time. Where we’ve seen this done well, managers and other stakeholders clearly identified the tangible benefits to their business from professional coaching of a direct report, however, they also cite other factors (other than coaching) that could have impacted the development outcomes, which again demonstrates how confounded the issue of ROI is.

What Do Leaders Want?

Considering these limitations in measuring coaching ROI (and there are many more!) we also highlight that business leaders very rarely demand PROOF of coaching efficacy, but rather want to see CORRELATED EVIDENCE of its impact on their business. So while an ROI measure makes this impact easily quantifiable, it’s arguably too simple as a concept for this complex experience, and business leaders smell that. The trends towards ROI has been largely lead by marketing, in an attempt to highlight products and academics who strive to deliver the evidence base for coaching. With this in mind, we encourage HR leaders and buyers of coaching to pull back from ROI and focus on more comprehensive measures of coaching effectiveness. We recommend:

1. Select coaches with care - formally trained and accredited, and following a structured hiring process that delves into their method. The quality and coach relationship is of paramount importance to your outcomes.

2. Provide strong organisational support - backup from a manager is particularly important. Communication between this dyad is a crucial factor.

3. Measure and communicate the impact locally - know what a great outcome looks like, and communicate it.

4. Make coaching more widely available, such that coaching impact can be observed across broader data sets and diverse experiences.