Building An Effective Model for Coaching Return On Investment (ROI)

In today’s competitive business environment, understanding the return on investment (ROI) of coaching is crucial for companies looking to maximize the effectiveness of their employee development initiatives. 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. 

The Benefits of Companies Measuring Return on Investment (ROI) of Coaching

There are numerous reasons why companies should look to measure the ROI on their coaching initiatives. Each of the below benefits should be considered as an indicator needing to be measured, depending on the companies coaching goals.

Accountability and Justification:

Demonstrating ROI helps justify the coaching expenditure to stakeholders by showing tangible benefits.

Ensures accountability for the coaching process and its outcomes, aligning with broader business goals.

Enhanced Decision-Making:

Provides data-driven insights to guide future investments in coaching.

Helps identify which coaching strategies and programs are most effective, optimizing resource allocation.

Performance Improvement:

Highlights the direct impact of coaching on employee performance and productivity.

Facilitates targeted improvements by identifying specific areas where coaching has the most significant effect.

Employee Engagement and Retention:

Shows employees that the organization is invested in their development, boosting morale and engagement.

Helps retain top talent by demonstrating the value placed on their growth and career progression.

Strategic Alignment:

Ensures that coaching initiatives are aligned with organizational objectives and contribute to strategic goals.

Reinforces a culture of continuous learning and development within the company.

Competitive Advantage:

Differentiates the company in the marketplace by showcasing a commitment to employee development and high-performance culture.

Attracts top talent who are seeking organizations that invest in their growth.

Financial Impact:

Measures the financial returns of coaching initiatives, such as increased sales, improved efficiency, and cost savings.

Provides a clear picture of how coaching contributes to the bottom line, enhancing overall financial performance.

Measuring ROI in coaching not only validates the effectiveness of these programs but also empowers companies to refine their strategies, foster a growth-oriented culture, and achieve sustainable business success.

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?

In the realm of organizational coaching, measuring return on investment (ROI) has traditionally been the gold standard. However, Leedham (2005) proposed an alternative approach through the ‘coaching scorecard,’ a multifaceted evaluation tool that captures the diverse impact of coaching beyond mere financial metrics. This coaching scorecard is structured around four key categories, each encompassing different dimensions of coaching effectiveness.

1. Foundation Factors:

This category covers the fundamental aspects of the coaching process and the attributes of the coach. It includes elements such as the structure of the coaching sessions, the methodology employed, and the qualifications and competencies of the coach. By evaluating these foundational factors, organizations can ensure that the coaching process is robust, well-organized, and led by skilled professionals.

2. Inner-Personal Benefits:

Inner-personal benefits refer to the internal changes experienced by the coachee, such as increased motivation, confidence, and self-awareness. These benefits are crucial as they often serve as the catalyst for external changes. By tracking these inner-personal gains, organizations can assess how coaching is enhancing the psychological and emotional well-being of employees, which is fundamental for sustained personal and professional growth.

3. Outer-Personal Benefits:

This category focuses on observable changes in the coachee’s skills and behaviors. It includes improvements in specific competencies, such as leadership abilities, communication skills, and problem-solving techniques. Measuring these outer-personal benefits allows organizations to see tangible changes in how employees perform their roles and interact with others, providing clear evidence of the coaching’s impact on individual performance.

4. Business Benefits:

Ultimately, the goal of any coaching program is to drive positive business outcomes. This category includes metrics related to business performance, such as increased productivity, improved team dynamics, and higher sales figures. By linking coaching outcomes to business results, organizations can demonstrate the direct impact of coaching on their overall success, thereby justifying the investment in coaching programs.

Incorporating Leedham’s coaching scorecard into ROI reporting brings these categories to life, offering a comprehensive view of the value coaching brings to both individuals and the organization. By assessing a range of metrics from foundational process factors to tangible business outcomes, organizations can better understand the multifaceted benefits of coaching. This holistic approach not only highlights the diverse impacts of coaching but also helps to tailor and improve coaching programs to better meet the specific needs and goals of both employees and the organization.

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 BOLDLY 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.

If you're interested in learning more about how BOLDLY can help your organisation, we invite you to explore our website or write to us at connect@boldly.app.

About the Author:

Alexandra Lamb is an accomplished organisational development practitioner, with experience across APAC, North America, and MENA. With 20+ years in professional practice, conglomerates, and startups, she has collaborated with rapid-growth companies and industry innovators to develop leaders and high-performance teams. She is particularly experienced in talent strategy as a driver for business growth. Drawing from her experience in the fields of talent management, psychology, coaching, product development, and human-centred design, Alex prides herself on using commercial acumen to design talent solutions with true impact.