How do You Measure the Impact of Coaching?

While there is widespread acceptance that executive coaching works to effect positive improvements in executive performance, providing concrete metrics that measure this improvement can be challenging, as human change can be a very complex process. This can be compounded by confidentiality issues that may limit access to specific data regarding progress made by the executive. However, there are several tools that can be useful in determining whether observable behavioral improvement has occurred and what, if any, impact this has made on the business.

Follow-up 360° Interviews
By re-administrating an abbreviated version of the original 360° interviews conducted during the executive’s assessment, it is possible to secure an unambiguous measurement of improvement against the 2 or 3 primary developmental goals specified during the creation of the action plan. This underscores the importance of having well-documented coaching goals at the outset of the coaching. The follow-up 360° can be as simple and non-time consuming as a short online survey with 4 or 5 questions sent to the same raters who participated in the original assessment. This allows measurement of improvement as perceived by the executive’s leader(s), peers and direct reports. In order to measure the lasting effects of the coaching, this follow-up 360° should be conducted 6 months or more after the completion of the coaching.

Post-Coaching Evaluation
A survey measuring the satisfaction of the coaching client, leader, HR and other stakeholders can be sent out 2 to 6 months after the completion of coaching. This questionnaire can also canvas these people for insights into the business impact from the coaching. This provides not only feedback to the coach, but also identifies executive coaching success factors and helps the company improve upon future coaching initiatives. Sample questions for the evaluation include:

• Did the executive receive meaningful information about how to leverage his/her strengths and work on developmental needs?
• Was it helpful to the executive to review 360° feedback and other assessment results?
• Was it helpful for the executive to spend time discussing developmental objectives with his/her leader?
• Was there meaningful progress made towards the executive’s overall goals?
• Did the coach clearly define his/her role in the process?
• Did the coach help the executive better understand his/her strengths and developmental needs?
• Did the coach help the executive clearly define his/her goals and how to attain them?
• Was the coach timely and prepared for the sessions?
• Was the coach accessible when the coach needed further information and support?
• Was the coach effective in his/her approach?
• Was the leader engaged in the process?
• Was the leader clear with his/her expectations for the executive?
• Was the leader involved in the developmental plan?
• Did the leader give periodic feedback and support throughout the process?
• Did HR properly facilitate and support the coaching process?

While these sample questions are general, more specific questions can be asked depending on the details of the situation.

The WJM Development Tracker™2.0 App

The WJM Development Tracker™ can be used to quantify the effectiveness of coaching by providing measurement of progress against development goals for an executive being coached, as observed by others who work with the leader. For more information on the WJM Development Tracker™, please click here.

Anecdotal Evidence
While certainly the least “scientific” of measurement methods, anecdotal feedback on the coaching process is probably the most prevalent and, in many ways, the most meaningful way to judge the success of a coaching intervention. Talk in the hallways or around the coffee maker about changes in the executive’s performance or executives sharing insights into their own coaching experiences can have a larger impact on a company’s conclusion about the effectiveness of coaching than any formal analysis or survey.

Return on Investment (ROI)
Executives like to say that the company’s most important asset “goes up and down the elevator each day”. If this is the case, logic would dictate that an intelligent, strategic plan of investing in this “human capital” (e.g. through executive coaching) should lead to a greater return on the organization’s core assets.

However, investing in people is not the same as investing in a piece of equipment or a new software program. For one thing, measuring the return on an investment in a person is a bit more difficult than, say, measuring the increase in the number of widgets per hour produced by the new widget machine that has just been installed on the factory floor.

While it is more difficult to calculate an ROI for the investment in a coaching case, it is certainly not impossible. The formula is straightforward:

% ROI = (Benefits Achieved – Coaching Costs) ÷ Coaching Costs X 100

The challenge is clearly identifying the Benefits Achieved through the coaching program and assigning a monetary value to those benefits.

We can increase the chances of calculating a meaningful estimate of the bottom-line impact of coaching by carefully identifying the highest priority objectives before the outset of the program - and take an “objective” measurement of these areas of interest before and after the coaching occurs.

Again, while the specific areas identified for improvement will vary case-by-case, some examples include:

• Communicating clearly and effectively with leaders, peers, reports, customers, investors, etc.
• Consistently delivering business results that meet or exceed the competition, and/or forecast
• Managing the team in an efficient and effective manner
• Providing developmental opportunities and support for others
• Encouraging and rewarding innovation
• Demonstrating vigilance regarding costs, quality and customer service
• Performing in a manner consistent with the company’s mission and prevailing ethical standards.

After identifying the highest priority objectives for the coaching program, we can then consider the results that arise from either achieving or falling short of our objectives.

Some results are more “tangible” than others and are, therefore, easier to translate into monetary value or bottom-line impact. This is not to say that the tangible outweigh the intangible in terms of importance. In fact, intangible changes in the client’s behavior can often have a wider-ranging impact than, or may actually lead to, the more tangible benefits of coaching.

Examples of “Tangible” Benefits from Coaching:

• Increased sales
• More customers called on
• More new accounts opened
• Decreased costs
• Decreased employee turnover
• Decreased absenteeism
• Shorter time to market
• Improved productivity
• Fewer customer/employee complaints

Examples of “Intangible” Benefits from Coaching:

• Reduced conflict
• Better teamwork
• More productive meetings
• Improved employee morale
• Improved development of subordinates
• Better customer service
• Increased job satisfaction
• Better work/life balance

There are several vehicles for measuring the benefits achieved (again, conducted both before and after the coaching occurs). They can include:

• The 360° assessment surveys of the client’s leader(s), peers and reports
• Climate surveys
• Customer surveys
• Surveys of sales, costs, employee turnover and other business results

In order to calculate ROI, we have to convert these benefits into dollars. Of course, while executive coaching can have a considerable influence on business results, other factors obviously have an impact. For example, sales volume is subject to many complex factors, only one of which is coaching. The level of sales is also impacted by: economic conditions, product developments, competition, pricing, customer demand, currency fluctuations, etc. To the extent that we have confidence that the coaching influenced sales volume to some extent, we can apply a percentage adjustment or weighting to the monetary value of the sales increase to reflect this impact.

For example, if we believe that 25% of a $1 million increase in sales can be attributed to behavior change prompted by the coaching, we would add $250,000 to our “Benefits Achieved” number in our ROI formula. This adjustment allows us to isolate the effects of the coaching.

An Example of Calculating Executive Coaching ROI
Let’s look at “simplified” example of calculating the ROI for an executive coaching case. Using a real-life case, we will focus on a single, tangible benefit achieved through coaching for illustrative purposes.

A division head of a large, public technology company was being considered for promotion to a recently vacated Chief Operating Officer position. However, the executive had a reputation for micro-managing and was considered by peers and reports to be “intense” and “intimidating”. A 6-month coaching program led to breakthroughs that transformed his reputation as a leader to one of collaboration and empathy. The coaching also helped the executive to improve his strategic use of time through greater delegation of responsibility. The Board of Directors cited these changes when naming him the new COO and affirmed that without these improvements, a new COO would have been sourced from outside the company. The coaching program cost $30,000.

One key benefit from this coaching case was avoiding an outside search for a new COO. Let’s estimate the monetary value of this benefit.

• Executive search agency fee of 30% of annual compensation ($300,000) is saved - $90,000.
• Assuming the company’s internal recruiter spends 75 hours on the search, including reviewing candidates, scheduling interviews, preparing assessments, conducting reference checks, notifying unsuccessful candidates, etc., this cost can be estimated at approximately (75 hrs/2,000 hrs annually X $75,000 recruiter annual salary) - $2,800.
• Assuming the search would have taken approximately 3 months, the cost of lost productivity resulting from the vacant COO position can be estimated at 25% (one quarter of a year) of annual compensation - $75,000.
• Assuming a new COO recruited from outside the company is contributing at a 75% productivity level for the first year on the job as the corporate culture, policies, practices, etc. are learned, the cost of this lost productivity can be estimated as 25% of annual compensation - $75,000.

If we stop here, we see we have already reached a 709% return on the coaching investment. Of course, this calculation is incomplete, as we have not included the savings related to orientation, training and other administrative expenses incurred with a new hire. We have also excluded other tangible and intangible benefits resulting from the behavioral improvements from the coaching, many of which may be quite substantial.

Studies on Executive Coaching Investment Returns

• According to a study of senior level executives at Fortune 1000 companies who received developmental coaching, the average return from the programs was nearly 5.7 times the initial investment. (Maximizing the Impact of Executive Coaching, The Manchester Review, 2001, Volume 6, Number 1, Joy McGovern, et.al.).
• According to a survey of 30 executives who participated in a large executive development program at a Fortune 500 company, coaching resulted in a 529% return on investment (Executive Briefing: Case Study on the ROI of Executive Coaching, Merrill C. Anderson, Ph.D., MetrixGlobal, LLC.).
• According to the Harvard Business Review, 3 stock portfolios comprised only of companies that “spend aggressively on employee development” each outperformed the S&P 500 by 17 - 35% during 2003 (How’s Your Return on People?, Harvard Business Review, March 2004, Laurie Bassi and Daniel McMurrer).