Measuring return on investment (ROI) always feels like a sensible thing to do. In most activities within an organization, it would be folly not to; the effort expended on introducing a new IT system, for example, might be justified because it will increase efficiency. It’s measurable, and that measure will either validate the investment was worthwhile, or shine a light on lessons that need to be learned.
Coaching is an activity that takes place within many organizations, so measuring the ROI can feel necessary and sensible for those very reasons. And yet it feels extremely tricky and, at times, even counter-productive. How important is it to formally validate the investment made in coaching, and what should organizations do as a result?
ROI works well with predictable, repeatable, linear processes. A fast-food restaurant might be comfortable investing what feels like an astronomical amount in a machine that grills burgers on both sides simultaneously, because the time saving and quality management makes the decision an obvious one. And while coaching initiatives can be introduced with a specific desired outcome, coaching is not predictable, repeatable or linear.
Coaching conversations can start anywhere, and go in any direction. That’s part of their power; the permission for absolute freedom offered by a skilled coach empowers a coachee to explore the limits of what is currently known. This, by its nature, is the space that innovation happens, and that’s important. The personalized nature of coaching requires new ways of thinking, because what worked for Person A might not work for Person B. And how do you measure something that has never existed before in that state, and might never again?
But there might be some solutions that would allow us to effectively measure at least the key elements of coaching ROI, which need us to consider several factors.
Identifying the benefits
The primary thing to do is develop a clear understanding of what objectives the coaching is achieving. This works at a coachee-by-coachee level, and at an aggregated level across an entire coaching program. In practice, this looks like a simple series of questions that quantify what individual growth has taken place thanks to the coaching, how this can be directly linked to the organization, and its financial impact. The three main ways to implement this would be:
- As a required aspect of the final coaching session; this would be ideal, as a natural and satisfying conclusion to the coaching relationship between coach and coachee.
- In a post-coaching debrief session, perhaps conducted as a tripartite with the coachee’s line manager; this has the advantage of giving more structure to the output.
- In an automated questionnaire; the most cost-efficient approach, while losing the helpful pressure a coach can apply to generate higher-quality insights.
It’s important to note that we need to feel okay about not quantifying everything. There’s no value at all in forcing measurements that don’t exist. A good coach can slow the pace of a coaching exit session down, listen to what the coachee is really saying, pick out what tangible data there is, and connect that back to what coaching has delivered. This offers many benefits, encouraging the coachee on their progress, supporting the coach in their own reflective practice, and providing the organization with important quality assurance and benefits monitoring metrics.
Calculating the finances
The cost of coaching isn’t just the fee charged by an external coaching provider. The time invested by the coachee leads to lost productivity in other ways, both within the session itself and outside of it. The idea that internal coaches cost less than an external provider makes sense on the surface, but doesn’t always hold water when factoring in additional time and costs associated with the activity. When an internal coach takes an extra hour finding the most relevant TED talk for each coachee, that’s time taken away from their day job.
This complexity makes it tempting for organizations to introduce approaches that measure what’s easiest rather than what’s best, or otherwise excuses them from demonstrating the ROI altogether. Therefore, while it can be tempting for a coaching commissioner to come up with a framework based on their own knowledge or experience, it’s better to partner with the CFO to create something that draws on their expertise and is fully aligned to the organization’s priorities.
This approach brings an additional benefit in the form of increased engagement; a development offer from HR can sometimes feel like it’s being ‘done to’ the learner, whereas the same offer from a CFO can feel like a gift people want to make the most of.
Hands down, the biggest mistake organizations make in the space of coaching ROI is doing nothing. For some organizations, that comes down to a lack of confidence about getting it right. For others, it can be because of a fear that the data will reveal the coaching hasn’t actually been worth it after all.
Another mistake is the Hawthorne Effect: people behave differently when they know they’re being watched. If a coach knows they will be measured on something specific, their professional and ethical priority of remaining nondirective risks being trumped by a desire to hit the metrics.
A third, particularly concerning, issue is broader: typical organizational priorities orbit around what’s quantifiable, and on a per quarter basis. That’s a shame when we apply it to coaching, because the most powerful benefits it offers tend to be much longer term, focused on deeper, more intangible mindset shifts. A coaching program targeted at more inclusive leadership, for example, needs a long time for the right behaviors to be bedded in; patience and perseverance in these cases are important.
Recognizing the true ROI
Coaching ROI can feel like an intimidating subject that is simultaneously academically interesting to discuss, almost impossible to do justice to, and potentially a waste of time in any case. In practice, a pragmatic approach that pays attention to both financial ROI and more intangible benefits will be possible in many situations.
The key to this is to hold off on trying to capture the impacts of an individual coaching relationship until the most sensible point. For time-bound coaching programs, that will be at least at its end, or even at some point further down the line, and for more indefinite programs an intelligent approach that incorporates coachees only after they’ve had a chance to see a change will make sense. This should mitigate the negative session-by-session impact on coaches’ behavior, and use the process purely as the validating data snapshot rather than as a tool for change in its own right.
The truth is that coaching has been demonstrated to generate value every time it’s been studied. Trusting that that’s going to happen, and putting in sensible processes to capture it, will give it the chance to shine that it deserves.