Return on Investment
According to a McCormick study (2007) of 500 respondents, 67 % said their organizations don’t measure coaching ROI and 44% believed it was impossible to measure the ROI of coaching at all. We respectfully disagree with the assertion that it’s impossible.
Sherman and Freas (2004) explain why this 'impossible' thinking is popular. “Unlike most business processes, which tend to reduce information to abstractions, executive coaching engages people in customized ways that acknowledge and honour their individuality. Coaching helps people know themselves better, live and work more consciously and contribute more richly.”
That said, the impact of coaching is measurable. We like the ROI formula provided by Sherpa Coaching of Cincinnati, Ohio which goes like this:
- Estimate the total value of resolving an issue:
Example: Avoided $45,000 in turnover costs (recruiting, re-training, travel, consulting fees, overtime,
Increased productivity by $25,000
Total Benefit: $70,000
- Multiply by the percentage of the improvements attributable to coaching (in this example, estimate 50%)
Coaching benefit $35,000 (1/2 of $70 K)
- Factor in a degree of confidence in the estimates:
(in this example, we are 80% sure our estimates in steps 1 and 2 are correct)
Adjusted coaching benefit: $28,000 ($35,000 x .8)
- Subtract cost of coaching ( say, $3,750)
Net Coaching Benefit: $24,250
- Calculate ROI: Divide net coaching benefit (step 4: $24,250) by coaching cost ($3,750)
ROI = 646% ($24,250/$3,750 = 6.46)
Granted, there are value judgments involved in this example. How much is a project worth? How much contribution did coaching make? That is why the formula factors in a degree of certainty, in effect reducing the calculated value of coaching directly, to account for subjectivity in the other variables in the formula.
Direct phone inquiries to Bruce Meyers, 403-538-8609 or Email bruce.meyers@thecentrepoint.ca
Related Links
What Executive Leadership Coaching Is
Primary Benefits of LEAP
A Few Coaching Scenarios
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