A frequently cited survey by PriceWaterhouseCoopers and the Association Resource Centre found that the mean ROI of coaching was seven times the initial investment. Since then, some critics have deemed the ROI of executive coaching “notoriously difficult to quantify.” If you buy a share of stock at $100 and sell it at $500, you’ve realized a return equal to four times your initial investment. Clearly, determining the ROI of a non-financial instrument — like executive coaching — is more complicated, given the intangible and indirect benefits that factor into the equation.
Regardless of the client, the company or the circumstances, executive coaching builds leadership capacity and that translates into a return on investment in myriad ways. The ROI of executive coaching transcends dollars. The International Coaching Federation (ICF) reports that “leaders who participated in coaching saw 50 to 70 percent increases in work performance, time management and team effectiveness.” And that’s just the beginning. Under strong leadership teams, companies increase their capacity to scale. They benefit from higher productivity, engagement and retention rates, which profoundly collectively contribute to bottom-line results.
Intangible Benefits Lead to Tangible ROI
The return on any investment is determined by measuring the cost in relation to the gain. In executive coaching, the financial returns are typically an indirect — albeit closely interconnected — result of the engagement. Sometimes, though, the ROI is easily quantifiable.
I once coached a client who reached out to me for individual executive coaching because she had over-performed, doubling her annual sales from $5 million to $10 million. Ironically, she worried that it would result in her losing her job since it was the company’s policy to fire anyone who sold less in any year than they did in the prior year. She firmly believed that the $10 million she sold was an anomaly, and that she’d never be able to replicate (much less improve upon) it. While her original concern was that she’d be out of a job, I helped her shift her perspective. I firmly believed that she could sell more than $10 million that year; our work together was to help her see it, too. Coaching helped remove the psychological obstacles that limited her sales potential — that year or in any year. She proceeded to sell over $100 million the year we worked together.
When wrapping up our engagement, I asked her: “So, are you leaving your job?” She laughed, and said, “Oh no … I’m selling more than $100 million next year.” And she did. This client achieved a dramatic return on her investment. Our engagement was successful because I was able to help the client completely reframe her belief systems, particularly the ones limiting her potential and her performance.
Coaching isn’t always the client’s idea. A few years ago, a Fortune 500 company requested coaching for one of its C-level executives. This individual was exceptional when it came to driving results; in fact, it was what landed him in a leadership position. The problem was, he had only one leadership style: authoritarian and directive. Unable to create followership, he actually cost the organization dearly by driving away top talent. People didn’t want to work for him, and left in droves. This client had perhaps one of the most profound transformations I’ve witnessed. He went from being completely unaware of the impact of his communication style, lack of trust and disregard for others … to making a complete turnaround. The engagement was successful because I was able to disarm his defense system, and build trust where its absence had previously held him back. By dropping breadcrumbs for him to follow, I helped him recognize his blind spots, particularly when it came to interpersonal relationships, and to concern for others, for the team and for the organization. Once we were able to calm his physiology … to train him to become more mindful in moments he felt triggered or threatened, we started to work on a new habit of engaging — or at times disengaging — far more effectively.
In time, what unraveled was a kind, thoughtful leader. He not only increased his ability to drive results; he also created followership and was able to align his team, which, in turn, enhanced its performance. The company benefited from increased retention, improved engagement and enhanced productivity — all of which contributed to its bottom-line results. As these clients’ experiences illustrate, personal growth — an intangible outcome — often translates into tangible financial gain. When you apply this type of transformation across an entire team or organization, the gain is exponential.
Measuring the Intangible Benefits of Executive Coaching
It is important to note that intangible isn’t the same as immeasurable. In fact, measurable outcomes provide a valuable lens through which to evaluate the return on an executive coaching investment. Executive coaching cultivates leadership competencies, which can be accurately measured by 360-degree assessments, administered pre- and post-engagement. In addition to a self-assessment, the assessment is also usually given to 8 to 20 key stakeholders. Obviously, the more 360 assessments each client receives, the greater the accuracy of the cumulative scores. At JMA, we evaluate 32 leadership competencies, ranging from decisiveness to delegation, active listening to effective feedback.
The truest ROI of executive coaching lies in its ability to enhance leadership capacity, specifically, helping leaders:
- Increase their emotional intelligence
- Develop or strengthen their executive presence
- Improve situational leadership skills
- Inspire and influence key stakeholders
- Navigate political minefields
- Increase employee engagement
- Embrace accountability in themselves, and develop a culture of accountability on their teams and in their organizations
- Achieve business results more quickly
Related: The ROI of Career Coaching: A Cost-Benefit Analysis
The ROI of Executive Coaching for Teams and Organizations
Stronger leadership leads to ROI extending far beyond the individual level. One of the leadership teams I coached had been plagued by “groupthink” for over a year. In our work together, I helped them uncover — and move past — a shared limited belief that wound up costing the company a million dollars per month (not a typo!).
This entire leadership team was paralyzed by the fear of making the wrong decision. And so, they made no decision at all. Instead, they continued to collect more and more data. The stalemate had been going on for over a year, unwittingly costing the company millions of dollars. Through our work together, the team quickly became aware of the systemic problems that manifested in their lack of execution. They realized that insufficient data had never been the real issue; rather, fear and unhealthy group dynamics had resulted in this paralysis — at a tremendous cost to the company. This new understanding allowed them to cut through the complexity — and to make a decision that very same day, stopping the financial bleed.
Whether you have an effective leader at the helm of a 10- or 1,000-person team, the benefits multiply. When a leader is able to make effective requests, embrace and instill accountability and increase overall engagement, it shows in the performance — and bottom line results — of the team and organization. Therein lies the true ROI of executive coaching.
Learn how our executive coaching services will enhance your leadership capacity, facilitating a higher level of performance — for you, your team and your organization.