ROI on executive coaching could be vague and sometimes very hard to calculate or predict. It’s not only me talking, it’s a general concern in the research related to executive coaching in the academia.
But there is a simple way to judge the ROI of an executive coaching process, which is by setting start points. Say you are hiring an executive coaching for your company and at the time of hiring you are making $X1 in pure profit. If your purpose of hiring the coach is to increase your net profit then you are looking at $X2-$X1 = ROI where $X2 is the net profit after 6 months of starting the coaching program.
Your purpose of the coaching defines how to calculate the ROI. For example, in some cases the purpose of executive coaching could only be reducing the number of man power hours of work to achieve a certain goal. In that case you start with a certain number of man power hours needed currently to finish a job, and you calculate the number of man power hours after the coaching program and the reduction of man power hours multiplied by the hourly wage equals the amount of money saved through the executive coaching.
In reality it’s never that simple, but it helps to break down your companies performance into tasks or jobs and do your math for costs and net profits and integrate every thing into one whole process that represents your company’s performance. To learn more about this process follow the link below:
Now with the article. I hope you enjoy it.
The Business Case for Executive Coaching
Are you working in a company or law firm where executive coaches help leaders develop their leadership capability? Does your company or law firm provide executive coaching and leadership development for high potentials and high performing leaders?
One of the most powerful questions you can ask is “Does providing executive coaching for company leaders have a direct effect on the company bottom line?” Emotionally intelligent and socially intelligent organizations provide executive coaching and leadership development for authentic leaders at all levels of the organization.
Approximately 25 to 40 percent of Fortune 500 companies use executive coaches, according to the Hay Group, an international human-resources consultancy. According to a survey by Manchester, Inc., a Jacksonville, Florida, career management consulting firm; about six out of ten organizations currently offer coaching or other developmental counseling to their managers and executives. Another 20 percent of companies said they plan to offer coaching within the next year.
Although it was once used as an intervention with troubled staff, coaching is now part of the standard leadership development training for executives in such companies as IBM, Motorola, J.P. Morgan Chase, Hewlett-Packard and many others. Brokerage firms and other sales-based organizations such as insurance companies use coaches to bolster performance of people in high-pressure, stressful jobs.
The ICF Coaching ROI Global Study
The 2009 International Coach Federation (ICF) Global Coaching Client Study reported the median coaching ROI to be 700%. The results of the study is rather dramatic providing much needed metrics for this popular leadership development strategy..
The International Coach Federation conducted a qualitative and quantitative global client survey and interview research project between May to December 2008. The full research report was made available to the public on June 11, 2009. Highlights related to the return on investment from coaching are reported here. This is a crucial research topic — what do coaching clients say is the value of coaching?
The design phase of the research consisted of three components: First, fourteen in-depth interviews were conducted with an international sample of coaches to assist with the design of the questions to be utilized in the qualitative and quantitative study. Second, the qualitative research phase consisted of five focus groups with a total of 41 clients participating. The focus groups allowed for in-depth probing of qualitative issues. Third, the quantitative research component consisted of 2,165 coaching clients from 64 countries participating in a 20 minute online survey.
What do clients say motivates them to begin coaching? The clients cited career opportunities and business management as their most important reasons for seeking coaching services.
Both coaches and consumers of coaching services are interested in Return on Investment (ROI) studies on coaching. An often cited ROI study of executive coaching, Coaching for Increased Profitability: How to Deliver and Demonstrate Tangible Results to the Bottom Line by Merrill C. Anderson, Ph.D. MetrixGlobal (2003) had reported an ROI from coaching of 788%.
In an apparent confirmation of that finding, the ICF Global Coaching Client Study Executive Summary (April 2009) reports, “The vast majority (86%) of those able to provide figures to calculate company ROI indicated that their company had at least made their investment back. In fact, almost one fifth (19%) indicated an ROI of at least 50 (5000%) times the initial investment while a further 28% saw an ROI of 10 to 49 times the investment. The median company return is 700% indicating that typically a company can expect a return of seven times the initial investment.”
Source: ICF Global Coaching Client Study, Executive Summary, April 2009, in consultation with PricewaterhouseCoopers LLP, and Association Resource Centre inc.
Working with a seasoned executive coach trained in emotional intelligence and incorporating leadership assessments such as the Bar-On EQ-i and CPI 260 can help company leaders improve their leadership capability. You can become a leader who models emotional intelligence and social intelligence, and who inspires people to become fully engaged with the vision and mission of your company or law firm.
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Dr. Maynard Brusman, Consulting Psychologist & Executive Coach
Help Companies Assess, Select, Coach, and Retain Emotionally Intelligent Leaders
San Francisco, California 94147-1525