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Executive Briefing: Case Study on the Return on Investment
of Executive Coaching
Prepared by:
Merrill C. Anderson, Ph.D.
MetrixGlobal, LLC
November 2,
2001
A Fortune 500 firm and Pyramid Resource Group, a coaching services
company, recently engaged MetrixGlobal LLC to determine the business
benefits and return on investment for an executive coaching program.
This executive briefing was excerpted from the final report of the
study and is intended for the private use of MetrixGlobal clients
and professional associates. Please contact Merrill Anderson, [email protected],
515 278-0051, for additional information.
The Bottom Line: Coaching produced a 529% return on investment and
significant intangible benefits to the business. The study provided
powerful new insights into how to maximize the business impact from
executive coaching.
Introduction
A Fortune 500
firm launched an innovative leadership development effort that was
expected to accelerate the development of next generation leaders.
The participants in this effort were drawn mostly from the ranks
of middle managers and from many different business units and functional
areas. Leadership development activities included group mentoring,
individual assessments and development planning, a leadership workshop
and work on strategic business projects.
Coaching was
considered to be a key enabler for this approach to leadership development
because the participants could work privately and individually with
his or her coach to develop specific leadership competencies. The
client organization engaged the Pyramid Resource Group to provide
coaching to the leadership development participants. While participants
spoke very highly of their experience with coaching it was decided
to conduct a formal assessment of the effectiveness and business
impact of coaching. It is intended that the results from this study
be used to determine:
1. How did coaching add value to the business and what was the return
on investment?
2. How could coaching be best leveraged in the future, especially
if coaching was to be expanded to other business regions?
Data Collection
Procedures
It was decided
that the best way to isolate and capture the effects of coaching
on the business was through a questionnaire. This questionnaire
had two parts. Part one was completed electronically via email and
examined clients initial reaction to coaching, what they learned,
how they applied what they learned and captured their initial assessment
of business impact. Part two was conducted over the telephone with
each respondent and probed more deeply into business impact and
the financial return on investment
The target population
for the survey was 43 leadership development participants. These
participants were drawn from two regions: Eastern United States
(37) and Mexico (6). These participants represented a cross section
of the business and included those in sales, operations, technology,
finance and marketing. All had been identified as potential leaders
and executives. Thirty (30) of 43 leadership development participants
returned their surveys for a 70% response rate.
Results
Coaching was
a very effective developmental tool for the leadership development
participants, producing financial and intangible benefits for the
business. Coaching sessions were rich learning environments that
enabled the learning to be applied to a variety of business situations.
Decision-making, team performance and the motivation of others were
enhanced. Many of these business applications contributed annualized
financial benefits. Other applications created significant intangible
benefits. Overall, the participants appreciated their coaching experiences
and would highly recommend coaching to others.
Three-quarters
(77%) of the 30 respondents indicated that coaching had significant
or very significant impact on at least one of nine business measures.
In-depth discussions were conducted over the telephone with each
respondent to further explore the business impact of coaching. Sixty
percent of the respondents were able to identify specific financial
benefits that came as a result of their coaching.
Overall, productivity
(60% favorable) and employee satisfaction (53%) were cited as the
most significantly impacted by the coaching. Respondents defined
productivity in this context as relating to their personal or to
their work group productivity and half (50%) documented annualized
financial benefits. Employee satisfaction was viewed both in terms
of the respondents being personally more satisfied as a result of
the coaching as well as the being able to increase the employee
satisfaction of their team members. The respondents could not quantify
this benefit in financial terms. Employee satisfaction, then, was
a significant source of intangible benefits. Customer satisfaction
(53%) was also a significant source of intangible benefits.
The next most
frequently cited as being significantly impacted by coaching were
work output (30%) and work quality (40%). Twenty percent of the
respondents identified financial benefits as a result of increased
work output. Many respondents reported improvements in work quality,
however, they were not able to quantify these improvements in terms
of dollar benefits. Work quality improvements were considered an
intangible benefit of the coaching.
Program costs
were tabulated for all 43 leadership development participants in
determining the return on investment. A 529% return on investment
was produced by the coaching process (excluding the benefits from
employee retention). While those clients who had customer or people
responsibilities produced proportionally greater financial benefits,
the realization of benefits to the business was fairly widespread
throughout the group involved in this study.
Recommendations
were made to maximize the business benefits from executive coaching:
Ø Manage
the entire coaching process to ensure consistency and quality. Though
the content of individual coaching sessions should always be confidential,
the coaching process itself needs to be managed to ensure that the
coaching clients and the coaches are following the appropriate process
and leveraging best practices.
Ø Prepare
clients in advance for coaching and don't force coaching on anyone.
Because coaching remains a relatively new development technique,
people may not understand how the coaching process can help them
become better business professionals. The sooner they understand
the process, the sooner they will see results.
Ø Offer
clients the ability to select their coaches. Chemistry is important
to build an effective coaching relationship. Provide prospective
coaching clients with information about the coaches including biographies,
education, coaching credentials, functional expertise, industry
experience and other background information.
Ø Provide
coaching strong organizational support. Those being coached should
receive encouragement and support from their immediate managers.
Also, coaching should be conducted in the context of other developmental
efforts such as competency development, assessments, mentoring and
leadership workshops.
Ø Ensure
coaches are grounded in the company's business and culture. Coaches
are more effective when they can identify with and talk about the
realities of their client's environment.
Ø Allow
each coaching relationship to follow its own path. A major difference
between coaching and training is that coaching allows the individual
to determine what works best for him or her at a very personal level.
Coaches need wide latitude to work with "the whole person"
and help each client be more effective as a person as well as to
be more effective as a business leader.
Ø Build
performance measurement into the coaching process. Evaluation of
coaching should be designed into the process from the beginning
to better set performance expectations and open up new learning
opportunities for making coaching more effective while the coaching
is being conducted. For example, coaching can be refocused to deal
with issues or to ensure that business priorities will be met. In
this way, the evaluation of coaching becomes more than just a measuring
stick - it becomes a structured approach to deepen the business
value of coaching.
About MetrixGlobal,
LLC
MetrixGlobal
LLC is a professional services firm specializing in performance
measurement solutions that increase accountability for bottom-line
business results. Whether it's developing a scorecard for a corporate
university, determining return on investment for a human resources
program or conducting a business impact study on an organization
change initiative, MetrixGlobal consultants partner with clients
to create powerful measurement methodology. Please visit our web
site, www.metrixglobal.net to learn more about us.
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