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The ROI of Executive Coaching
By Gail Finger, October 2007
Until recently, “leadership” has been one of those intangible assets that could not be quantified on a balance sheet. Businesses have been talking about the importance of leadership to an organization’s success, but did not have a way to measure the return on investment of providing executive coaching to the current and future leaders of the organization.
Executive coaching has a price tag, and with all of the costs associated with doing business these days, the expense might seem difficult to justify. However, there are now some compelling numbers to look at that allow an organization to see ROI of an executive coaching program.
Coaching, Not Training
Executive coaching – sometimes referred to as leadership coaching – is intended to provide continuous, individualized support for business professionals in an effort to develop the competencies associated with good leadership. Good leadership, in turn, motivates employees, boosts productivity, impacts service and product quality, stimulates employee morale and retention, and ultimately, increases profitability and shareholder value.
Unlike internal training, which focuses on technical skills and is almost always delivered to a group of people rather than an individual, coaching relies on the relationship between an employee and the coach to achieve changes in thinking, attitude and behavior. Some of the intangible benefits leadership coaching delivers include:
- Helping executives understand themselves and gain insight into others, which
improves their relationships and their effectiveness as managers; - Providing a rich learning environment where individuals can evolve professionally
and personally; - Preventing serious employee issues through support from emotionally mature managers;
- Building a committed, engaged and proactive workforce;
- Optimizing decision-making, team performance and innovation;
- Developing passionate employees who are satisfied with their contributions to
and impact on the organization; - Encouraging greater mental flexibility to see things from several different perspectives, tolerate ambiguity and uncertainty, adapt to change, learn from mistakes and solve problems in new ways.
Previously, these benefits were not measurable, but several recent studies deliver a compelling argument for the investment in executive coaching and the specific returns a company can expect as a result.
Real Numbers, Real Results
In 2001, Fortune magazine reported the results of a poll of executives and upper level managers who had six to 12 months of coaching with a Masters or Doctoral level executive coach. The executives were asked to give a “conservative estimate of the monetary payoff from the coaching you received.” The survey results showed that the recipients valued the executive coaching at six times the cost of the service. In other words, a nine-month, $18,000 executive coaching program investment for a vice president produced a $108,000 return on investment. Another study, conducted by Manchester, Inc., mostly among Fortune 1000 companies, also concluded that a company’s investment in executive coaching realized an average return on investment of almost six times the cost of the coaching.
These studies indicated specific corporate and personal benefits received from an executive coaching program:
Corporate Benefits |
Personal Benefits to the |
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A Competitive Edge
In recent years, many more companies have discovered the competitive edge that executive coaching delivers. In April 2006, Fast Company magazine reported that many of America’s CEOs and senior executives had embraced the benefits of executive coaching:
- 43% of CEOs and 71% of senior executives had worked with a coach;
- 63% of organizations say they plan to increase their use of coaching over the next five years;
92% of the executives coached said they plan to use a coach again.
Read more on this topic in our white paper titled: Executive Coaching: An Investment In Creating Masterful Leadership, in our coaching section, and in our case studies.