ROI (Return On Investment) from Coaching

The true challenge of the Coaching ROI (Return on Investment)For Coaches – For HR Managers – For Coaching Clients  

André Politzer     August 1st, 2007

 ROI is one of the most intriguing topics for an executive coach working with Corporate.This is a challenging value that is often categorized as “intangible”.With my long executive experience in Corporate Europe and Corporate America, I appreciate and understand that most decision makers would be suspecting that the coaching impact can’t be measured on solid grounds until proven otherwise.After all, whoever would make the decision to hire a coach, has accountability for the engaged expense. and this one needs to be obviously addressed. Let me line up a few relevant outcome items from my first experiences of facing those objections.  If organizations and practitioners work together to set standards and monitor activity, they will both benefit. From that standpoint, decision makers who are buying coaching have a responsibility to ensure coaching service providers that have the appropriate experience and qualifications. In the last four months, I have been focusing on how some organizations view measurement of their investment in their talent development budget. First the scope of application of coaching has been addressed. I can mention the following mostly common bottom line items those “prospective clients” mentioned during this exercise: -Improve individual/team performance-Improve productivity of the division (P&L) or global organization-Improve quality of interaction and communication between division leader and direct reports-Improve leadership/management effectiveness-Improve staff retention-Improve customer service and client retention-Establish a strategic planning dynamic-Improve emotional intelligence With HR managers I addressed their approach to coaching and found out that rather than being part of a development strategy, coaching help them truly maximize and harness their own departmental internal performance promoting efficient resources to their top executives and top performing teams, and furthermore provide additional savings in training and recruitment costs to the company.  On the latter, by hearing several times that this is really a sensitive area for them, I could suggest we talk about the ROI applied to Coaching. It positions Human Resources inside the company and identifies the total financial benefit the organization draws like a learning/training program cost. We can subtract from that value the total investment it would take to develop, produce, and deliver that program internally. We had some challenges figuring out an exact measure of the costs associated with a training program and isolate the financial benefits from it. The suggested comparison was very well accepted and it was reasonable in the eyes of my HR contacts to assess this as a financial value. I suggested the following  formula:             (total benefit – total costs) = ____           X 100 = ROI
                             total costs

 Total benefits would include the money saved by the organization, an allocation of a revenue increase for the division or the company, and anything that adds directly or indirectly to the bottom line.Total costs would include the development costs (using a comparable expense the HR or the division engaged in the past), the employee’s time away from doing something else, the overhead in education and materials, travel, cost of coordination, and any other cost incurred. The more I used that analogy to training cost and the more I could gain comparative benchmarks and a sincere recognition from the HR executive that we had room for creativity to find the tangible measure criterion applied to Coaching especially when it comes to the objectives listed above. Now, where do we go from here? As we relate to ROI and not to sales argumentation tips, I will add that it helps to show some evidence about value and not neglect to refer to standards such as the ICF (International Coach Federation) www.coachfederation.org  and the coaching competencies, some of the mechanisms such as 360-feedbacks, project outcomes, coachees reports to their supervisor, etc. That process will build up over time generating some clear benchmarks the company will use along the way, when hiring external coaches. Surprisingly or not, some of the contacts I had during this process also expressed lots of skepticism and objections talking openly about their own experience of dealing with too many of what they called the “cowboys” coaches who use too much of  “anecdotal evidence”. It made me feel each time I heard this kind of comment that it is crucial to agree on a definition for the ROI and offer one they can relate to a financial approach. For example: 

• Return on Investment (ROI) is a traditional financial measure based on historic data. Coaching is a new topic for research and resources exist to find data and evidence on performance (provide them with some resources)
• ROI is a backward-observation metric that yields no insights into how to improve business results in the future
• In training, like in educational organizations, ROI has been used primarily for self-justification rather than continuous improvement. In Coaching, it’s all about continual improvement at the individual and group level

I was inspired to search for good ROI resources especially in the professional training space. There are websites and discussions dedicated to the topic and countless articles and reports, books and tools to justify and even calculate a Coaching ROI. Here are some practical examples I used in the Cyberspace. ROInet is a Yahoo! Group forum evaluating and measuring experiences shared with over 2,500 members: http://groups.yahoo.com/group/roinet . It was created for HR professionals interested in measuring ROI in HR development projects. The ASTD  (American Society for Training & Development) is the world’s largest association dedicated to workplace learning and performance professionals  www.astd.org proposing a data-rich environment where you can find resources, discussion projects and issues related to measurement of ROI and it does not require any registration. I also found the American Evaluation Association www.eval.org an extremely relevant resource focusing a lot on HR performance evaluation tools. As a conclusion to this important topic, let me share a few tips I found useful when discussing ROI applied to Coaching: 

1. Make sure you discuss and agree the outcomes your prospect wants to achieve from coaching at the outset
2. Make sure those are realistic, clear, and genuinely relevant to individuals and teams inside that organization (if you have the opportunity to evaluate that aspect directly with the stake-holder who will be involved with the coaching program, that will ascertain this crucial level of clarity)
3. Record these outcomes as part of a potential “coaching contract” and it will be used as a basis for determining what has been achieved
4. Try to develop some tangible measures like the examples I listed above
5. Establish right from the inception of this relationship a process to review performance with the coach and the coachee at given times to make an ROI estimate
6. HR and P&L Divisions are presenting budgets and forecasting to their supervisors. They are accountable for their expenses. Just keep it in mind and offer your support to provide all the tools and the resources needed to make a balanced mix of tangible and intangible criteria allowing to present a reliable ROI formula

 The challenge for each of us is to avoid the assumption that our clients support our way of thinking. I suggest we try to appreciate all facets of our clients, especially when they are only prospects. Looking at the Return of their Investment on our services already makes them trusting we do care about their accountability.

Coaching in Silicon Valley

The format Coaching is suggesting to self-starters in unusual to them. They can just leave Stanford or UCLA with an MBA or a PHD and completely freak out in front of a professional coach just because the format is different.
It is a learning process. But it is entirely tailored to you. You’re in the center! You set the agenda. You make yourself accountable. You hire a coach to practice your business muscles and optimize your impact in the world.
You can have all the great knowledge about business principles and theories, made enough research on trends and how to make a difference in the market place. When it comes to you, it’s a different ball game. How your interaction with partners, employees, suppliers, customers and product developers will develop is a total different planet.
You have your particulars. You even built up a vision for the company. You might even be challenged by the next Google (or the current one) or Yahoo! who just made you an offer for $1Billion you just rejected violantely because you want to keep having fun without the big bullies on your head!
Coaching helps you connect to your guts, live the moment, use most of what it offers you to get and give back in the world.
Joe, the client I just agreed to coach for a lower fee as he is starting up his new company with very limited funding is an exciting guy. He just married a fantastic woman who, like him, graduated from Stanford last year.
They both have a passion for networking and following Joe’s lead and genious ideas, decided to build the first network website for couples graduated from the same school. They are convinced the dynamic of this will bring a very new type of space out there, offering multitude of opportunities for inspiring people to work with each other, finance each other, learn with each other…
The harmony of love, mixed with creativity in business and innovation. What Joe told me he is looking for using a coach is to help making the steps into building a team, prioritize his plans and identify what are the best synergies to use with his wife to maintain a balance in their lives, and make work another “room” where they can share passion and fun.
I accepted the challenge because I like Joe and feel I can contribute a lot. I see in this a potential for coaching his wife too, and his new team members. With the dynamics of planning and the framework of starting up a business and build profitable plans, I know coaching can be a precious source for Joe and make his dreams come true…
Keeping the balance, measure reasonably and keep your head above the frenetic pressure VC firms are still enjoying when they share the risk with people like Joe. Joe is smart enough to avoid the VC’s like he would avoid a contagious area infested with a vicious virus.
Yes, Joe is right. Silicon Valley can also be a place for new couples eager to win and make money while having fun and quality of life. I trust he is right. Thank you Joe for the opportunity! Looking forward!

Perceiving value of coaching

http://www.yourfocuspoint.com/It doesn’t take very long to figure out whether or not the person you’re talking to understands the value of coaching. Just ask “hey, have you ever thought about using a coach?” “A what?” “C.O.A.C.H! Someone who cares, has skills, is seriously involved, understands business (let’s say has experience), can identify with your challenges, is your closest business partner, works with ethics and applies the International Coach Federation core competencies and ethical guidelines.”Look, that’s the whole point of starting this blog today. We, as coaches, are coming across fascinating and unique situations every hour of the day. Through the eyes of our clients, we can see the entire world, feel the challenges, and tremble when it comes to sensitive situations or genuine breakthroughs.Let’s start today with an incredible story. (We are using aliases and are slightly changing the context of each situation to keep the client’s confidentiality).My client “Rob” is the founder and chairman of a 500 employees high-tech multinational public company. At 9:00 am, Rob announced to the media that last night he was about to jump off the Golden Gate Bridge but at the last minute thought about his ten kids and dear wife, whom he cherishes, and had to step back, not even sweating or shaking. The radio interview took place first thing in the morning and without hesitation, he revealed this information live on the air.
Now he is talking to me and sets the agenda for his session; how can he continue to be himself when interviewed and not create a new character or fake anything! After reiterating the boundaries between Coaching and Therapy, I reframed this objective by suggesting that he look for the best disposition he can find for himself when he is exposed, and represents others than himself when he speaks as a chairman of a public company versus talking to anyone privately.
Basic concept? Naivety? Total lack of sensibility about remaining discreet as a public figure? Before we could focus on Rob the Chairman, we had to address the tremendous amount of adrenaline invested the day before. I listened attentively but did not respond as Rob questioned the meaning of his life, his contribution to his kid’s education, as well as other intimate aspects of his life. We were then able to explore the impact his declaration would have on his business life and speculate on the number of articles we’d be reading in the press and the value of stock for the next few days…What is the problem here? Should we look into his direct reports? Who is affected most by Rob’s depressive inclination? What is lifting his morale? What triggers to his falling pattern? Did it already happen but luckily not in sequence with a public appearance so that this can go away from his mind and remove him from the vulnerability of reacting or be impulsive?Far from setting any standard remedy to this situation, I feel the incident is somewhat revealing. I cannot pride myself that this is happening everyday and that I injected the most powerful vaccine to protect my client from this incident to happen again. Little by little, Rob gained some awareness about his surroundings, his responsibility, and the minimum tolerance benchmarks.We, in fact concluded on a set of three benchmarks for him to keep in mind at any price, so that his exhibitionist tendency do not revisit at critical times. Family remained at the top. He is spiritually and materially responsible for nourishing his loved ones. The purpose of him working after he made his money in 1993, when the company went public, is definitely to create jobs and be a productive philanthropist. Finally yet importantly, the appreciation of life through his religious values as the unavoidable outcome of completing the suicide that night would have caused him to become a murderer… This extreme provocative image connected him to true deep values and made him feel very satisfied and complete. He had the tools and could use them at anytime. Rob asked that we develop a communication strategy and an action plan to deal with the inevitable interviews he would encounter. He wanted to be prepared and to keep a strong profile.By the way, my dear first readers do not think for an instant that the above story is reflecting any kind of expertise on my part. Each situation has its magnitude and intensity. With the discipline of using competencies and reflection with research, when it’s needed, I simply try to remain professional in any given situation.Coaching is a process. There are many approaches to it. What makes a coach a good coach is probably his/her ability to cope with a specific situation and apply the appropriate strategy.