Return on Investment
Measuring the Return on Investment (ROI) in Coaching
Coaching is an Investment
Coaching is an investment. According to an article, “What Can Coaches Do for You?” in the Harvard Business Review, organizations can plan on paying between $200 and $500 per hour for coaching, with executive coaches charging up to $3,500 per hour. And this article is from 20 years ago!
Nonetheless, we can all appreciate those who know the price of everything and the value of little. If you paid $3,500 and yet you earned $7,000, you would be more than happy about your initial investment. We now know of various studies detailing the return on investment (ROI) of coaching exceeds 100%.
The numbers speak for themselves:
• In the study, Maximizing the Impact of Executive Coaching: Behavior Change, Organizational Outcomes, and Return on Investment, published in the Manchester Review, the return on investment for the 43 participants who estimated it, averaged nearly 5.7 times the initial investment (Joy McGovern, et al., 2001).
• According to Booz Allen Hamilton’s executive development director, Vernita Parker-Wilkins, in their study, coaching produced intangible and monetary benefits for seven out of eight business impact areas, and they realized a return on investment of 689 percent.
• An internal coaching program at Intel confirmed similar results; their program resulted in a return on investment of more than 600 percent.
How will I know if my investment in coaching will be worth it?
You can calculate your return on investment (ROI), once your team members have received coaching, you paid for the coaching, and you have evaluated the results. You subtract the cost from the total value gained, divide by the cost, and multiply the results by 100%. For example, if you paid a coach $2,400 for coaching services that resulted in a $10,000 increase in your gross income, your ROI would be ($10,000 – $2,400)/$2,400 x 100% = 317%.
Keep in mind when you are deciding whether to hire a coach, you won’t yet have the numbers to evaluate to determine if coaching will be worth it. Several factors, other than cost, also contribute to ROI, and involve:
• The fit of the coach with the opportunity you seek.
• The complexity and ambiguity of the circumstances surrounding the situation or opportunity.
• Your team member’s commitment to heeding the advice of the coach.
• The amount of money you will most likely save or earn because of the engagement.
Assuming you hire a coach well suited to your circumstances or needs, and your team member is committed to following the coach’s guidance, the extent to which coaching will contribute to the ROI you seek, will largely come down to:
• What will it cost?
• How much will it save money, increase revenue, or deliver value in other ways such as solving issues or exploiting opportunities?
After you have considered your desired outcomes, the cost of coaching, and the potential ROI, you will be better informed to have productive discussions about the value coaching may bring to your organization. Contact me to learn more about how coaching may benefit your organization.