Does Coaching Pay?

Coaching is hot. A recent survey found that 80% of executives believe that they would benefit from coaching. A BusinessWeek report on companies whose CEOs and other executives use coaches reads like a Who’s Who of American Business - Charles Schwab & Co., eBay, Pfizer, Unilever Group, American Express, Ford, Maytag, and Hewlett-Packard.

Why? Executives achieve leadership posts by mastering their business. They are smart, knowledgeable, and technically superior. When they step into leadership, this is not enough. As BusinessWeek noted, “CEOs get hired for their skills but fired for their personalities.” The Center for Creative Leadership found the same to be true for smart, talented executives whose careers were derailed despite high IQs and business smarts.

Leading requires mastery of the complex interpersonal skills required for constructive influence. Further, leaders must know how to manage themselves in response to otherwise crushing stress that is part and parcel of leading. No burned out executive ever did a company any good.

Most leaders, new to their role, discover that now they must learn the personal and interpersonal skills that they did not develop while they focused on building the business skills required to earn their chance to lead. Many executives have told me that their success now depends more on people savvy than on business savvy. Further, they don’t want to be “just adequate,” because their leadership skills will establish the limits on company success.

Companies entrust their current and future welfare to their leaders. It is in their best interests to ensure that current and future leaders are fully prepared to execute all of their duties. Coaches get hired to fill in the gaps.

The case for a coach, someone who has spent time learning such skills - and learning how to build them in others - is easy to make. Hire a specialist who knows what you don’t know so that you can learn it. And, in fact, the skills can be learned. But, coaches don’t come cheap. Competent, experienced coaches usually start at about $15,000 for a year’s services. So a reasonable question arises: Is it worth it? What is the ROI for coaching?

Accurate measurements of coaching ROI are hard to get for several reasons. Leadership skills are hard to quantify. Likewise, the impact of improvement, from a scientific vantage point, is tough to nail down because so many other factors also influence performance. Despite these challenges, there is evidence that is worth your consideration.

Perhaps the most comprehensive review of coaching ROI was published in the Manchester Review in 2001. Researchers studied 100 executives who had completed their coaching experiences between 1996 and 2000. 50% of the participants held titles of Vice President or higher. Coaches were Ph.D.s or MBAs with 20 plus years of experience in organizational development or as line managers. Coaching goals were to change management style or to create growth for recently promoted executives. Coaching engagements lasted from six to twelve months subsequent to a thorough assessment of the executive and business situation.

While their methods go beyond the scope of this column, the study authors took pains to derive highly conservative estimates of benefit from each participant. Still, the authors found a return on investment of 570%. In other words, for every investment of $15,000, companies demonstrably earned back approximately $85,500.

A 2001 report of research done by the International Personnel Management Association found that ordinary training increased productivity by 22%. However, training plus coaching increased productivity by 88%.

Triad Performance Technologies reported the impact of coaching sales professionals and their managers with a large telecom organization. This third party study found a ten to one return on investment within one year. Concrete results included the retention of talented employees who had planned to leave, increased revenue, and improved customer satisfaction.

A 1997 study examined the impact on targeting four emotional intelligence skills with managers. Half the managers were coached to develop those skills and half were not. The coached managers created double the profit of those not coached.

A 2002 survey of human resource professionals by the consulting firm Lee Hecht Harrison found that 55% of respondents use coaches in their company. Coaching is used to maximize management and leadership potential. A similar survey of HR professionals by The Lifecoaching Company found that the top four words these professionals used to describe coaching in their firms were supportive (98%), empowering (82%), holistic (80%), and inspirational (77%).

This handful of studies supports the notion that coaching can deliver results. This does not mean that you should immediately go out to hire coaches. Before you do so, set yourself up for success. Consider the following issues to help ensure that you get results similar to what these studies show:

• Establish the benefits you hope that your business will enjoy, such as greater bench strength, higher profits, or greater talent retention. Build ways to measure whether you are achieving those benefits.

• Be sure that those to be coached are interested in or receptive to coaching. Otherwise you will waste your money and time.

• Develop criteria for the credentials of potential coaches. To achieve lasting, significant changes in behavior, your coaches must be deeply trained and experienced in behavior change. If not, at best you will get no ROI and, at worst, the program can create real damage. This is no time for amateurs. Because coaching is unregulated, amateurs abound.

• Develop a mechanism to keep the coached executive’s manager “in the loop” without violating the privacy needed for effective coaching. This helps ensure that the process continues to meet your business needs.

• Be sure that there is a personal fit between executive and coach. Relationships matter.

Dana C. Ackley, Ph.D., is founder and CEO of EQ Leader, Inc., which helps individuals and companies solve problems and build skills. He can be reached at (540) 774-1927, or by e-mail at dana.ackley@eqleader.net.