One of the barriers to evaluating ROI is establishing a metric that captures observable behavior. Three techniques can be used to create such a metric. One assessment that works well for this is a 360 degree evaluation. The difference between a baseline assessment and one taken after coaching can produce a metric that can be weighted and calculated as an economic benefit. Another way to assess improvement based on the effects of coaching would be to conduct a role play, case study, or demonstration of the new behavior and then translate the scored value into economic terms. Forecasting can also be used to project the financial benefits of a coaching program. [30] Another barrier to measuring ROI is how to quantify intangibles such as improved employee morale, more competent employees, or more satisfied customers. These benefits definitely provide added value to the business but cannot be easily quantified. Intangible value must be considered along with ROI by organizations when deciding whether a coaching program has merit. [31] One of the most difficult and challenging issues involved in measuring ROI is isolating the effects of coaching from other factors in the benefits observed. Phillips believes it is always possible, even if estimates are used. Sophisticated and credible processes include using control groups, trend-line analysis, and forecasting models. Other techniques are expert estimation and customer input. Phillips notes “Always strive to carve out the amount of data directly related to the program or project.” [32]
The American Society for Training and Development (ASTD) gathered 30 case studies of how organizations measured ROI. From these cases, two common formulas for calculating impact predominated: benefit/ cost ratio (BCR) and ROI. To find the BCR, divide the total benefits by the cost. In the ROI formula, the costs are subtracted from the total benefits to produce the net benefits, which are then divided by the costs. For example, a coaching program producing benefits of $225,861with a cost of $23,575 would yield a BCR of 9.6. For every $1 invested, $9.6 in benefits were returned. The net benefits are $225,861- $23,575 = $202,286. ROI is $202,286 divided by $23,575 x 100 = 858 percent. Using the ROI formula, for every $1invested in the program, there was a return of $8.58 in net benefits. ASTD found that “most organizations conduct evaluations to measure satisfaction; few conduct evaluations at the ROI level. Both are desirable. Evidence shows that if measurements aren’t taken at each level, it’s difficult to show that any improvement can be attributed to the training.” [33]
The Corporate Leadership Council study found that maximizing returns on executive coaching involves several key factors. First, greater rigor is needed in the management of both coaching engagements and professional coaches. Also necessary is standardizing coach management procedures and clearly allocating accountability for actions. This can provide benchmarking opportunities. Another critical factor is extending the coaching mission beyond the needs of the individual to an initiative that will benefit the business needs of the organization. This means the direct manager and the business are the ultimate customers of the coaching engagement.
The Corporate Leadership Council found that it takes a staggering amount of effort to manage “every aspect of coaching engagements from assessing requests for coaching to finding coaches to ensuring that coaching engagements progress against specific and measurable goals.” [34] Lastly, the Council found five key challenges in maximizing the returns on professional coaching. These were:”(1) difficulty finding ‘best fit’ professional coaches; (2) unfocused coaching engagements; (3) poor matching of coaching resources to executive requirements; (4) disconnect of coaching engagements from the organization; and (5) inconsistent delivery and quality of coaching.” [35] The Council’s six-month investigation of the variability of ROI in coaching found the main problems to be guaranteeing a positive relationship between the executive and the coach, and the challenge of linking the engagement with the needs and goals of the organization. [36]
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