Home Research Return on Investment An ROI Method for Executive Coaching: Have the Client Convince the Coach of the Return on Investment

An ROI Method for Executive Coaching: Have the Client Convince the Coach of the Return on Investment

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You must ask clients not only to connect one Key Factor to another, but also to assess to what extent the internal and external variables they had named earlier impacted their results.  I see it as my duty not only to remind them of all the variables that could have affected their results but to paint them with bold strokes.  I once told a client who claimed the coaching variable was 100% of the impact, “You can’t give me 100% of the credit — your leadership alone was a huge variable.  You made it happen.  What are you, chopped liver?”  Through deeper questioning, healthy skepticism, and light hearted humor, I helped the client to knock down the percentage they gave to coaching as they more seriously considered the host of variables at play.  This increases my credibility as a hard-nosed business partner.  I am not looking for an unjustified compliment but rather a realistic picture of the business variables and the coaching impact.

Anne was able to weigh all the variables in her situation and to acknowledge the competent team she started out with, the opportunities in the marketplace, and her own business market instincts.  After some careful consideration she assigned the coaching effort a 25% contribution to their success.  She underscored that, though the other variables weighed in at 75%, she and her team would not have managed them to success without coaching.  They absolutely needed the 25% coaching variable to get them the rest of the way.  As one client said, “We would have gone 60% of the way ourselves, some expert consultants helped us achieve another 20%, and you delivered 20%.  But without that 20%, we wouldn’t have made it.  There was no in-between — we had to either reach the goal completely or fail.  Given what we were dealing with, without the coaching we would have failed.”

By now the leader is confident that the percentage of the impact attributed to coaching is realistic.  Based on my clients’ evaluations regarding the percentage of impact among all variables, the impact executive coaching has had on bottom line results averages between 20 and 33 percent.

Now let’s go back to the numbers.  The formula I use to calculate Benefit/Cost Ratio that accounts for the coaching impact as only one variable affecting the outcome is:

business results  x  % impact of executive coaching
cost of executive coaching

I calculate an intentionally conservative Benefit to Cost Ratio to offset any doubts clients may harbor for the lack of a conclusive one-to-one statistical correlation between the behavioral Key Factors to the business results Factor.  Rather than using the coaching impact as 25 percent of total revenue ($244.8 million), we took just the portion of Anne’s revenue that was the difference in percentage between her performance and the next best department’s revenue, which was a 6 percent difference (since many of Anne’s internal and external variables are shared by all departments in Anne’s division, you can think of other departments as a kind of control group that did not have the variable of executive coaching applied to their efforts for the year).    Six percent — the difference in performance- was $14.69 million.

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