Executive coaching pays
Research has shown that the return on investment (ROI) in executive coaching is 500-800%. This means that $10,000 spent on executive coaching should generate $50,000-$80,000 in return. Not bad.
Two recent surveys provide some more insight as to why businesses use executive coaching. One is by the American Management Association (AMA) who commissioned the Institute for Corporate Productivity to conduct a global survey of coaching practices. Over 1,000 executives and managers were questioned about their use of coaching to determine, amongst other things, its association with higher performance and the correlation between executive performance via coaching and corporate performance. The report is available here but you need to register with the AMA to read it. The other survey was sponsored by HR consultancy Chiumento in conjunction with Personnel Today and explores the use of coaching in UK organisations from a survey of almost 500 companies. Their report can be found here.
What do the surveys say?
- Executive coaching is widespread. The AMA report found that 52% of North American companies used coaching as did 55% of organisations outside of North America. According to the Chiumento survey, 65% of British companies have used coaching for the past five years.
- Executive coaching is popular. 93% of the British companies surveyed by Chiumento believe that coaching is a leading development tool and of the AMA respondents who don’t yet have coaching programs 37% in North America and 56% outside North America say they plan such programs in the future.
- Executive coaching is associated with higher performance. By “associated” I mean that the surveys couldn’t prove that coaching causes better performance but the AMA survey found that organisations that increased their use of coaching were more likely to report that they experience more success in coaching and that their organisations are performing well based on criteria such as revenue growth, market share, profitability and customer satisfaction.
- Executive coaching is primarily aimed at boosting individual performance. According to the British survey, 77% of firms use coaching primarily as a tool to improve performance. The figure for North America in the AMA survey is 79% and 87% for outside North America.
Gimme the bottom line
A study conducted by MetrixGlobal for Nortel Networks found that coaching produced a 529% return on investment as well as significant intangible benefits. MetrixGlobal have also reported that executive coaching at Booz Allen Hamilton returned $7.90 for every $1 the firm spent on coaching – almost 800% ROI. A report from the Manchester Review calculated an average return on investment of 545% from investing in executive coaching. The authors of the report postulated that:
- Coaching translates into doing
- Doing translates into impacting the business
- This impact can be quantified and maximized
But – and this is a big “but” – the Chiumento survey found that 44% of businesses believe it is impossible to measure the ROI of coaching. Their report argues that this is why 67% of organisations don’t even bother to try to measure ROI. To make matters worse, their survey found that over two-thirds of businesses believe there are too many cowboys in coaching, raising concerns about how buyers of coaching can be sure of what they are getting for their investment.
ROI is a theme I will come back to in future postings as is the subject of how to maximize the effectiveness of an executive coaching programme.
