Understanding Roi The Case For Coaching


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an article on the ROI as a result of coaching.

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Understanding Roi The Case For Coaching

  1. 1. Mentoring and support―providing a The Case for Coaching secure environment for executives to explore and reflect on the demands of It’s not easy for HR to show whether executive their roles, and their decision-making and coaching gives a good return on investment, intervention options. but there are ways. Although there can be considerable overlap, BY DR. GAVIN DAGLEY these categories indicate the range of skills and backgrounds effective coaches need. High-end and high-potential senior leaders Coaches with extensive experience as trainers and educators, as senior executives, or in are necessarily intelligent and demonstrably psychology or counselling, can each be successful. They frequently have postgraduate expected to bring different skill sets and degrees and have completed many training professional strengths to their work. As a courses. HR professionals can struggle to find result, they may be more or less effective, viable methods to engage and develop such depending on the focus of the work. people, and executive coaching is sometimes Executive coaching also varies according to seen as the new ‘silver bullet’ solution. the circumstances of the coaching and the Coaches and researchers argue that the type of program needed. The circumstances personalised, one-to-one approach develops can be loosely grouped as remedial, planned leaders’ awareness of their particular needs developmental and supportive. and idiosyncrasies, which helps them become Remedial coaching is used when a leader’s better leaders. performance has been deficient. Coaching in Executive coaching is an unknown quantity these situations might feel like being sent to to many HR professionals. Does it work? the headmaster, and motivation and When does it work best? Does it deliver value commitment can be a major focus early on. for money? Whether it represents a good investment is a complex question. Any answer must begin by Coaching in these situations might defining what coaching is and is not. A commonly used definition comes from R feel like being sent to the R Kilburg’s Executive Coaching: Developing headmaster… Managerial Wisdom in a World of Chaos (2000). In brief, Kilburg defines executive coaching as a goal-oriented working Planned development programs are intended relationship between an organisational to further improve a leader’s skills and leader/manager and a skilled and abilities rather than remediate a deficiency. behaviourally oriented consultant, intended to Participants in these situations tend to view provide both organisational and personal coaching in a more positive light. In practice, benefit. The range of coaching objectives this the distinction between coaching for remedial definition covers can be grouped under four and planned developmental reasons is, at best, general headings: fuzzy. The key difference is perceptual - that Skill development―using educational is, the extent to which the leader views methods to develop personal, coaching as beneficial or punitive. interpersonal and managerial skills. Programs initiated from a perceived need Personal growth―working to clarify for support may include elements of skill and understand the executive’s enhancement and personal growth. Support- idiosyncratic ways of being and driven programs may be self-initiated, or the interacting, and the personal drivers that result of a senior leadership or HR concern support these. for the executive. Coaching for support is Strategy and culture change―working common when a senior executive is appointed with leaders to improve their effectiveness to a new role, or where there is concern for as change agents. their well-being in a particularly demanding HRMonthly July 2006, p.22-26
  2. 2. role. It is also employed by executives who work?” to “What factors are most important want to follow a self-directed coaching to the success of psychotherapy?” Executive agenda. coaching could be expected to follow a The circumstances under which coaching is similar path. Ultimately, research findings on initiated can affect a leader’s commitment the factors that predict success will be of and, in turn, the overall effectiveness of the more use to practitioners than arguments intervention. about whether coaching “on average” is an effective developmental tool. The skills, experience and personal BEING ABLE to demonstrate that a attributes of coaches are only one group of proposed intervention is likely to be effective factors that affect the success of executive is one of the key components of a strong coaching. Other variables likely to influence business case. In reviewing the research on outcomes include: coaching efficacy, D B Peterson and K The individual participant Kraiger, in A Practical Guide to Evaluating characteristics such as commitment, Coaching (2004), put the matter succinctly: preparedness, motivation, attitude to “Coaching works.” They argue that a rapidly change, and the ability to build trusting growing body of personal testimonials, case relationships and to self-reflect. studies and other diverse research methods The relationship―the match between clearly indicates that coaching has a positive coach and participant, the quality of the impact on both individuals and organisational working relationship that develops, and results. ethical and trust considerations. On the other hand, researchers have The environment―including the provided us with few methodologically strong quality and extent of feedback, resourcing studies of the outcomes of executive coaching and management support, the underlying programs. Even the few studies commonly reasons for initiating the coaching, cited as evidence of effectiveness should be alignment with organisational goals, interpreted with some care. features of the organisational culture, and We also have to be wary of the very human career path opportunities. biases around the interpretation of numerical data. We frequently attribute stronger and more generalised certainty about results than FINANCIAL MEASUREMENT and the numbers may warrant (which can be both evaluation of any coaching starts with a problem and a boon when presenting establishing the estimated dollar costs and business cases). dollar returns. The cost part of the calculation As well as viewing numerical results with is relatively easy. The direct cost can be appropriate skepticism, you should consider isolated from either payments made or the how well the results from a study might contract documents. (Indirect costs may be translate into the real world of organisational another matter. In an effort to build a strong performance. case, it can be easy to overlook hidden costs such as administration, the risks of poor The skills, experience and personal outcomes, and the time lag between intervention and outcome.) attributes of coaches are only one Rather than “What did it cost?”, a more group of factors that affect the revealing question might be “What is the success of executive coaching. range of costs?”, or “What do you get?” From a Melbourne-centric point of view, Poor research support for the effectiveness based on limited available research data and a of psychotherapy dogged professionals in that range of discussions with coaching and HR field for many years as well. As the volume of professionals, overall program costs are based quality supportive research increased, the most commonly on per session rates. A focus shifted from “Does psychotherapy ‘session’ usually lasts 50-120 minutes, HRMonthly July 2006, p.22-26
  3. 3. although some coaches use session lengths of up to a half day, and others don’t specify but ALLIED TO the question about executive determine duration based on the coaching’s value is another question: Is it circumstances at the time. Sessions usually expensive for what you get? That is, does it occur at between weekly and monthly cost relatively more or less than alternative intervals. methods of achieving similar outcomes? And Rates at the extremes can be as low as $100 how do pay rates for executive coaches a session and as high as $1,500 or more. The compare to rates for services provided by most common rates seem to be in the $300- similarly qualified professionals? $800 per session range. Intervention methods used in preference to The number of sessions in a program also executive coaching include structured seems to vary considerably. Although single- programs delivered to groups and customised session programs exist, they generally range individual approaches. Most commonly, from very brief programs of three sessions, to group programs are professional training 20 or more sessions for in-depth programs. courses and leadership development programs Some per session-based programs are available through internal and external structured as ongoing relationships, with no suppliers. They range from two-hour specified end date. educational seminars and workshops delivered onsite, to five-day residential Rates at the extremes can be as programs and postgraduate degree courses. Individualised and personally tailored options low as $100 a session and as high delivered in-house usually focus on feedback, as $1,500 or more. performance management and mentoring, but most one-to-one programs sourced outside an A few programs do not specify a per session organisation tend to be classified as executive rate, but charge a single (or multiple-stage) coaching. fee for service with the number of sessions Professionals with similar levels of training unspecified. These programs may be limited and experience to coaches might include in other ways, such as time period (perhaps 12 CEOs, psychologists, teachers, professional months) or the attainment (or abandonment) trainers, HR professionals, accountants, of predetermined goals. Some providers lawyers and doctors. Formal training can negotiate payment in full prior to range from none at all through to doctoral commencement of the contract, others invoice degrees. on a per session basis, and still others invoice In considering the professions that might be monthly. equivalent, it is useful to consider the level of Given that one of the primary focuses of training and experience that would be executive coaching is behavioural change, the sufficient for the coach to be both effective duration of, and investment in, a program is and credible working with your most senior important. That is, the scale of the program and influential staff. will have a bearing on the magnitude and The second major component in the ROI depth of issues that can be addressed, and the equation is the value received from the sustainability of changes that can be expected. coaching. For many years researchers have For example, it is unlikely that a senior argued that expenditure on training and executive’s primary method of functioning development should be measured, and the under pressure, established over 40 years, most commonly recommended methods are would be modified significantly (or with any based on four measurements originally longevity) as a result of three one-hour formulated more than 40 years ago by Donald discussions. Sustained behaviour change is Kirkpatrick: more likely to require consistent and Participant impressions of and persistent focus and intervention over an satisfaction with the training extended period. Explicit knowledge and skills gained HRMonthly July 2006, p.22-26
  4. 4. Transfer of knowledge and skills to to the organisation of the coaching they the work environment received. The researchers then discounted Economic benefits to the organisation each estimate for the degree of certainty about The first three items provide a reasonably the original estimate, the proportion of the practical guide for undertaking a non- estimate attributable directly to coaching, and monetary evaluation of an executive coaching the degree of certainty around that attribution program. The HR team from a Melbourne- estimate. based multinational used this approach to In spite of the heavy discounting, the monitor and evaluate its extensive coaching researchers found that the return on program. Both participants and their investment averaged $100,000 per executive, managers provided feedback on the or 5.7 times the average $17,500 invested. knowledge gained and the noticeable The obvious and fundamental difficulty with behavioural changes. (D B Peterson and K this approach is that it is based entirely on the Kraiger provide some useful checklists and executives’ ability to supply accurate pro forma questionnaires for use in evaluation estimates in the absence of objective criteria. programs in their chapter in The Human Resources Program-Evaluation Handbook, The researchers found that the 2004, edited by J Edwards, J C Scott and N S Raju.) return on investment averaged $100,000 per executive, or 5.7 times the average $17,500 invested. MEASURING AND establishing the financial returns on coaching is considerably A second method of establishing coaching’s more complex. The essentially human and economic value is a loss and risk-based interpersonal character of the work that makes model. The basis is the question: What would coaching effective is also what makes the be the cost of not achieving behaviour effects nearly impossible to quantify. change? This approach is particularly useful The difficulties arise in two ways. Firstly, with remedial coaching. That is, if an program content varies widely in goals, executive does not achieve satisfactory approaches and outcomes, which makes behavioural change, he or she and the financial comparison difficult. How do you organisation may need to part company. Costs compare and quantify one executive’s new associated with disengagement could include: found sense of emotional control with Redundancy and retrenchment another’s decision to move on and find a Outplacement consultancy more satisfying role? Locating a replacement Secondly, to determine financial return, Loss of the employee’s contact researchers need to be able to separate the networks effects of coaching from the multitude of Loss of organisational function due to other factors that influence net profit in the loss of knowledge financial statements. That is, they must be Risk associated with release of able to isolate the direct effects of the organisation-specific knowledge to the coaching on behavioural change, how competitive marketplace behavioural change effects individual Potential for staff and client poaching performance, and ultimately the influence of The relative uncertainty of a new individual performance on net profit. appointment In the study “Maximising the Impact of Lead times, including the time for a Executive Coaching” (Manchester Review, new appointment to become fully 2001), a group of researchers used an productive innovative way to estimate the direct bottom- Using the loss and risk-based method, the line effect. They sidestepped the difficulties business case amounts to a comparison of creating linkages and asked their between the cost of the coaching (along with participants to estimate the financial benefits the associated time lag and risk of not HRMonthly July 2006, p.22-26
  5. 5. achieving sufficient change) and the costs and Many executive coaching outcomes are not risks of retrenchment and replacement. related directly to financial gain at all, but to A variant can be used when coaching goals leader satisfaction, building the generic are related directly to a major strategy capability of senior staff and providing an implementation. Evaluators can assess both option to deal with particular HR problems. the potential financial gain of successful Some HR professionals initiate coaching implementation, and the potential losses or simply on the basis of an identified need and a downsides of an unsatisfactory one, using the belief (or fond hope) that it will be effective, financial information built into the strategy without reference to detailed cost/benefit assessment. This approach can be particularly analysis. useful where key personnel are associated Why, then, attempt financial evaluation of at with financially identifiable and separate all? If the methods of estimation are initiatives. inherently frail, how can HR professionals The third method of evaluation is indirect. provide any confidence in the quality of the Coaching is assessed on the basis of its numbers they produce? The primary reason contribution to and alignment with high-level for attempting financial evaluation is probably corporate strategies (themselves tied to political. HR professionals compete with financial strategy). other organisational leaders for resources. If a The Balanced Scorecard approach (R S coaching program requires executive approval Kaplan and D P Norton, 1996) is an example. for funding, then HR professionals will need The Balanced Scorecard is a method of methods of measurement and evaluation to defining, implementing and measuring vision buttress their proposals. and strategy using four areas of focus: Compelling business cases do not usually financial and shareholder, customer, internal rely on a single argument. They frequently business practice, and learning and growth. include multiple scenarios and rationale, For each area, leaders define key objectives present number ranges rather than single and initiatives closely aligned with the values, and address not only the gains from organisation’s vision and overall strategy. the proposal, but the threats of not acting, and Progress is evaluated against them using tools the potential blocks to implementing the idea. that provide the most direct measurement of HR professionals who are considering the desired outcomes. If, for example, executive coaching can build stronger coaching was a key initiative under “learning business cases, and compete more effectively and growth”, then coaching-specific measures for scarce organisational resources, by being around satisfaction, learning and observed able to draw on a range of efficacy change could be linked to broader measures information and evaluation approaches. of employee satisfaction and retention, which themselves are part of the overall strategy to achieve financial goals. Dr. Gavin Dagley is a psychologist and former Company Secretary. Dr. Dagley Performance changes are not the practices as a researcher and executive coach. In partnership with AHRI, he is only beneficial outcomes from currently undertaking an extensive research executive coaching. program with HR professionals investigating executive coaching efficacy and best practice. The drawback (or advantage) of this Email: gavin.dagley@bigpond.com approach is the disconnection of costs from value received. That is, although the business case demonstrates tight alignment with corporate strategy, it does not provide direct linkages between coaching cost and benefit. Performance changes are not the only beneficial outcomes from executive coaching. HRMonthly July 2006, p.22-26