Organisations naturally want to maximise the value of their spending on coaching. This should be a job for HR managers – if only they could find a magic measurement formula.
Coaching just never seems to add up. For example, the past couple of years have seen some scare stories about this expensive intervention with, in some instances, only four out of 10 HR people able to point to a quantitative benefit from coaching.
And to add further confusion, some of the same research, from the Association for Coaching, found that almost all respondents reported a significant improvement in motivation and people management.
So, the feel-good factor is high, but is anyone doing the maths?
Catherine Fennell is trying to. She is managing director of Quilken, a consultancy specialising in organisational effectiveness and leadership development. She has produced studies on the benefits of executive coaching among FTSE 100 and Fortune 500 companies.
The 2005 research involved 30 qualitative interviews with executives at 13 companies based on three core themes: personal effectiveness organisational effectiveness and performance benefits. It found that 93% of respondents said coaching had brought interpersonal skills benefits, while 83% said self-management and leadership skills had improved.
Return on investment
Measuring return on investment (ROI) proved difficult as many performance benefits could not be quantified in terms of financial returns, because improvements were not traceable through company management systems. But, where specific returns could be identified, the ROI ranged from three to 1,250 times the coaching spend.
“It is a question of whether clients and coaches are able to track coaching and maximise it to its full potential,” says Fennell. “But be aware – there is much more to it than money.”
She found a pattern: more than two-thirds of the sample cited coaching as having an impact on at least one business area, but only just over half were able to quantify this in monetary terms.
She also found that there was no pattern to the financial benefits. The largest sum of ROI came from “fast and effective restructuring” according to the respondents, which yielded 1,250 times the investment. Other large returns were attributed to a “more focused team”, leading to reduced headcounts and improved performances which created cost efficiencies of 47 times the investment. Seemingly ‘harder’ actions resulting from the coaching, such as strategic retention and performance savings, showed only three times the ROI.
Fennell warns that clients need to give a broader meaning to the idea of ‘value’. “This open question brought quick convergence on repeating themes that had no direct mention of financial return,” she says, pointing out that they covered the personal value of the coaching, such as the safe environment, the opportunity to reflect and the resulting awareness of how to make an impact.
So it would seem that clients include their feelings about a coaching intervention and its benefits. Are there any other ways to toughen up the metrics?
Helen Caton-Hughes, a director at Forton Bank Consulting, thinks there could be. “People who receive coaching first-hand know its value,” she says. “But you also have to reassure people that it’s money well spent.”
Prove your worth
Forton Bank Consulting uses the ROI approach, based on qualitative and quantitative questions used by US consultancy Merrill Anderson.
If a client tells Caton-Hughes that an amount of money – say £1m – has been saved, she will ask them to rate as a percentage how much of that is down to coaching. If the answer is 10%, an initial figure of £100,000 would be put forward to be verified with a ‘certainty question’: “How certain are you that the sum saved is down to coaching?”.
If a client says they are 80% certain, then the amount of money saved is said to be £80,000 before deducting the costs of the coaching.
Such questioning can only take place retrospectively, but maximising the value of coaching means planning and targeting the investment from the outset.
That is the time for the fee-payers to start thinking about what they want and why, otherwise they will not get the best out of the intervention, says Simon Callow, UK managing director of international talent management and leadership consultancy PDI.
This is particularly true of senior people at the top of an organisation. Callow says he has spotted mobile, ambitious people moving in and out of senior roles, trailing their unmonitored coaching influences with them.
“Too many people turn up at an organisation and use their own coaches,” he says. “HR and training professionals need to be involved so that they can align the coaching interventions with the strategic direction of the organisation.”
Callow believes that HR professionals must identify the coaching need and nominate who will deliver it. “For example, if an organisation has got pivotal roles, or high potential people, they are the people to invest in. Some large organisations struggle to know who is being coached.”
Once coaching takes place, a lot of its added value is missed. Callow says coaching is useful for unearthing key issues in an organisation as lots of problems will be aired during a coaching session. “But does anyone ever ask what themes are arising?” he asks, advising that HR needs to mine the data.
Such themes could be obstacles to decision-making, problems with the hierarchy, or failures with IT. “HR could extract that data, but the number of organisations that let it escape are frightening,” Callow says.
Among the suggestions on maximising the value of the information arising from a coaching session, Callow recommends that HR runs after-action reviews and finds out what the coach is comfortable about sharing.
He does not advocate a breach of client confidentiality, but says that coaches can help identify key issues. “This could be of a lot of value to an organisation as a guide to what is happening at a thematic level.”
Lindsey Masson, director of executive coaching at Ashridge Business School, cautions against jumping into evaluation exercises with both feet. “The only way to maximise the value of coaching is to be clear on what you want to achieve and to evaluate it,” she says. “It depends on clarifying expectations up front, and to do this, the contract is everything.”
She advises that the coach and client continuously review the appropriateness of the contract and how they feel about it.
It all comes back to basics, says Carole Gaskell, managing director of the Full Potential Group.
“You have to define what coaching means before you start,” she says. “Some companies are talking about one-to-one coaching and others about people and how they are managed. For others, it is about starting to embed a coaching style.”
After definition comes benchmarking – via professional organisations and conferences – and learning from other people’s experiences, she says. “Most companies are keen to share and to talk about it – this is context setting.”
Metrics can grow from this context, but central to the process is that there is an evaluator.
“You need someone who holds it all together,” says Gaskell, emphasising Callow’s point that HR has to take charge of the coaching process. “The evaluator can give feedback into the business about the results.”
Gaskell points out that feedback creates a self-perpetuating circle of positive reactions. “Sending out case studies into the business generates a sense of value about what is happening and encourages people to do more,” she says. “This will help maximise the value and embed coaching into the organisation’s DNA,” she adds.
How to maximise the value of coaching
- Define the business strategy and identify the critical issues facing your organisation.
- Match the coaching to the business goals that leaders value the most.
- From there, agree the metrics: the desired results, objectives and specific measures of success. Find some hard and soft metrics. Hard metrics might be financial ones or about retention costs. The ‘soft’ might be about how the culture feels.
- Put evaluation methodology into the coaching process from the beginning and integrate it with existing business and HR processes. This will keep things clear and simple.
- Manage perceptions and expectations, provide best practice examples and communicate quick business wins.
- Believe in both the monetary and intangible values of coaching.