Personnel Today’s coaching research, published back in June, showed that worryingly few companies measure the return on investment of coaching, despite spending a considerable proportion of their learning and development budgets on it every year. So what can you do to measure this effectively?
Measuring the value of an investment is important to us all. If we spend a lot of money on a new car we want to know that the car works, that it will get us from A to B and will enhance our quality of life. Similarly, if an organisation invests thousands of pounds in a new piece of machinery or in a training programme to improve staff performance, then they will want to know how much value it is adding to the business compared with the cost of the investment.
Research by the Full Potential Group indicates that only 20% of organisations consistently measure their coaching activities. The most commonly applied evaluation of coaching interventions is ‘informal’ measurement via anecdotal or intuitive assessment: this method is used in 77% of one-to-one and 23% of group coaching programmes. ‘Harder’ bottom-line-related business measures are used far less frequently by employers.
Our research shows that the extent to which the return on investment (ROI) of coaching interventions is measured is somewhat hit and miss and depends more on the individuals involved in the coaching programme – and whether or not they see ROI as important – than on any other factors. It is unsurprising, then, that we continue to hear arguments questioning the value of coaching interventions.
Why measure ROI?
The old adage of “what you measure is what you get” still rings true. In most cases, if an organisation chooses not to measure coaching, it risks undermining the value and impact that coaching has and calls into question what value the organisation wants to gain from it. Having strong, tangible business or behavioural results can help in a variety of ways – whether by satisfying key stakeholders that their investment has been worthwhile, validating an organisation’s spending on coaching, or by building the business case for coaching.
Measuring ROI also acts as a good way of assessing progress. By putting a stake in the ground, organisations can see how far they have progressed with their coaching initiatives and what more is required to move things forward to the next level.
Taking the time and effort to measure the real value that coaching adds to an organisation will also highlight precise, quantifiable benefits in terms of employee motivation, staff retention, teamworking, speed of promotion, performance and behaviour.
How to measure effectively
Designing ROI evaluation activities for coaching is not as difficult or time-consuming as people might imagine. Look at both the ‘hard’ business measures – including questionnaires, interviews, surveys, and focus groups to evaluate improvements around increases in sales and productivity, accountable profit, reductions in cost, and so on and ‘soft’ behavioural measures – such as 360° assessments, and customer and employee surveys.
When being specific in measuring ROI there are several steps to go through:
- Begin by agreeing the business objectives, key behaviours and why they are relevant to results. For example, the business objective may be to increase profits by 10% in 12 months, while the key behaviours that can affect results could be to increase the average scores on the staff survey around management behaviours by 20%.
- Next, calculate the likely impact of coaching, taking into consideration other organisational variables. For example, if other initiatives for increasing profit are to introduce better IT systems, recruit more sales staff and improve distribution, then look at the likely impact that coaching could have on these. Is it 33% for each one or is it 20% for one, 30% for another and 50% for the other? Use this data to define an overall ‘percentage impact’ of coaching. (It is important to point out that this is an art and not an exact science, so it is best to get all parties involved in a discussion to decide on this figure.) Generally, the percentage impact of coaching can be anywhere between 20% and 100%. The fewer organisational variables involved, the bigger impact the coaching will have.
- Once the programme has been rolled out, calculate the cost-benefit ratio of coaching. The formula to use is: percentage impact of coaching multiplied by the year-on-year gain in turnover, divided by the cost of coaching. So, if we continue our example, let’s say that the percentage impact of coaching was 50%, the year-on-year increase in profit was £1m and the cost of coaching was £100,000.
50% x £1,000,000 / £100,000 = ROI of 5.
The cumulative effects of coaching take time to filter through an organisation, so measure ROI one year after the end of the coaching programme and then for the subsequent three years. ROI will increase in additional years as there will be no cost of coaching involved.
Other measures to use include 360° assessments and staff surveys, both before and after coaching. Note the differences in management behaviour scores.
Communicating the programme
You can maximise the impact that coaching has in an organisation by communicating the measurable benefits to staff.
A structured, 12-month communications programme is essential, as this will help to highlight the differences that coaching is bringing to the organisation and what people are now doing that they weren’t doing before the coaching was introduced.
Be sure to include individual case studies from an employee’s perspective – particularly those who would not be expected to endorse coaching – as this can help to highlight the impact of coaching as well as encouraging employee buy-in. These case studies can be included in company newsletters and on intranet sites.
Other initiatives could include developing a dedicated coaching intranet site with useful tools and information, issuing regular e-mail bulletins, displaying notices and posters and implementing a campaign to publicise the results to a wider audience – all of which contribute to employees feeling proud to belong to an organisation that looks after its people.
Good communication of successes helps to generate excitement around coaching and supports the successful embedding of new skills and behaviours.
Finally, remember to be realistic about when to measure the results of coaching interventions. Fundamental step changes in individual behaviours must be given time – this kind of transformation does not happen overnight.
Case study: Portman Building Society
Portman Building Society (which was absorbed by Nationwide in August) introduced coaching using the Full Potential Group in 2005 to help support performance management. To gauge the return on investment (ROI) after each coaching programme, an action plan was developed that included the differences the society could expect to see in terms of increased sales, improved customer satisfaction scores or improved staff retention.
Portman analysed the scores managers received in the areas of feedback, coaching and development via annual staff surveys, and looked for evidence of stronger performance. Staff 360° feedback questionnaires were also repeated to compare the scores people received pre- and post-coaching.
For recruitment and retention, Portman measured feedback from candidates regarding their experiences and reviewed their performance after they had been in the role for six months. It also carried out a validity study looking at how well suited staff were to their roles, conducted mystery shopping exercises and reviewed staff turnover statistics. Within six months of rolling out the programme, staff turnover had been reduced by 2%. After 12 months this reduction reached 5%.
Exit interviews were also monitored and there was a reduction in the number of employees who cited ‘lack of development’ as a reason for leaving. This was attributed to the more effective coaching skills of Portman’s managers.
Six steps to measuring the return on investment of coaching
- Define the business strategy and identify the critical issues facing your organisation – be courageous and put a cost on them.
- Align the coaching to address the business goals that leaders value the most. Only then, agree desired results, objectives and specific measures of success.
- Build evaluation methodology into the coaching process at the outset and integrate this with existing business and HR processes to help keep things clear and simple.
- Create shared ownership of the evaluation by engaging evaluators from many levels and functions within your organisation.
- Manage perceptions and expectations, provide best practice examples, and communicate quick business wins.
- Remember you need to hold on to the strategic value and intent throughout. When you believe in the monetary and intangible value coaching adds to your organisation and expect to achieve transformational change, it will happen – what you measure is what you get.
Carole Gaskell is founder and chief executive of coaching, leadership and high-performance culture specialist the Full Potential Group