Is Coaching Worth It — Literally WORTH IT?

What is the return on investment (ROI) of coaching? This is an important question for managers who consider opening their doors to the ever-increasing breed of coaches.

 

To quote Goethe’s Faust, “Two souls, alas, are housed within my breast […]” — because I am writing this as an MBA and business analyst but also as a coach. The coach in me will of course say the value of coaching is priceless and I will come armed with stats and graphs to prove it. For example, one study says the ROI for coaching is 529%, meaning for every $1,000 invested in coaching you get over $5,000 in return. The International Coaching Federation (ICF) reports an even better ROI of some 600%. 

 

Too Good to Be True?

So, the coach in me is happy and can feel smug. But then I get this funny feeling I always get when I look at spreadsheets with 10,000 rows, calculate an average and subsequently launch into my highly sophisticated process of analyzing the numbers, i.e. sorting, eye-balling, guessing and basically applying my very own bullshit radar. Here is why I find the 600% ROI claims worth investigating further (to put it kindly). In the world of stock markets, an ROI of 10% is considered good and it can range up to just under 30% for technology as of 2023. On the other end of the spectrum, the average ROI for a fast-food restaurant was 5% in 2022.

 

Whatever Google search terms I apply — and I am eager to learn where I got it wrong purely for personal financial gain — I don’t find any sector, industry, stock index, etc. with an ROI much above 30%. That means I cannot see myself taking that 600% ROI seriously for the simple reason that a CFO/CEO worth his or her metal will simply laugh me out of his or her office. Then there is the other thing: the 529% ROI is from a 2001 study. The 600% ROI quoted in the ICF study is more recent but from 2009. Either one is still being used, no wonder, by coaching companies. Such eye watering results are hard to kill. Dig a little deeper and you will find problems.

 

The Math Is Correct But the Methodology?

The formular to calculate the ROI of coaching is easy enough: Coaching ROI = (Benefit attained by coaching) / (Cost of coaching) x 100. That bit about “benefit” is the tricky part providing ample opportunity to misunderstand numbers and let’s be frank to fudge numbers. I am not a statistician but smarter people than me have mentioned the words sample bias, lack of control samples, independence of assessors, etc. when reviewing these studies.

 

Personally, I find it easier to check for additional factors. The study published in 2001 was the result of research that took presumably place in 2000 and earlier. Ditto for the ICF study published in 2009. If the data collection and analysis took about a year, the data were probably based on outcomes which occurred before 2000 and 2007, respectively. What did the economy do just before and after these studies were published? Between 1995 and 2000 it grew, a lot. Same for the years 2003 to 2008. The S&P500 more than doubled between 1995 and 2000. It grew much slower at around the time the ICF study was conducted but it grew.

 

Why all this history? Because the ROI formular takes the benefits of coaching including for example increased productivity comparing them against the investment costs of coaching. However, coaching is only one line item under investment costs. I am having a hard time believing coaching alone resulted in productivity improvements for example. 

 

Refocusing on What Organizations Call their Biggest Asset

Writing as a coach now, I argue improved efficiency and/or productivity numbers are a byproduct. The main product is the preceding transformation of people if coaching is done well. That’s the fuzzy bit in the formular to calculate the ROI of coaching, the real “benefits attained by coaching”. But most organizations should not have a problem with that because they say people are their most important asset anyway, right?

 

Let me try and change the perspective a little when I reiterate my earlier statement the value of coaching is priceless — under the right circumstances. As executive manager, you play a crucial part in ensuring coaching takes place under the best possible circumstances. You can argue with better byproducts, but your focus needs to be the people in your organization which is a significant part of your job description anyway — people. How then to create the right circumstances? Let’s take the challenges organizations face regarding diversity, equality, and inclusion (DE&I), the latest variables that have been identified as high impact factors for efficiency and productivity gains. There is one easy way to create the right environment — the top brass needs to seriously want the transformation and must be willing to be coached to transform themselves first. 

 

Bottlenecks Are at the Top

I would not be surprised if 90% of executive management teams would agree DE&I is important and a transformation is needed. Based on “what I hear in the market” a big chunk of these executives really mean everyone else but them needs to undergo a transformation. This is not unusual. The running joke among coaches is that when our clients say they want to change, what many of them really mean is they want everyone else to change. Change is hard because it brings uncertainty and we don’t like uncertainty. 

 

What about the coaching “targets”, the employees? A large share will have one question in mind, namely “what does this transformation mean for me”. They won’t speak the language of efficiency gains, increased productivity nor will many of them speak “DE&I” and their organizational benefits unless inclusion, equality and diversity relate to their own day-to-day work. Your female workforce may develop hopes for promotions for management positions while the post-modern whipping boy (i.e. white middle-aged male) will fear losing out because to make it look good, the next VP of Marketing better be a non-white woman.

 

To help your organization handle the uncertainty let them see the executive team walk the talk. If you don’t believe in the necessity of your own transformation as a manager — and your organization lets you get away with it — it might be better for everyone to forget about transformation. Here is why. Transformations are expensive and above all exhausting. The assumption coaching can serve as a band aid to get your people over the hump while you or your managers carry on as the always have will only cause frustration and headaches. 

 

People Power

The truth is successful transformations also mean change for the executive management. Examples for that are Google’s restructuring into Alphabet, Microsoft’s re-focus on a common purpose after Satya Nadella took over from Steve Ballmer, Amazon’s continued outward focus on the customer rather than a navel gazing profit focus, and Toyota’s efficiency drive that gave the world just in time delivery. What do all these companies have in common? They focus on people, the customer and/or or their employees and to really want change. For example, the focus on employees resulted in authorizing Toyota’s front-line workers (the ones who tighten the screws during assembly) to suggest local improvements and brought us just in time production. Google examined what teams work best based on the thousands of teams working for the company and published the results: the top factor? Psychological safety. And for all the hate Mr. Bezos received for getting even richer during the pandemic, all he did was pay attention to what we needed and wanted and then provided it.

 

Some organizations make it look like they focus on people but in praxis do what they can to avoid change. For instance, they reward high potential talent with executive management courses which can easily set the education budget back $45,000 per talent. The problem often is these high potentials come back with a lot of enthusiasm and a lot of ideas on how to change things. However, the organization is not ready for change. Doing that with one high potential may not cause any issues. If this turns out to be a pattern, you end up with an entire group of high potentials who take notes, get disgruntled — and may easily opt to leave. Some providers of executive training courses have taken notice and collect statistics on how many members of an average training cohort change jobs within four to six months after returning to their respective organizations. That’s $45,000 down the drain for the organization and that’s just for starters. 

 

Realizing that your organization requires change is one thing. Not getting lost in smokescreen activism because you subconsciously try to avoid change is the challenge. Therefore it is a good idea to seek coaching for the executive team first so that a real willingness to change can trickle down the organization. It starts at the top. Getting back to the concept of ROI of coaching perhaps it helps change perspectives. What if the primary objective of coaching is not more efficiency, productivity, etc.? What if it is to help people transform themselves first and with them the organization resulting in efficiency and productivity gains? That kind of ROI is easier to calculate anyway.

This blog post was original published in German on September 19, 2023 on crimalin.com.