Executive Coaching: An ROI Process

In a blog article entitled “Executive Coaching: An ROI Sample Calculation,” I calculated that $311,250 is incurred by a company if an executive does not opt for executive coaching. Yes, exactly $311,250. I love being a nerd, but, in this post, I am going to take a different focus than the financial return on investment of coaching.

There are many other lenses through which to measure return, and maybe we will talk about them one day too. For today, let’s address the return with regard to competencies. Demonstrating ROI based on competencies is harder than you think. And we have failed repeatedly as talent development professionals and coaches because what seems obvious is, in fact, not. So I have placed questions for you to ask yourself throughout this post.

The Process to Measure Competencies

When it comes to evaluating the impact of coaching, leaders want a method that is simple, uses common sense, and provides quick and meaningful results—a model that can be used in an ongoing fashion, without costing too much money to evaluate or using too much of their time. “Meaningful” is the point of focus here. Why? Because the people department and other leaders need a method they can use for their planning, decision making, and documentation. As a coach or talent professional, you will want that too. And this is where measuring competencies comes in, using the following process.

Ask yourself: “Am I able to toggle between two or three methods of measuring ROI, depending on how the conversations go?”

1. Discuss and Agree on the Initial Goal

Most smart coaches don’t immediately commit to developing specific competencies or coaching goals at the start of the initial conversations. As we know, things are not always what they seem. Instead, smart internal or external coaches ask questions and listen. Understanding the business needs is important so you can target what sponsors and senior leaders want to achieve through coaching. Uncover what the leaders’ vision is for their part of the organization. Capture the challenges they face. And start to formulate what is needed to overcome their challenges and to achieve their vision. After you have ascertained that, then you can outline the competency assessment process that will serve as the true driver of competency goals with your coaching client.

Ask yourself: “Can I define a competency to a smart but uninformed leader?”

The coaching client’s 360 feedback yields an important baseline measurement of competencies. A 360 is where you collect the client's colleagues’ feedback about the client's strengths and areas of potential development. This represents the “pre-coaching competencies.” You can throw in psychological and business profiles, but they typically don’t change much over time, so they would not be included in your post-coaching competency assessment. See what I did there? You already know where I am headed.

Ask yourself: “Does the company have a competency or skills library? If not, do I have something usable to propose?”

2. List the Pre-Coaching Competencies

Based on your competency assessment, it is important to identify a handful (not 20) of competencies you will be working on during your coaching assignment. Do this with your coaching client, which will serve as a ray of hope after the 360 (a process that can be a splash of cold water in some cases). Yes, you will measure achievement against the pre-coaching competencies the coaching participant identifies. Be specific about the competencies, such as critical thinking, problem solving, building strategy, operationalizing strategy, executive presence, confidence, project oversight, setting priorities, managing through systems, developing teams, or interpersonal ease.

Ask yourself: “What is the link between competencies and performance goals?”

Invite your coaching client to spell out how the competencies and performance goals will be demonstrated, such as “My team will be clear on annual goals and performing well against them,” or “I will be delegating more effectively, so that each team member, when asked, will be able to articulate their goals.” Get them to quantify what this will look like in ways that are most relevant to them. For example, 50 percent fewer interruptions by confused staff, 25 percent fewer customer complaints or late deliverables.

Ask yourself: “Am I clear on how competencies drive business objectives?”

3. Align With the Organization’s Business Objectives

Make the coaching competencies more meaningful, aligned, and measurable. You can go macro to micro: Ensure the coaching client identifies which of the company’s business goals are connected to their coaching. Or micro to macro: Define which of their competency goals are aligned with which company initiatives. In either case, help them identify how they are connected, what key performance indicators are relevant, and the extent to which they will be impacted. Now we are laying the foundation to prove meaningful ROI.

Ask yourself: “Do I know how to discuss the coaching process without revealing the content?”

4. Involve the Coaching Client’s Manager

When the coaching client is ready, arrange a joined meeting with their manager. The coaching client will expound on the competencies in need of development, how they will manifest, and how ROI will be measured in a post-coaching 360. The manager’s thoughts on what the participant has put forth are critical. Even more important is their insight on how the outcomes connect with their own business objectives, and the organization’s goals that will be impacted.

Invite the coaching client to share the competencies (and/or behavioral manifestations thereof) that need development with the people involved in the pre-coaching assessment. Yes, we will be asking the same people at the post-coaching assessment. Try saying “I will be working on my team’s strategic alignment, delegation, and timely customer service,” for example.

5. Review Competencies and Impact Halfway Through

When your coaching client is ready, about halfway through, arrange another three-way meeting to review the progress. Discuss observations of developing competencies, their impact, and what the coaching client still needs to do and how their manager is assisting. Ensure the concept of ROI is revisited.

6. Measure the Post-Coaching Competencies

As a final step of the coaching engagement, tap the same folks involved in the pre-coaching interviews. Ask questions targeted directly at the competencies your coaching client has been working on. How did the coaching client do, on a rating scale of one to five, before and after coaching, on team strategic alignment, delegation, and timely customer service?

Use the same for the self-assessment in case there are blind spots. This is also the right time to get the coaching client to reiterate the ROI by linking the competencies yet again to the departmental and business objectives. In writing.

The final three-way meeting, including their manager, is when the coaching participant and their manager confer on what has been accomplished. Make sure they identify the same kinds of qualitative and quantitative measures that were discussed before, linking the newly developed competencies, behaviors, and impact on the coaching client’s department and overall business objectives and KPIs.

Ask yourself: “Am I able to incorporate the manager's initial vision for the business, and highlight alignment with the coaching?”

7. Share Results

This is where most coaches go wrong, and part of why we don’t have a good perception of ROI. They can get so wrapped up in a misunderstanding of confidentiality that they don’t measure the ROI in a final coaching report. Get the coaching client or their manager to share the report with key stakeholders in the coaching engagement, including the head of the enterprise, the sponsor, and human resources. Or distribute it yourself, with their permission.

Since you know the impact on the business objectives, the report is meaningful and hits home to the key stakeholders and sponsors. It will also be credible and insightful because it will have the fingerprint of the coaching client and their manager.

The report does not contain confidential information about private discussions between you and the coaching client. Instead, it focuses on the impact that the competencies have on the department and business. This report has value, and clearly demonstrates the ROI. Leaders feel confident in using this simple and practical report for their planning, decision making, and documentation.

Ask yourself: “Am I bold enough to demonstrate the value of executive coaching by trying this ROI process?”

This is one method I have used for decades. Of course, it varies among clients, as different leaders and companies hold different measures of ROI. But clients appreciate these reports I create with the coaching client about the value of the coaching engagement.

Just like the $311,250 on the financial ROI, it is as accurate as possible for leadership and organization development—which are notoriously hard to measure. Executive coaching is part art, part science. But this thing is highly practical, and my clients often use it alongside other leadership and operational reports.