ATD Blog
The ROI of Coaching: A CEO’s Perspective
Wed Nov 20 2024
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When executives want to measure the ROI of training, they rarely focus on hard skills. In fact, 90 percent of the time, they are trying to find the value of their investment in soft skills training. It is usually harder to identify the connection of those skills to strategic objectives. Resources are always limited, and there will always be more requests for the budget than dollars to fulfill those requests. So, as leaders make choices and trade-offs, they will be looking for evidence of ROI. You should recognize the importance of these inquiries to present a compelling case.
When the executive asks for justification, what should you know?
When making an investment, there are two measurements you should pay close attention to. The most obvious is the result you hope to get from making the investment. The other is the behavior or action you believe will create that result. For example, your organization may be seeking to increase the number of leads you receive. That is the result you are targeting. The behavior, or action, would be the purchase of online advertising. If you want the result of an increased number of prospects for the sales team, the action you may take is hiring and training more inside sales reps.
What are the behavior and result measures for coaching?
Leaders commonly make the mistake of saying the result measure for coaching is the act of coaching. The result measure of coaching is NOT coaching itself; rather, it is the outcome or goal that coaching was applied to. For example, you may be trying to reduce staff turnover—that’s your result. Take note of the current turnover rate and target what rate would represent a satisfactory change. Lower turnover means fewer new hires, saving significant costs ranging from a third to double the annual salary per hire for recruiting, training, and other startup expenses. Beyond those savings, consider the productivity boost from a more engaged and stable team. These benefits offer a clear metric for your result. Your behavior is to train your teams in coaching and to assure they practice and use it. The behavior of coaching now has a quantifiable result upon which to weigh the cost of coaching, helping you understand the real return on your investment.
Deciding to invest time or money in coaching means either you are facing a challenge you wish to overcome or seizing an opportunity for growth.
Here are some examples of how you can apply coaching to a strategic objective:
Business Priority | Results | Behaviors | ROI (Possible Metrics): |
Enhance leadership effectiveness | Increase in leadership competencies | Develop leadership skills across all levels | KPIs related to team performance, project completion rates, and overall organizational productivity Changes in voluntary turnover rates and length of employee tenure Promotion rates, internal mobility, and leadership succession planning effectiveness |
Boost customer satisfaction and loyalty | Increase in customer satisfaction scores | Improve service delivery and product quality | Percentage of customers making multiple purchases or renewing services Customer Lifetime Value (CLV) or repeat customer revenue Number of complaints, support requests, and ticket resolution time |
Optimize operational efficiency | Reduction in operational costs | Streamline processes and reduce waste | Reduction in operational costs, such as labor, materials, or overhead Time taken to complete core processes, such as production cycles, customer orders, or service delivery Utilization rates of equipment, technology, and other assets |
Foster innovation and creativity | Increase in the number of new ideas generated | Cultivate a culture of innovation | Percentage of revenue generated from newly introduced products or services Time taken from idea conception to product or service launch Amount of cost savings generated from innovative process improvements |
Strengthen cross-functional collaboration | Increase in the number of successful cross-functional projects | Improve interdepartmental communication and teamwork | KPIs for cross-functional teams, such as output, quality of work, and achievement of key milestones The time it takes cross-functional teams to resolve complex issues or challenges Employee engagement scores or satisfaction surveys focused on teamwork and interdepartmental cooperation |
There are four simple questions that can help you build the ROI case for a coaching program:
What are we aiming to change?
Where do we currently stand?
Where do we aspire to be?
What is the value of achieving this difference?
When faced with questions about ROI and the impact of coaching is unclear, it’s important to reflect on your objectives and the measurable differences you aim to achieve. Coaching isn’t merely an assumption of improvement; it’s the catalyst that propels all your strategies forward, enhancing effectiveness and ensuring smoother operations across the board.