Coaching: How to Calculate Your Return on Investment

Coaching ROI 10Have you thought about the return on investment (ROI) of personal coaching? I would probably guess not as this investment decision is somewhat analogous to the early days of personal computers.  With every new product or service, there is a small portion of the population who are the early adopters.  In the case of computers, they were likely the technology gurus, who were excited to upgrade their TI or HP hand-held calculators for 256 kB of desktop memory.  I propose this analogy parallels personal coaching.  There is a small portion of the population who are driven towards self-improvement, so hiring a coach is a no-brain decision.  What about the others?

In the early 1980’s, when IBM computers were first launched, companies struggled with the financial decision of whether to buy their employees personal computers. They intuitively knew their employees would be more productive, but did not grasp how to calculate a ROI.  Is personal coaching following the same path? Most people believe they would benefit from coaching, but they struggle with how to justify it.

How much would you pay for coaching services if you thought you would get promoted within the year, add an extra 10% to your base salary that carries forward for 20 years, or have more job opportunities?  What value would you place on coaching services that solidified your performance in a position where you felt overwhelmed? Can you calculate that value and weigh it against the cost?  What about the intangible benefits such as greater fulfillment and your impact on others.  An increase in your leadership abilities helps others lead better.  Accurately measuring all the downstream benefits would prove difficult, so I suggest focusing on what can be measured and let the unquantifiable extras be the cherry on top of the sundae.

My 5-step process to calculate coaching ROI involves answering a series of basic questions to define the opportunity, determine the gap, measure the performance, and calculate the value.  These steps are:

  1. Define the need/opportunity and determine the gap
    • What specifically do you want to accomplish?
    • What is your baseline?
    • How big is the gap?
  2. Calculate the benefit
    • What are the parameters that need to be addressed that will deliver value?
    • What is the quantifiable value if the performance gap is closed?
    • Is the growth in value linear, exponential, or binary?
  3. Develop a coaching approach
    • What is the coaching strategy and tactics to achieve the target?
    • How will progress be measured (the metrics)?
    • How frequently will progress be measured?
    • Who will be responsible for collecting and reporting the data?
  4. Implement the coaching plan
    • What is working well?
    • What needs to be adjusted to meet target?
    • What is the interim analysis and value?
  5. Calculate the ROI
    • What is the total cost?
    • What is the monetary value of the improvement?
    • What is the ROI (net benefits/coaching costs)?

Putting this model into practical use, a client may have a goal to develop and lead more effective project meetings.  After a review of the client’s work and process, the coaching plan may focus on strategies and tactics to improve preparation, organization, and execution that results in fewer, shorter, and less attendees needed at all meetings.  The costs savings is easily calculated by the reduced man-hours in meetings multiplied by salaries over the project life.  The true cost savings are immeasurable as the upgrade in the client’s skills will carry forward into future projects.

When was the last time you attended a meeting and wished the meeting leader was better at preparing himself and the team as well as more effective in leading the meeting and staying on task? Ask me how I can help? The ROI is off the charts.


HE21118Davis_07-medAbout the Author: Sandra Dillon is a professional coach and consultant with an extensive background in leadership and business development.  She coaches individuals as well as designs and facilitates workshops that address her clients’ business needs.  She has a passion to help organizations fully engage all its employees.  Reach out to her at sandra.s.dillon@hotmail.com or 281.793.3741 to further the conversation and determine how she can help you grow your business.

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