Is Executive Coaching a Cost or an Investment?
Executive and leadership coaching has grown in popularity and practice over the past few decades. The role of an executive has arguably become more complex and the levels of volatility, uncertainty, and ambiguity have risen globally.
Executive and leadership coaching has grown in popularity and practice over the past few decades. The role of an executive has arguably become more complex and the levels of volatility, uncertainty, and ambiguity have risen globally. Executives and company directors are now expected to be masters of the operational, the strategic and the cultural, and this mix is now often supported by an executive coach who is tasked with bettering the executive’s performance on all levels. But when is executive coaching viewed as a cost? And when is it considered an investment?
If executive coaching is viewed solely as a cost, it is likely that this view only takes the impact on the individual into account. While significant benefits are found at an individual level (MetrixGlobal found ROI of 529%), when viewing executive coaching at both an individual and an organisational level the value is much larger and more widespread. Additionally, those who view coaching solely as a cost often don’t have a clear understanding and first-hand experience of the value which expert coaching provides. This view is often seen in an environment where financial constraints are high, and short-term gains are placed over long-term sustainability. Often culturally people are regarded as simple assets and a cost of an organisation.
Where people are viewed as more than assets, and are viewed as investors in the knowledge of an organisation, this coincides with a viewpoint that executive coaching is an investment. These organisations tend to gain more value from their people-related investments. It is likely that decision-makers will have had exposure to coaching in the past, and have seen the benefits it can provide. The environment in which they work is also a contributing factor, and it tends to be one of longer-term horizons, cultural growth and change.
Questions over whether executive coaching is a cost or an investment can also be related to value. Just as executive coaching is a highly individual matter, so are the ways in which we assess its value. Recent studies have shown that:
- 75% of the sample (participants and stakeholders) indicated that the value of coaching was “considerably greater” or “far greater” than the money and time invested. (MocGovern, Lindermann, Vergara, Murphy, Barker and Warrenfeltz)
- Coaching generated a ROI of 7 times the initial investment, where more than 25% reported an ROI of 10-49 times the cost. (PWC)
It is rare that any spend in other areas such as technology or process has such high levels of return.
So, when does the cost of executive coaching become an investment in the future of a business and its stakeholders? And how do you measure a return on this investment? There are many options to do this here are four of the most common:
- Return could be measured in purely economic terms e.g. we have spent £X and we have received £X+Y value as a result of it. With clear, specific and numerically measured objectives, this type of return is possible to measure.
- When an organisation has invested time and money developing an in-depth leadership competency framework, identifying and documenting certain behaviours and actions which will lead to better business outcomes. Alignment of the coaching to the development of these competencies can also then result in a similar equation to the one above.
- Measures based solely on non-financial return can also be used, and this comes into play particularly in some purpose and mission-driven companies. In this case, return is measured more strategically, aligning the coaching to business mission and future strategy in order to develop the individual and retain key talent, as well as ‘walking the talk’ in terms of values and culture.
- A combination of all of the above.
Being able to quantifiably measure the return from a coaching programme will not only make the coaching more effective, but it will also demonstrate your own investment return, allowing you to make future investment decisions more confidently. It also gives a line of sight for the coachee to the value which they have created by going through the process, which can, in turn, generate softer benefits such as higher motivation and buy-in to future initiatives.
In my opinion, executive coaching is an investment. Furthermore, it is necessary to evaluate executive coaching in terms of both financial and non-financial results. These types of results are not mutually exclusive and a virtuous cycle of benefit is likely to be generated. In the end, however, it is the decision-maker who will decide on the return which needs to be made for the business and they will look for value creation (however that value is best quantified for them.) Having clarity and alignment on this before a coaching programme begins is critical.
In order to generate real value from executive coaching, therefore ensuring it is an investment, consider the following:
-The strategy and direction of the business.
-The competencies (behaviours, actions, capabilities) required of leaders if the organisation is to execute its business strategy, and those competencies required for specific impact on business results (short and long-term).
-Which leaders need those competencies the most and what their current levels are (both at a team and individual level).
-How appropriate coaching can help build those competencies in these people. For example, is the coaching change oriented – with an emphasis on supplementing and refocusing individuals and teams to align to required changes, or growth-oriented – accelerating the learning curve for or guiding recently promoted individuals or a combination of both?
Understanding the context of the coaching programme, and how it fits into your objectives for the business will enable you to assess its value more objectively.
Finally, in order to ensure value is created and the investment in executive coaching is warranted, look at ways to maximise the impact of the coaching engagement;
- Choose your coach with care. Look at the credibility, style, professionalism, training and cultural fit with your business.
- Provide organisational support to the coaching programme. Ensure the line manager is kept up to date and reinforcing the work which the coach and coachee are progressing. Keep in mind the importance of communication and the way of presenting the coaching.
- Measure and communicate the impact of the coaching. This can increase the effectiveness and impact of the programme as well as lower organisational barriers to the acceptance of further coaching.