ROI OF BUSINESS COACHING
Return on Investment: Frequently Asked Questions... and
By Jack J. Phillips, Ph.D.
As businesses and organizations increasingly turn to coaching for performance improvement
and leadership development, questions about the value of coaching naturally arise. In
addition, calculating the return on investment (ROI) of coaching can seem daunting. Here are
five of the most frequently asked questions that business coaches ask about measuring the
ROI of coaching.
- Do I have to learn finance and accounting principles to understand and effectively
measure the ROI in coaching? No. Although many of the basic principles of finance
and accounting aren't required for developing the ROI in business coaching, it is
important to understand issues such as revenue, profit and cost. Ultimately, the payoff
of coaching or any human resources project or program will be based on either direct
costs saved or additional profits generated. It's helpful to understand the nature and
types of costs and the different types of profits and profit margins.
- Do I have to know complicated statistics to understand ROI? No. Basic
statistical processes--simple averages, variance and the standard deviation--are all
that are necessary to develop most ROI impact studies. These very simple concepts are,
by design, simplified as much as possible so that the ROI can be determined successfully
with all types of business coaching solutions.
- Isn't ROI too complicated for most business coaching professionals? No. The
ROI calculation itself is a very simple ratio: net benefits divided by costs. The
process follows a methodical, step-by-step sequence with guiding principles for
collecting data and calculating benefits and costs. In all, six types of data are
collected, including reaction, learning, application, impact, ROI and intangibles (to
review, see Figure 1 at www.wabccoaches.com/bcw/2005_v1_i1/roi.html).
What can make the process somewhat complicated are the many options in each step in the
process. Several methods are available for isolating the effects of coaching as well as
for converting data to monetary values. Selecting the data collection methods for a
given coaching assignment will be influenced by the nature of the coaching engagement
and the particular environment and setting. To keep the process simple and clear, the
coach, the participant, and the sponsor or client organization must establish the
parameters and expectations for the coaching experience at the beginning of the
- Shouldn't business coaches focus on the human dynamics rather than on the
numbers? Certainly, within the coaching assignment the business coach's attention
is on the coaching task and on developing rapport with the participant so that learning
and change can happen. The astute coach and coaching firm will realize the need for
accountability and for measurement and evaluation of the coaching engagement, including
ROI. Assessing the value of business coaching and reporting that information to
decision-makers enhances the likelihood of continuing and even increasing the
opportunities to coach.
- Isn't this just a fad? No. This methodology is comprehensive, consistent, and
credible. ROI has been used as a business evaluation tool for 300 years. Although ROI
has only recently begun to be used to evaluate coaching, its significance as the
benchmark in measurement and evaluation is well-established and well-documented.
Measuring and evaluating the return on investment validates the critical role of coaching
as a performance improvement solution. Expressing value in monetary terms puts business
coaches on track to meet the growing demand for accountability.
J. Phillips, Ph.D, is a world-renowned expert on measurement and evaluation,
chairman of the ROI Institute, and consultant to many Fortune 500 companies. He facilitates
workshops for major conference providers throughout the world. His most recent books are Proving
the Value of HR (SHRM, Winter 2005) and Investing in Your Company's Human Capital
(AMACOM, Spring 2005). Find out more about Jack's work at http://www.roiinstitute.net.
He may be reached by email at firstname.lastname@example.org.