THE ROI OF BUSINESS COACHING
Business Coaching ROI: A Real Life Example
By Jack J. Phillips, Ph.D.

Business coaching is expanding as a means of improving programs, processes, and even people. Sponsors, clients, and corporate executives--those who fund coaching activities--want to hear about successes in terms that they understand, terms related to organizational needs. Everyone might know that a coaching program made a positive difference, but someone insists on getting to the bottom-line: what did we spend and what did we get in return? The following is a brief summary of a real-life case study of a coaching intervention demonstrating measurement and evaluation, including the calculation of the return on investment (ROI).

 
Background

A USA-based, internationally established, prosperous hotel company, the Nations Hotel Company (NHC), sought to maintain and improve its status in the highly competitive hospitality industry. With hotels in 15 countries, 98% brand awareness worldwide, and 72% customer satisfaction rating, NHC wanted to help executives find ways to improve efficiency, customer satisfaction, revenue growth, and retention of high-performing employees. Challenged to execute this project, the Nations Hotel Learning Organization (NHLO) developed a program, including as a pivotal component a formal, structured coaching program called Coaching for Business Impact (CBI). NHC corporate executives wanted, as part of the process, to see the actual ROI for the coaching project. 


Process 

The NHLO first surveyed executives to identify learning needs and to assess their willingness to be involved in coaching. Most of the executives indicated that they would like to work with qualified coaches to assist them through a variety of challenges and issues, and that this would be an efficient way to learn, apply, and achieve results. The measurement and evaluation goal for the senior executive team was to assess results for 25 executives, randomly selected (if possible) from the participants in CBI. Figure 1 depicts the 14 steps in the new coaching program, from the beginning to the ultimate outcomes. For the planned ROI analysis, step #4 was critical; executives made a commitment to provide data on action plans and questionnaires. 



Although these steps are self-explanatory as to the coaching process, the ROI process involved gathering data throughout the coaching engagement so that evaluation results could be reported for all five levels:

  • Level 1: Reaction,
  • Level 2: Learning,
  • Level 3: Application,
  • Level 4: Business Impact, and 
  • Level 5: ROI.

To collect complete and reliable data for Levels 4 and 5, executive-participants completed action plans that included questions addressing the four business impact measures sought to be improved:

1. What is the unit of measure? 
2. What is the value (cost) of one unit in monetary terms?
3. How did you arrive at this value? 
4. How much did the measure change during the evaluation period? (Monthly value)
5. What other factors could have contributed to this improvement?
6. What percentage of this change was actually caused by this coaching for business impact program? 
7. What level of confidence do you place on your estimate of the change attributable to this program? (100% = Certainty and 0% = No Confidence)

Using the action plan responses and collecting data through executive questionnaires, senior executive questionnaires, and company records, the NHLO obtained information to convert data to monetary values (items 1-4 above), to isolate the effects of the coaching on this business impact data (items 5-6 above), and to adjust for errors in estimation (item 7 above).


Evaluation Results

Careful data collection planning allowed the NHLO team to measure the results of the coaching program at all levels. Level 1: Reaction, Level 2: Learning, and Level 3: Application all showed positive results and comments.

Impact: To assess the business impact, the NHLO team assimilated the information on the action plans for the 22 CBI executive-participants who responded. Using these responses, the NHLO arrived at the total adjusted value of the program's benefits as $1,861,158. 

ROI: The fully-loaded costs of the CBI program included both the direct and indirect costs of coaching (needs assessment/development, coaching fees, travel, time, support, overhead, telecommunications, facilities, and evaluation). CBI costs for 25 executives totaled $579,300.
Using the total monetary benefits ($1,861,158) and total cost of the program ($579,800), the NHLO developed two ROI calculations. First is the benefit-cost ratio (BCR), which is the ratio of the monetary benefits divided by the costs:

This value suggests that for every dollar invested $3.21 was returned. The ROI formula for investments in any human performance intervention is calculated as it is for other types of investments: earnings divided by investment. For this coaching solution, the ROI was calculated thus:\

For every dollar invested in the coaching program, the investment dollar was returned and another $1.21 was generated. In this case, the ROI exceeded the 25% target. 

Intangibles: The NHLO chose not to convert all measures to monetary values, creating a list of intangible benefits -- improved commitment, teamwork, job satisfaction, customer service, and communication. 


Credibility

Credibility of data and of the ROI process itself is always critical. The NHLO's sources of data (executives and company records), conservative data collection process, isolation of program impact, adjustment for errors in estimates, use of only first-year benefits in the analysis, fully loading program costs, and reporting results at all levels made a convincing case for the CBI program.


Communication

To communicate results to target audiences, the NHLO produced three documents:

  • a detailed impact study,
  • an eight-page executive summary, and
  • a brief, five-page summary of the process and results.

To convey a clear understanding of the methodology, the conservative process, and information generated at each level, the NHLO team held meetings with the sponsor and other interested senior executives. Conservative and credible processes and competent communication led senior executives to decide that, with a few minor adjustments in the program, they would continue to offer the coaching for business impact program on a volunteer basis. Pleased with the process and progress, they were delighted to have data connecting coaching to the business impact.

WABC Members can access this full case study in the Members' only Knowledge Center.

 
Jack 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. Jack may be reached by email at jack@roiinstitute.net.

Jack Phillips will be hosting a free one-hour webcast on his new Measuring The ROI on Business Coaching workshop on October 1, 2005. For more information, click here.

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