Leadership Coaching - Cost or Investment?
In times when budgets come under close scrutiny, return on investment (RoI) should be an important consideration. As a coach, I naturally believe that money spent on (effective) leadership coaching is money well spent. It is however no good assuming that this view is shared by everyone – especially those charged with responsibility for overseeing L&D budgets.
A starting off point in many discussions about coaching is that budgets are limited due to other leadership development initiatives such as business school courses, seminars, team bonding, motivational speakers, etc. So, a first step is to be able to explain why coaching is different (but complementary) to other initiatives and why it has the greatest chance of leading to sustainably positive outcomes.
Technical training, such as seminars and business school courses, engages the intellectual brain (pre-frontal cortex). Unless learnings are reinforced through practical application and repetition, they are soon forgotten. Think of a bachelor’s degree at University that provided some general knowledge never to be used in your career, as opposed to a medical degree. Or those French lessons that you once took that are now of no use because you don’t have anyone to communicate with in French. Or the motivational speaker who inspired everyone at the senior management conference but whose message was soon forgotten on return to the daily challenge of dealing with the complexity of leadership.
Coaching, by contrast, is about self-directed learning and is generally focused on behavioural change. Behavioural change takes place in your emotional centre/limbic system (as opposed to your intellectual brain) and involves a continuous loop of experimentation, feedback, reflection, repetition and/or trying something different, feedback, etc. Coaching helps create new neural pathways and new ways of working through practice and repetition, as opposed to trying to change existing pathways through force of logic.
To be able to demonstrate the RoI on a coaching engagement, it is important to start with a clearly articulated set of coaching objectives and link them, to the extent possible, to some quantifiable outcomes. This is more challenging with one-to-one coaching where the primary objective may be around behavioural change where measures of success tend to be more qualitative. In most cases however, it should still be possible to define quantifiable outcomes.
The desired change may, for example, include developing presence around the Board table and a desire to run meetings more effectively. Per the Harvard Business Review [January 2019] wasted time on overly long and/or unnecessary meetings is estimated to cost more than $30billion a year in the US alone. An outcome that results in more focused meetings and an agenda that provides team members with the opportunity to work on more important, inspiring, or revenue-generating tasks should be capable of being quantified.
Another frequent coaching objective for leaders is to become more effective at delegation. Once again, a dollar value can be put on the executive time that can be freed up for more value-added work around strategy, employee development, business development, stakeholder relationships, etc.
Attaching a dollar value to team-coaching tends to be a lot easier. Teams are typically brought together for a particular purpose – delivering a project on time and on budget; building revenues; delivering efficiencies; etc. In these cases, the desired outcomes can be quantified and an RoI easily calculated.
There are also those coaching interventions where the prospect of calculating an RoI may be non-intuitive. Corporate restructuring following a decision to hollow out layers of management and/or a switch to agile are areas where support provided through coaching can result in a positive RoI. The cost of coaching to fully support a senior/long-serving executive who is being made redundant is insignificant relative to the positive impact on the employer brand. Especially in the NZ market where that executive is likely to move on to another organisation that may well be a significant client. Equally so with an investment in coaching to help a senior/long-serving executive be effective in an agile environment when s(h)e has been spent a career operating in a very hierarchical structure.
Feedback as to whether coaching support (either at an individual or team level) has added value should be standard practice at the end of any engagement. Where feedback is positive, achievement of the quantitative measures outlined at the start can, in whole or part, be legitimately attributed to the coaching. The simple calculation of dividing the cost of the coaching program into the incremental gain (e.g. increased revenues, cost reductions, etc.) will, in my experience, always result in an exponential return on the initial investment.