Executive Briefing: Case Study on the Return on Investment of Executive Coaching

Prepared by:
Merrill C. Anderson, Ph.D.MetrixGlobal, LLC  November 2, 2001

Introduction

A Fortune 500 firm launched an innovative leadership development effort that was
expected to accelerate the development of next generation leaders. The participants in
this effort were drawn mostly from the ranks of middle managers and from many
different business units and functional areas. Leadership development activities included
group mentoring, individual assessments and development planning, a leadership
workshop and work on strategic business projects.

Coaching was considered to be a key enabler for this approach to leadership development
because the participants could work privately and individually with his or her coach to
develop specific leadership competencies. The client organization engaged the Pyramid
Resource Group to provide coaching to the leadership development participants. While
participants spoke very highly of their experience with coaching it was decided to
conduct a formal assessment of the effectiveness and business impact of coaching.

It is intended that the results from this study be used to determine:


1. How did coaching add value to the business and what was the return on investment?
2. How could coaching be best leveraged in the future, especially if coaching was to be expanded to other business regions?

Data Collection Procedures

It was decided that the best way to isolate and capture the effects of coaching on the
business was through a questionnaire. This questionnaire had two part:
Part one wascompleted electronically via email and examined clients initial reaction to coaching, what
they learned, how they applied what they learned and captured their initial assessment of
business impact.
Part two was conducted over the telephone with each respondent and
probed more deeply into business impact and the financial return on investment

The target population for the survey was 43 leadership development participants. These
participants were drawn from two regions: Eastern United States (37) and Mexico (6).
These participants represented a cross section of the business and included those in sales,
operations, technology, finance and marketing. All had been identified as potential
leaders and executives. Thirty (30) of 43 leadership development participants returned
their surveys for a 70% response rate.

Results
Coaching was a very effective developmental tool for the leadership development
participants, producing financial and intangible benefits for the business. Coaching
sessions were rich learning environments that enabled the learning to be applied to a
variety of business situations. Decision-making, team performance and the motivation of
others were enhanced. Many of these business applications contributed annualized
financial benefits. Other applications created significant intangible benefits. Overall, the
participants appreciated their coaching experiences and would highly recommend coaching to others.

Three-quarters (77%) of the 30 respondents indicated that coaching had significant or
very significant impact on at least one of nine business measures. In-depth discussions
were conducted over the telephone with each respondent to further explore the business
impact of coaching. Sixty percent of the respondents were able to identify specific
financial benefits that came as a result of their coaching.

Overall, productivity (60% favorable) and employee satisfaction (53%) were cited as the
most significantly impacted by the coaching. Respondents defined productivity in this
context as relating to their personal or to their work group productivity and half (50%)
documented annualized financial benefits. Employee satisfaction was viewed both in
terms of the respondents being personally more satisfied as a result of the coaching as
well as the being able to increase the employee satisfaction of their team members. The
respondents could not quantify this benefit in financial terms.

Employee satisfaction,then, was a significant source of intangible benefits. Customer satisfaction (53%) was
also a significant source of intangible benefits.
The next most frequently cited as being significantly impacted by coaching were work
output (30%) and work quality (40%). Twenty percent of the respondents identified
financial benefits as a result of increased work output. Many respondents reported
improvements in work quality, however, they were not able to quantify these
improvements in terms of dollar benefits. Work quality improvements were considered
an intangible benefit of the coaching.

Program costs were tabulated for all 43 leadership development participants in
determining the return on investment. A 529% return on investment was produced by the
coaching process (excluding the benefits from employee retention). While those clients
who had customer or people responsibilities produced proportionally greater financial
benefits, the realization of benefits to the business was fairly widespread throughout the
group involved in this study.