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This case study provides critical insights into how coaching creates value in an organization.

Phillips, J. J. (2012) Coaching for Business Impact: Creating Value, Including ROI, Through Executive Coaching. In Phillips, P. P. and Phillips, J. J. Measuring the Success of Coaching. ATD Press, pp., 183 – 201.

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.

This article first appeared in Business Coaching Worldwide (Fall Issue 2005, Volume 1, Issue 3).

Jack J. Phillips, Ph.D

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.

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 https://wabccoaches.com/2005/04/measuring-roi-in-business-coaching-an-overview/). 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 assignment.
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.

This article first appeared in Business Coaching Worldwide (Summer Issue 2005, Volume 1, Issue 2).

Jack J. Phillips, Ph.D

Measuring ROI? In business coaching? Yes and yes.
Isn’t this just a fad? Isn’t this impossible? No and no.

As more and more organizations use business coaching as a human resources, performance improvement, and leadership development approach, many executives question its value, particularly as coaching expenditures grow. Whether the engagement takes place in the context of an internal department for coaching or through arrangement with a business coaching firm, coaching assignments and commitments are planned and executed with good intentions. Unfortunately, however, not all coaching engagements produce the value desired by either the individual being coached (participant) or the sponsor who often pays for it. It will be increasingly important that business coaches measure a significant return on investment (ROI) and show the value of business coaching in terms that managers and executives understand.

It’s Not a Fad . . .
Measuring ROI enjoys a history of nearly thirty years of application in a variety of human resource and performance improvement processes and across the full spectrum of industries and organizations. Thousands of trained practitioners implement an ROI process in their own settings and thousands of impact studies are generated annually worldwide. The methodology is the subject of many books in many languages.

It’s Not Impossible . . .
Successfully measuring ROI for business coaching involves much more than simply assessing results achieved. The most effective ROI processes involve four phases: planning, data collection, data analysis, and reporting.

In the planning phase the coach, the person being coached, his or her manager, and the sponsor (client organization) agree on the evaluation plans and establish a baseline for expectations.

The data collection phase occurs in two time frames. Data is collected first during the coaching experience and then at the conclusion of the engagement or at an appropriate follow up time. The data collected include satisfaction and reaction, learning, application and implementation, business impact, and ROI. See Figure 1.

Evaluation Levels
Level	Measurement Focus
1. Reaction & Planned Action	Measures participant satisfaction with the coaching experience and captures planned actions
2. Learning	Measures changes in knowledge, skills, and attitudes
3. Application and Implementation	Measures changes in on-the-job behavior and progress with application
4. Business Impact	Captures changes in business impact measures
5. Return on Investment	Compares coaching engagement monetary benefits to the program costs

Figure 1 – The Levels of Data

The third phase in the ROI Methodology–data analysis— isolates the effects of the coaching on the business. The process includes converting data to monetary values using conservative figures (higher figures for costs, lower figures for benefits), capturing costs, calculating the return on investment, and identifying intangible measures and benefits.

Phase four–reporting–requires reaching conclusions, generating reports, and communicating the information to target groups. This new knowledge affords all involved–from the coach and the person being coached to upper level executives in the client organization–the ability to assess the value of the coaching engagement and the opportunity to make adjustments going forward.

Final Thoughts . . .
Developing the ROI in business coaching is not a fad, and it’s not impossible. Measuring ROI in business coaching is, and will increasingly become, an imperative for organizations and coaching firms pursuing the highest standards of accountability.

This article first appeared in Business Coaching Worldwide (Premier Issue 2005, Volume 1, Issue 1).