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How to measure the ROI of Business Coaching
Measuring the return on investment (ROI) of business coaching is a hotly debated issue. Traditionally it has been difficult to demonstrate an increased value of a company's human capital. The knowledge and value of coaching is growing and clients are increasingly demanding that rigorous methods be employed by coaches to measure the impact of coaching. Clients want clear statistical evidence of the bottom-line value of coaching and they want coaches to better justify the methodologies they employ.
The challenge is that the cost / benefit analysis of coaching is not easily made because the outcomes produced by coaching may not be easily measured or directly attributable to coaching.
The Formula for Measuring ROI of Business Coaching
ROI = (Gain from Coaching - Cost of Coaching) / Cost of Coaching
For example, a coaching initiative may improve team communication which then stimulates more innovation. How is that innovation measured? Would the company's best ideas have been generated without the coaching? Furthermore, coaching initiatives are not usually implemented in isolation. If the company grows revenues by 25% during the time that coaching initiatives were employed, what other initiatives were taken during that time?
To improve the accuracy of ROI calculations, first identify what the purpose of the coaching is and what key metrics will be used to measure the benefits.
Depending on the type of business you operate and the type of coaching being deployed, you may want to measure any one of the following metrics:
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Profit increases such as higher throughput, increased sales, sales by department, cross-division sales, etc...;
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Cost savings such as decreased inventory, lower cost per lead, less management, etc...;
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Aggregate employee metrics such as worker turnover, worker satisfaction, injuries, and more;
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Individual employee metrics such as behavior-based measures
Once you've determined the metrics you want the coaching to affect, collect baseline data against which you can measure the benefits of the coaching. If you are in the process of hiring a business coach for your company, be sure to cover the topic of measuring ROI in detail.