Measuring ROIpar Lisa Dawn Chandler, ACC
This article was published in the November 2012 issue of ICF’s “Coaching World”. Considering the general interest of organizations in their return on investment in coaching, we thought this article would provide useful information and a methodology to HR professionals and managers to measure the impact of coaching in a very tangible way.
It doesn’t take a lot of information gathering to know that coaching is in!
Not only is coaching a fast growing profession, but the ways in which coaching is utilized are growing. No longer is coaching only for executives. Instead, it’s becoming more common to see coaching used in various ways, such as a supplement to a new hire or a way to support transfer of learning to behavior of new job skills. In spite of the wide acceptance of coaching, the challenge to demonstrate the benefit and return on investment (ROI) of coaching remains.
By utilizing the ROI Methodology™, many organizations have been able to demonstrate the monetary impact and ROI of coaching programs related to coaching.
For example, in our book Measuring the Success of Coaching: A Step-by-step Guide to Measuring Impact and Calculating ROI (ASTD Press, 2012), we provide six case studiesthat illustrate the various ways coaching can be utilized. They include:
- A coaching skills and tools course in the medical technology industry
- A mentor-coaching program for executives in a beverage company
- A management learning program for managers in a plastics company
- A coach training program for internal coaches in a financial services company
- A structured executive coaching program for senior executives in a hotel company
- Leadership development for supervisors in a freight transportation company
All of these case studies use the same approach, the ROI Methodology™, to demonstrate the monetary impact and ROI.
What to measure?
There are five levels of evaluation to consider in measuring the ROI of coaching. The outcomes of your coaching program and include:
Level 1: Reaction and Satisfaction. At this level, we measure the coachee’s satisfaction, reaction and planned action as a result of coaching.
Level 2: Learning. At this level, we measure the coachee’s change in knowledge, skill or attitude as a result of coaching.
Level 3: Behavior, Application and Implementation.
At the third level of evaluation, we measure the coachee’s changes in on-the-job behavior, application and implementation of new knowledge.
Level 4: Business Impact. At the fourth level of evaluation, we are looking for the link between behavior (doing) and business impact (monetary impact).
Level 5: ROI. And, finally, at the fifth level of evaluation, ROI, we are looking for the answer to the question: after all costs of the program, including indirect costs, are captured, what was the return on our investment?
Where to begin?
The process of the ROI Methodology™ includes four steps in the overall process and they are:
1) Evaluation Planning. In this stage, we partner with key stakeholders to develop the objectives of the coaching solution and outline the evaluation plans, including collecting any baseline data.
2) Data Collection. At stage two, we collect data during the coaching implementation and/or at the end of the solution implementation.
3) Data Analysis. At stage three, we isolate the effects of the solution which means that we determine what percent of the monetary benefit is attributable to the coaching solution and what percent is due to other factors. We also convert data to monetary value, capture all of the costs of the solution, including indirect costs, calculate the return-on-investment and identify intangible measures.
4) Generate Impact Study. Finally, at stage four we create the impact study that includes a written document as well as a presentation for all primary stakeholder groups.
How to ensure consistency in the approach?
Finally, throughout the process it’s important to consistently apply the same principles and operating standards each time.
This ensures that the process is credible. These principles and operating standards are represented by the 12 Guiding Principles listed below:
- When a higher-level evaluation is conducted, data must be collected at lower levels.
- When an evaluation is planned for a higher level, the previous level of evaluation does not have to be comprehensive.
- When collecting and analyzing data, use only the most credible sources.
- When analyzing data, choose the most conservative among alternatives.
- At least one method must be used to isolate the effects of the project/initiative.
- If improvement data is not available, it is assumed that little or no improvement has occurred.
- Adjust estimates of improvement for potential errors of estimation.
- Extreme data items and unsupported claims should not be used in ROI calculations.
- Only the first year benefits (annual) should be used in the ROI analysis of short term projects/initiatives.
- Project/program costs should be fully loaded for ROI analysis.
- Intangible measures are defined as measures that are purposely not converted to monetary value.
- The results from the ROI methodology must be communicated to all key stakeholders.
