The ROI in Business Coaching: A Real-Life Example

"So?" asks the sponsor of your proposed coaching engagement, "Can you show us the return on our coaching investment?" This question is being asked with increasing frequency. With increasing frequency, too, business coaches are answering, "Yes!"

Background

A U.S.-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 percent brand awareness worldwide, and 72 percent 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, which included a formal, structured coaching program called coaching for business impact (CBI) as a pivotal component. 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. Following are the 14 steps in the new coaching program from the beginning to the ultimate outcomes. For the planned ROI analysis, step four was critical; executives made a commitment to provide data on action plans and questionnaires.

1. Voluntary participation
2. The need for coaching
3. Self-assessment
4. Commitment for data
5. Roles and responsibility
6. The match
7. Orientation session
8. The engagement
9. Coaching sessions
10. Goal setting
11. Action planning
12. Active learning
13. Progress review
14. Reporting

Although these steps are self-explanatory as to the coaching process, the ROI process involved gathering 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
• 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 percent 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 percent = Certainty and 0 percent = 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 and 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, which equals 3.21.

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 percent 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 loaded program costs, and reporting of 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
• 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 case study was previously published in the WABC eZine in 2005.