Executive coaching is currently estimated to be a $10 billion business in the United States. It is growing for good reason. According to Brian Underhill, Ph.D., founder and CEO of CoachSource.com, coaching is more effective than leadership training because it focuses on identifying the ideas, habits, skills and behaviors that matter most and provides the structure and follow-up that makes new learning stick.

Many organizations struggle to measure the value of the coaching they’re paying for. Some try by gathering “reaction” feedback, but that only tells them whether the executive liked working with the coach. Other organizations attempt to define a hard ROI, but not only is it difficult, but such calculations are easily challenged.

There’s a better way to demonstrate the value of coaching. It starts with a disciplined approach to defining and measuring the success of each engagement. Since coaching deals with human behavior and its impact across an organization, isolating the causes and effects that support an ROI conclusion will always be imprecise and highly variable. In fact, research shows that typical coaching ROI measurements can range from 200 to 500 percent, and in some cases, they’ve been estimated to be more than 10,000 percent.

Savvy buyers of executive coaching know that to answer the ROI question, they must first identify the behaviors they’ve earmarked for change during the coaching engagement. The behavior change itself is the value coaching delivers. Put another way, successful behavior change is a leading indicator of financial value. Successfully measuring the lagging indicators of performance improvement requires tracking the leading indicators of behavior change first.

Start by Defining Success; ROI Will Follow.

Although coaching engages the complexities of human behavior and the ways it ripples across an organization, its goal is always simple: to support the client in deploying new and different behaviors to achieve positive outcomes.

Successful behavior change precedes financial and operational performance gains. For example, Marlene was recently promoted from regional vice president of operations to regional president for a busy retail services organization. Her new responsibilities required her to spend more time setting strategy and influencing across a broader team of peers and partners.

Marlene had decades of experience and was respected for her results drive and business knowledge. However, when she was surprised or disappointed, Marlene dove deep into detailed problem-solving. As a result, her direct reports felt mistrusted and micromanaged. Support teams had also felt the impact of this behavior, and in her new role, Marlene needed the support and collaboration of those teams’ leaders more than ever before.

To help Marlene adapt, the company asked her to work with an executive coach. They decided to define success along two dimensions: First, she needed to restore good will with her internal partners and begin working more strategically. Second, she had to avoid micromanaging her staff and empower them with the tools, resources and authority they needed.

The organization understood that a successful change in Marlene’s behaviors would provide value, and, indeed, with coaching, Marlene’s behaviors changed. But how could her organization connect the dots between the changes she made and the impact of those changes? By identifying the behaviors that the organization saw needed to change – and defining that behavior change as the value it sought – the company could (and did) call the engagement a success. A 360-degree assessment showed that Marlene’s supervisors, peers and direct reports registered the change in her behavior. Marlene reported feeling more energized, less stressed, and better prepared to manage the gap between what she wanted to achieve and her impact on others.

The financial impact – the hard ROI – of Marlene’s changed behavior is still unfolding. Nearly all of Marlene’s financial metrics have trended upward since her coaching engagement began, and several have done so rapidly. Marlene’s supervisors point to coaching as key to her turnaround. These qualitative data, too, demonstrate coaching’s value.

How Tracking Success Leads to a Clear Value Picture

Organizations that excel at measuring the value of coaching put processes in place to ensure that coaching engagements are structured for success. Then, they collect data over time to show how success translates to value, thereby demonstrating its ROI. These leading organizations ensure that their coaching process includes:

  • Vetting the coaches they work with and ensuring that they understand the organization’s coaching process and reporting requirements
  • Making sure the executive wants a coach and will prioritize working with one
  • A clear and focused rationale that defines success for each engagement
  • An appropriate group of stakeholders, including the executive and his or her manager, who are aligned on expected outcomes for the engagement
  • Feedback and information gathered from multiple perspectives to establish the current state
  • A clear understanding among the coach, client and sponsor team regarding what will be measured and shared
  • The assurance that coaching conversations remain confidential
  • A coaching management team that tracks each engagement and the executive’s performance over time to demonstrate the delivery of financial value
  • Rewarding coaches with successful track records with more clients, while those with less successful records receive constructive feedback or are eventually removed

Good processes help ensure that coaching engagements are designed to succeed. They provide the buyer of coaching with data that will support both high-quality reporting of financial value and a foundation for continuous improvement.

Defining Value through Leading Indicators

Marlene’s successful behavior change paid significant dividends. Her organization was growing through acquisition, and she identified promising acquisition targets, shepherding them through the due diligence process. Her improved relationship skills enabled her corporate development and strategy partners to be receptive to her and prioritize the opportunities she presented.

Marlene’s organization has an efficient process for ensuring that coaching engagements are set up for success. It found that successful engagements focus on at least one or two of the following themes:

  • Increasing strategic agility and acumen
  • Shifting priority and focus (e.g., “getting out of the weeds” or “making time to focus on strategy”)
  • Improving stakeholder relationships
  • Increasing emotional and social intelligence
  • Empowering and developing staff and others (e.g., delegating effectively, providing challenging assignments, providing timely feedback and avoiding micromanagement)
  • Communicating effectively (e.g., communicating a vision, improving presentation skills and managing difficult conversations)

These themes connect to universal elements of organizational performance. In Marlene’s case, her shift in focus from operational detail to collaborative, regional strategy enabled her to move acquisitions through the pipeline more quickly. Empowering her subordinates increased their trust in her and their engagement, development and performance. Because her organization precisely defined what she was working on in coaching, it was able to show how the behavioral changes she made through coaching translated to financial value.

This organization continues to follow the performance of executives who have received coaching, linking successful coaching engagements to sustained performance improvements. After several years of measuring the success of coaching, the company has enough data to demonstrate that successful coaching leads to the creation of financial value.