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What is the ROI of coaching and how is it measured?

November 18, 2022 - 14 min read

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The importance of measuring coaching ROI

How the ROI of coaching has been measured in the past

How we think about coaching ROI at BetterUp

Who yields the greatest ROI from coaching?

Tips for a high ROI coaching program

The future of leadership and executive coaching ROI

Companies invest in leadership coaching for senior management and high-potential employees with the expectation that coaching will improve performance and retention. Many organizations understand that regular coaching sessions can lead to higher levels of self-awareness, productivity, and employee engagement. But when it comes to measuring the overall value of coaching and distilling this ROI, it can be difficult to get right.

Historically, the ROI of executive coaching as well as leadership and business coaching for managers and direct reports hasn’t been measured effectively. As a result, coaching can be perceived as less valuable than it truly is. And it’s also more vulnerable to criticisms for being “soft” rather than scientifically-grounded and quantifiable.

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At BetterUp, we invested early on in creating a model that can effectively measure behavior change, dramatically rethinking the ROI of coaching from the ground up. Our customer stories and case studies show the impact of coaching, and how these KPIs reassure key stakeholders that they have made a positive investment for their organization.

Our customers have reported:

These are just a few examples of the ways we can measure the ROI of coaching. We will talk more about that, but first, let’s look at the importance of measuring coaching ROI and how it is historically done.

The importance of measuring coaching ROI

On one hand, the value of measuring coaching’s return on investment is clear: to validate the costs spent on coaching employees. But when we look more closely, there are additional benefits to tracking this ROI.

  • An opportunity to pivot: When you have data supporting your investment, you can quickly see how it is working and make necessary changes. Without this information, much of your theories around whether your coaching program is productive and where the opportunities are will be left to guesswork.
  • Secured trust: More executives will trust data over vague hypotheses that are not rooted in quantifiable data. By measuring the ROI of your coaching engagement, you gain the trust of stakeholders who have supported the initiative, as they know that they have access to insights that reveal how their investments are faring.
  • Easier onboarding: How many employees do you think would continue to actively participate in a program without seeing their progress? Measuring their growth plays a key role in tracking the overall success and ROI of a coaching engagement. This information keeps coachees engaged and working on the areas where they could use the most development.
  • Proof to continue a process that works: Employee and leadership coaching is an ongoing process with a wealth of opportunity. According to the International Coaching Federation (ICF), “effective outcomes from coaching “could include self-efficacy, well-being, engagement, satisfaction, performance, [for an] individual, team, and organization.” Without measuring changes in these areas, it is difficult to see what is working and build a case to lean into it.

 

How the ROI of coaching has been measured in the past

At a global level, the most common approach to the ROI of coaching is simply not to measure it at all. Individual coaches lack the data they need to quantify the impact of their work on an individual’s daily output.

Over the course of a coachee’s career, coaches can trace the impact of their work through promotions and job satisfaction. But separating the impact of coaching from the impact of other events in their lives is all but impossible.

The self-report

Companies looking to measure coaching impact have taken a variety of approaches. Typically, they follow the levels of worker satisfaction with the coaching service and employee engagement over the course of the intervention.

Some attempt to map this to work performance through a self-report: the coachee is asked to describe the impact of coaching on their own performance. The shortcomings of this approach are obvious: lack of objectivity, lack of measure validation, lack of population baselines, and the influence of external lifestyle factors.

Performance ratings

Correlating coaching with performance ratings can lead to slightly more objective measurements. But performance ratings suffer from many of the same shortcomings of self-reported assessments of performance improvements.

Business unit performance ratings

The most robust coaching relationships correlate organizational performance with coaching. A vendor or employer might track the sales numbers for a team whose leader received coaching, or the customer satisfaction ratings for a customer service team that benefited from coaching.

These approaches offer the benefit of tracking a more objective business outcome, that ladders into top-line improvements and business impact. The shortcoming is that the sample sizes are small and the circumstances are unique. So there is no population baseline to measure those improvements against.

two womenn on a sofa talking about career caoching

How we think about coaching ROI at BetterUp

One of our goals in building BetterUp is to provide both our members and our customers with a validated, quantitative measure of the impact of our service.

Some of the outcomes of coaching appear to be intangible benefits. So measuring them takes some additional legwork.

This work started with an investment in developing our assessment tools, including our Whole Person Model, which draws upon the best behavioral science measures to track the personal and professional changes that matter most.

These measures have been produced through decades of research at Harvard, University of Pennsylvania, Stanford, Claremont, and many other institutions that have invested in quantifying behavior change.

Because of this investment, we have the ability to not only measure different metrics, types, and units of behavioral change, but to also then map those changes, item by item, to the business outcomes of interest.

We think about these business outcomes in three separate buckets:

  1. Performance
  2. Retention
  3. Well-being

Performance

We want to know that our coaching is improving an individual’s performance on the job.

A specific group of the measures we track is designed to tell us how our service is affecting the individual resources most critical to job performance. The size and nature of that impact have been demonstrated over decades of research, some of which we have replicated, so that we can separate out the impact of our coaching from the impact of, say, some new software on the employee’s performance.

Performance also includes days on the job. People miss work for all kinds of reasons, from sickness to vacation to leave. Different psychological factors are at play in determining whether, short of a medical emergency, an employee chooses to come to work. Our ROI algorithm accounts for this and isolates the factors that our coaching service impacts. For any given population, we can predict the number of increased days on the job we would expect our service to provide.

Retention

Coaching the leader to increase those strengths results in greater employee retention at all levels, a powerful force multiplier of the ROI.

87% of employers believe that improving retention is
“a critical priority for their organization.” As retention efforts ramp up across industries, turnover can in some cases serve as the main driver for an investment 
in coaching.

 Coaching provides individuals with a clear opportunity for growth and development that can sustain them in otherwise difficult or stagnant operational stretches. Coaching helps to bolster psychological resources that drive retention, independent of confounders at home or in the workplace.

The other important component of retention is the retention of the team members who report to the coachee. The old truism that people quit managers not companies has been well supported in the literature. On a deeper level, we can disentangle the behavioral and psychological traits of a leader that produce loyalty. Coaching the leader to increase those strengths results in greater retention among members of that team, a powerful force multiplier of the ROI.

Well-being

Across populations, BetterUp’s coaching has been shown to decrease employee stress by 12%.

BetterUp’s ROI algorithm includes a new and critical perspective: wellness. Across populations, BetterUp’s coaching has been shown to decrease employee stress by 12%. That yields returns in terms of performance, but it also yields returns in terms of employee health. Employees who are less stressed are healthier overall and spend less on healthcare services, decreasing employer spend in that area.

By analyzing savings in these three key categories, we’re able to offer our customers a holistic understanding of the financial impact of coaching for their organization. We’re also able to use our findings to refine our coach training programs and approach in order to drive even greater results for both customers and individual members.

woman typing on her laptop smiling

Who yields the greatest ROI from coaching?

Our research has shown that core managers — managers who sit two to three levels below the C suite, and who manage a team — yield the greatest ROI on coaching.

Individual contributors and executives both yield a positive ROI, but at a lower return than that we see for core managers. We’ve also seen that high performers yield a higher ROI for coaching than standard performers.

Taken together, this suggests a useful rule of thumb. Prioritize coaching on priority people and roles — those with disproportionate influence and contributions.

Tips for a high ROI coaching program

  • Set benchmarks
  • Employ quality coaches
  • of coaching is determined by the coach-coachee relationship.
  • Customize the program for your organization
  • Include goal setting and tracking
  • Provide supplemental resources along the way
  • Foster a coaching culture
  • Measure the ROI and adjust as needed
  • Incorporate it as part of your leadership development program and employee mentoring

The future of leadership and executive coaching ROI

The greatest shift we expect to see in this area in the next five years will be the expectation among buyers that coaches can demonstrate ROI. Qualitative reporting will have to be supplemented by quantitative reporting. As HR investments become increasingly data-driven, people development will be no exception. Both internal and external coaches will devote more resources to measurement and analysis.

The opportunity this shift presents for the field of coaching is to hone its focus on outcomes and organizational impact. 

The discipline required by this endeavor will afford coaching the push needed to evolve the state of its science more rapidly, and with a finer lens. It can also motivate the field to integrate the latest and greatest discoveries from the behavioral sciences into practice in the service of our members, and of the organizations they serve.

We also expect to see greater precision in the design of leadership and executive coaching programs. We already know a fair amount about which level of employees offer organizations the greatest return on their investment. How about which departments? Which industries? The level of specificity we can hope to reach over time is mind-boggling.

See how BetterUp works - Watch Demo

Published November 18, 2022

Dr. Gabriella Rosen Kellerman

Chief Product Officer

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