ROI

The ROI & Value of Executive Coaching for Leadership Development

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Struggling to get buy-in for leadership development? Use this case study that shows the break-down of potential value and return on investment (ROI) and exactly how Executive Coaching improves the organization’s bottom line. Additionally, leverage this case study to request that your organization subsidize coaching for yourself and/or others.

Let’s consider a senior manager, John, who benefits from ongoing one-on-one coaching provided by his company. With a base salary of $180,000 as a rough indicator of John’s value to the company, we can estimate the potential value derived from coaching. Improvements in performance and retention, as they relate to John, generate three distinct sources of value:

1. ROI from John’s performance improvement:

Assuming a conservative 5% enhancement in John’s performance over the next year due to coaching, this results in a return of at least $9,000 based on the $180,000 salary.

2. ROI from John retaining an employee:

Research from Gallup indicates that replacing an employee can cost over 200% of their annual salary. If coaching helps John improve his management skills and retain one team member (with a salary of, say $80,000) who would have otherwise left, the cost savings would be $160,000.

3. ROI from retaining John:

Applying the same 200% measure, we estimate the value of retaining John himself—something made more likely through his one-on-one coaching. With a salary of $180,000, the estimated value of retaining John is at least $360,000.

Value Generated from Executive Coaching

$9,000 + $160,000 + $360,000

= $529,000

If we conservatively estimate that coaching played a 10% role in these outcomes, coaching for John would be the source of $52,900 in value per year.

ROI (Return on Investment)

In this example, we'll use a coaching cost of $1,000 per month (or $12,000 per year). The ROI would be approximately 3.4x or 340% per year. Remember that we were very conservative in both the performance enhancement and the role coaching played in the outcomes.

340% = $52,900 – $12,000

$12,000

Leadership development is not a quick fix; it’s a long-term, ongoing investment that pays off over time. Unfortunately, organizations that are operating in a short-term, reactive mindset overlook or miss out on the benefits of developing leaders and opt for quick fixes. Taking the long view pays off.

What's The ROI of Executive Coaching?

The ROI for executive coaching is high because of the multiplier effect, which works both ways: dysfunctional behavior is contagious, while functional behavior can be taught. High-performing leaders and employees exhibit effective behavior that others notice, emulate and teach. Research shows that Executive Coaching consistently yields a return on investment (ROI) exceeding 500%, showcasing its substantial impact on personal and organizational growth.

Source: Right Management

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Source: Lore Research

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Source: The Manchester Group

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Source: Metrix Global, LLC

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ROI