ROI of Coaching: what do we know and why it is still difficult to identify a way to measure it.
Updated: Jul 31
It is very challenging to find real and credible numbers that have been validated regarding the ROI of coaching. In this article I would like us to explore quite a few metrics that look at certain aspects of coaching and discern those that do not relate to the concept of ROI from those that do - from a strictly scientific point of view.
Scientific literature as well as many non-scientific pieces published online provide us with a juxtaposition of quite an extensive array of various metrics about coaching industry and benefits that the coaching clients experience. From a strictly academic point of view, not many of the available sources, though, can be referenced to as “academic, peer-reviewed, validated studies”. One also needs to be very rigorous when reading about the coaching industry to fully understand the context of data collection and its implications to larger samples. In other words, is it possible to generalize the conclusions that apply to a very small selection of respondents with enough certainty? If you do so, most likely than not, you will be expressing a hypothesis or hope that something holds true, but not the actual state of how things are and work.
There are a lot of metrics used in various articles published online that span satisfaction of the coaching clients (or organizations hiring coaches), annual income that coaches earn, or even number of online search queries involving the term “coaching”. Many times, such metrics are then put in the same category (or at least as “related”) to the ROI of coaching. However, descriptive metrics for the coaching industry, do not strictly relate to the topic of ROI. An important point also needs to be highlighted regarding the metrics of satisfaction - clients and organizationsspend time to find the right coach, so the selection is not random. This implies that the coaches who are chosen - already possess some character traits (or other characteristics) that pre-determine them as (most likely) successful.
Various coach training sites or data analysis platforms also intend to evaluate the ROI of coaching - none of which are rigorous peer-reviewed academic publications or official government statistical reports. Such sources evaluate the ROI of coaching at 500% or as high as even 788%. However, if these publications are looked into through a strictly scientific lense, some doubts will emerge that would not allow those statistics to be quoted with certainty and generalized with any confidence. In some cases, conclusions are based on a very small sample size, where only 9% of respondents can evaluate how much they gained or lost as a result of coaching and how much have they spent on coaching. In such case one would wonder – what about the rest of 91% of respondents? Would they also see an ROI of over 500%? Can one guarantee it? Rather not, and in such cases the ROI should interpreted with utmost caution and not generalized to larger audiences.
Other non-scientific publications may have based their reports on post-hoc analysis of data that has already been gathered for the coaching program in the past. An example would be when the coaching program aims at retaining high potential within the organization. In such case, the objective of the program itself would predefine the distribution of the coaching clients – they would mostly be individuals identified as “high potential” and the retention rates in such a group following coaching would naturally be very high. However, such a metrics does not tell us anything about how would coaching affect retention in a different setting – when the potential varies across a group of coaching clients.
There are also numerous academic, evidence-based, publications that list the benefits and outcomes of coaching obtained and measured during carefully and rigorously designed scientific studies.
Executive coaching helps improve performance, satisfaction, and well-being. Leadership coaching can enhance: leadership style, self-awareness, self-confidence, as well as leaders’ relationship to conflict, power, and personal life. Coaching has positive impact on many psychometric outcomes as well: wellbeing, emotional intelligence, hardiness, self-efficacy, hope, self-esteem, self-acceptance, courage, self-determination, emotional regulation, self-reflection, and time management. Recently published meta-analyses indicate that coaching positively impacts individual performance, learning at work, cognitive and affective learning outcomes, workplace well-being, work attitudes, goal-directed self regulation, employee resilience, psychological states.
One can also look into statistical data on employee turnover. Coaching also decreases employee’s intention to leave, which adds even more complexity to the thorough evaluation of the ROI of coaching in terms of potential losses that have not been incurred by the organization but might have, if it were not for coaching. Work Institute’s 2017 Retention Report (2017) reported that turnover can cost employers even 33% of an employee’s annual salary based on the study of 34,000 respondents. This percentage also includes indirect costs such as knowledge lost when employees leave, the time spent finding a replacement and the time new hires need to become fully functional. Top reasons survey respondents gave for leaving their jobs were career development (22%), work-life balance (12%), managers' behavior (11%), compensation and benefits (9%) and well-being (9%). According to the respondents 75% of the causes of employee turnover are preventable. Coaching has been reported to have a positive impact on multiple areas of employees’ professional and personal functioning - career development, work-life balance and well-being, to mention a few. Coaching can therefore also be perceived as an approach that helps companies decrease employee turnover.
When we look at these relationships, they do not elaborate on the topic of ROI specifically, only the outcomes that may be positively affected without providing a broader context on what one can expect from coaching in terms of all the outcomes and their magnitude.
There are not as many scientific publications that focus strictly on the ROI of coaching. Boysen and her team reported that 75% of the participants of their study had evaluated the value of executive and leadership coaching as “considerably greater” or “far greater” than the money and time invested. The conclusions are based on a customer satisfaction survey. In this example, the ROI has been selfevaluated by the participants of the study as a "best guess" through a questionnaire, not by looking at the financial sheets. The methodology has several limitations(for example, it was not possible to state that the economic impact of coaching on an individual and the organization was negative or even 0). However, the authors have made a great start into the topic of ROI, and as they admit themselves, similar studies need to be conducted across more organizations and industries for better results.
At this point, you may start asking yourself: “That’s all great to read but is there a number that research can give me as an estimate of the ROI of coaching?”. I’m afraid at this point, such a specific number does not exist. However, what research does give us with certainty is an affirmation that coaching is a very powerful approach.
This meta-analysis gives us confidence regarding the effectiveness of coaching programs. The study looked at results obtained between 2 populations: one who received coaching, and one that did not, across multiple studies dating back to 1994. The study has found convincing indications for the effectiveness of coaching, with effect size of 0.59. An effect size is a measure of how important a difference is: large effect sizes mean the difference is important; small effect sizes mean the difference is unimportant. A size effect of more than 0.5 is considered “at least” moderate. Effect size is a measure of significance of the effect of the intervention - the effectiveness of the intervention. It does not say that “if you offer coaching to a leader, his/her productivity will increase by 59%”.
Is there anything that I can therefore tell you with certainty? Absolutely. COACHING WORKS. No doubt. And it works in an impactful way.