Executive coaching for top organizational leadership is an exploding trend. At the same time, there is a dearth of understanding about how the “executive coaching” process differs from “business coaching aka ‘mentoring,'” and other forms of coaching. Equally absent is clear grasp of executive coaching’s format, duration, and best practices. Other questions organizations have include: Who is executive coaching best suited for? What situations are a poor fit for executive coaching? How long do executive coaching engagements last? How much do they cost? Are they worth the investment? To answer these questions, Dr. Bill will soon be publishing: “Executive Coaching: A Field Guide for Organizations.”
Have you or your organization wondered the same yourself?
Here are three sample passages:
Passage 1:
…What is Executive Coaching Exactly?
Executive coaching focuses on the leadership development needs of high-level executives and leaders. Most are leaders within an organization, a growing number are self-referred salaried professionals. Others work within their own businesses, as entrepreneurs or “solopreneurs.” In many cases, the coachee (the one to be coached) is referred by his or her own boss, the CEO, or by human resources. In other cases, the coachee reaches out to engage an executive coach privately.
Executive coaching assists the coachee in understanding his or her business strengths and weaknesses, uncovering blind spots, setting business development goals, and leading his or her own team. By addressing the challenges of the coachee, not only is the coachee helped, his or her team and eventually the organization as a whole is improved. Executive coaching can also address other related concerns such as personal branding, career path, obstacles to success, conflict management, accountability, communication, emotional intelligence skills and much more. While a good executive coach has a strong background in understanding performance and positive psychology, those who are also psychologists refrain from providing therapy to those they coach. Instead, coachees are referred for therapy if it becomes apparent that it would be helpful as well or instead of a coaching arrangement.
A good executive coach is acutely aware that for coaching to be seen as a valuable investment it must ultimately pay for itself many times over. There needs to be a clear ROI with any coaching assignment. While it is not difficult to measure the ROI of coaching on the leaders’ development, their team success and the wider impact on the organization, it takes skill to determine which metrics should be measured and how. We will revisit this important “bottom line” topic in more depth below.
Passage 2:
…Why Companies Provide Coaching
Hecht Harrison found the top five reasons why companies provide coaching were:
- For leadership development—70%
- For skill development or style differences—64%
- To retain top talent—40%
- As part of management succession planning—34%
- To ensure success after promotion or with a new hire—30%7
The Manchester Review Study reported the average ROI was 5.7 times the cost of coaching.
Among the tangible benefits to the organization listed here in descending order were:
Improved productivity, organizational strength, quality, customer service, reduced complaints, own retention, cost reductions, bottom line profitability, top line revenue, reduced turnover.8
The results of a global survey of coaching clients by Price Waterhouse’s underscore the ROI of coaching can be far greater:
“…The mean ROI for companies investing in coaching was seven times that of the initial investment. A quarter of the companies in the survey reported an ROI of 10 to 49 times investment.”9
Passage 3
…Coaching as Part of a Systemic Organizational Intervention
Hourly coaching rates, though, tell only part of the story. It is not uncommon for top business consultants to include executive coaching as part of their overall intervention for a department or organization. In such cases, the overall investment is based, not on hourly rates, but on the impact and ROI to be achieved by the project.
For example, consider a hospital which employees 100 nurses. As reported by the 2018 National Healthcare Retention & RN Staffing Report, when the consultant’s services is requested, the annual nurse turnover rate is 30%, much higher than the national average of 18.2%.17 For each nurse that leaves it can modestly take up to $25,000 for recruiting, orientating, and training their replacement, especially when one considers inactive working hours for new nurses. These are not the only costs involved but will serve our purposes for illustrating how coaching as part of a larger consulting project works.
If 30% of their nursing workforce leaves each year, then 30 nurses need to be replaced at a cost of $750,000. If the consultant can help the hospital address the reasons why their nurses are leaving at more than the average rate of 18.2% and a replacement cost of $455,000 instead of $750,000, the hospital would save $295,000 a year. The consultant prices the investment of his or her intervention at a small fraction of this anticipated savings. For example, if just two fewer nurses leave the hospital each year, this small difference alone would result in a savings of $50,000 to the organization. If the consultant can’t help the hospital achieve this very modest goal, the hospital shouldn’t definitely not hire the consultant!