Investing in Leaders: The Proven ROI of Executive Coaching Programs

What if the biggest ROI for your company this year did not come from tech, but from your people?  We all rank performance at the top of the heap when it comes to achieving bottom line goals.  What is one of the best ways to achieve this?  Through executive coaching.    This article answers the “why?” and explores the power of executive coaching, how it enhances leadership at all levels and contributes significantly to promoting a robust organizational culture.  All these benefits can be seen and felt on their Return on Investment (ROI) and Return on Engagement (ROE).

Coaching is a powerful tool for developing leadership and driving organizational growth. Whether you’re introducing a new executive coaching program or revising an existing one, building a coaching culture starts with understanding the needs of your leaders and employees. Asking the right questions is essential to ensure the program aligns with company goals, supports employee growth, and is sustainable over time.

Research shows that today’s employees seek coaching, not just a boss. Gallup’s findings highlight that employees value managers who develop their skills through mentorship and feedback. In a recent chat I had with Josh Gozdecki, VP of People Operations, at Intellivo, his take is aligning coaching to strategic goals, “As HR leaders, it’s crucial to structure a program that fosters the positive reasons for coaching to better your organization’s strategic goals,” says Gozdecki.

When I ask new clients what their expectations are from executive coaching, it’s almost always “to improve and grow. “At its core, executive coaching is a personalized development process designed to empower leaders to unlock their potential, refine their skills, and achieve specific professional goals. Through one-on-one sessions with experienced coaches, executives gain insights into their strengths and areas for improvement, leading to enhanced decision-making and leadership effectiveness.

Before beginning the coaching process, it’s important for companies to define their objectives for these programs. According to Gozdecki, “For many of the programs I’ve run, the primary objectives included creating space for executives to be vulnerable, shifting from a fixed to a growth mindset, and embracing new strategic skills while leveraging staff to take ownership of the work.”

External coaches bring valuable perspectives to coaching programs, especially for leaders with long tenures. I often hear how great it is to have a third party to talk about one’s challenges and development.  Most clients say an outside viewpoint helps them see things differently, which in turn drives new insights and opens career opportunities. Gozdecki notes, “When choosing an external coach, I first look for relevant business/operations experience, then factor in the coaching process, cost, and chemistry.” A 2022 Forbes article echoes this, noting the importance of coach accreditation and measurable outcomes.

A committed Investment in executive coaching yields substantial financial returns well beyond any other investment your company will make. Most companies with coaching programs see this value and create a sustainable program as a key part of leadership development.  Studies consistently show impressive ROI figures:

• MetrixGlobal Study: A study by MetrixGlobal found an ROI of 788%, driven by increased productivity and employee satisfaction.
• Human Capital Institute: 51% of companies with a strong coaching culture report higher revenue compared to their industry peers, suggesting a clear link between coaching and business success.
• PriceWaterhouseCoopers and Association Resource Center Survey: This survey found that companies experience an average ROI of seven times the cost of coaching, underscoring their financial viability.

The trends noted above show recent data; but historical data points are the same: coaching pays for itself.  In addition to increases in outcomes and revenue, Kim Austin, Sr. Director of Employee Experience at Anaplan told me that “we quantify our financial returns in costs savings, particularly when we can minimize attrition. “In fact, the cost of replacing a senior leader can run as high as five to eight times their annual salary in recruiting costs, lost productivity, lost organizational knowledge, and strategic misalignments.

The data and personal insights I’ve shared with you thus far set the table for the centerpiece: real sustainable results come from ROE-Return on Engagement.  While ROI measures financial benefits, ROE highlights the qualitative advantages of executive coaching.  Not only is leadership enhanced, but employee engagement also improves, and organizational culture shifts to a coaching culture.  These are profound results that have long term benefits to all. As Rahaman notes in Forbes, leadership coaching delivers not just ROI but long-term cultural engagement as well.

Key benefits contributing to ROE include:

1. Enhanced Leadership Skills: Coaching fosters self-awareness and strategic thinking, enabling leaders to inspire and guide their teams more effectively.
2. Improved Communication: Executives develop better communication skills, leading to clearer directives and stronger relationships within the organization.
3. Increased Employee Engagement: Effective leadership resulting from coaching boosts employee morale and reduces turnover.
4. Organizational Performance: Coached leaders drive a culture of continuous improvement, fueling overall organizational success.

The impact of coaching extends beyond the end of the engagement. As leaders adopt new behaviors, these positive changes are reinforced and adopted by their teams and peers. The strategic value of coaching is still significant at any stage of a company’s growth and for leaders at all levels.

Measuring is where you see what “bang for your buck” you get with coaching.  I’ve seen many methods, and these are some common and readily available ones:

• 360-Degree Feedback: Gathering input from peers, subordinates, and supervisors offers a comprehensive view of leadership development. Tools are available to streamline this process.
• Performance Metrics: Evaluating key performance indicators (KPIs) like employee engagement scores and retention rates before and after coaching engagements help quantify the program’s impact on organizational success.   For example, executives who tend to hold on to what they know well, after coaching may more readily delegate tactical work, allowing those executives to focus on strategic goals.  Additionally, this shift focuses attention on building the bench and creating more opportunities for staff.
• Employee Surveys: Assessing changes in employee engagement and satisfaction can reveal the broader impact of coaching. Platforms like BambooHR or Perceptyx are examples of survey tools that serve this purpose.
• Actionable Outcomes: As leadership and development expert Alan Faulk suggests, “measuring actionable outcomes helps quantify growth and the consequences of inaction.”  The executive’s value increases when they fully embrace their role in the organization, stop holding on to what they know and letting go of activities better managed through others.

I’ve highlighted the power of executive coaching; here are some of the ways companies use executive coaching to meet various strategic objectives:

• Leadership Development: Coaching helps cultivate leadership skills, preparing executives to navigate complex business landscapes.
• Succession Planning: Organizations employ coaching to develop high-potential employees for future leadership roles, ensuring a smooth transition.
• Performance Enhancement: Coaching addresses specific performance gaps, leading to improved outcomes for individuals and teams. As Austin says, “Our programs most important goal is enabling manager success.  When we measure employee engagement scores and track our attrition rates, with coaching skills we see significant returns.”
• Cultural Transformation: Coaching can foster desired cultural changes, such as collaboration and innovation.

As technology continues to evolve rapidly, the need for strong leadership becomes even more critical. As Faulk sees, “The speed and intensity of change are crippling our people.” Beyond ROI, this underscores the urgent need for coaching programs. By investing in your leaders today, you can set them on a future path that bridges the gap between growth demands, change and leadership competencies.

Well-known companies have adopted coaching as a key part of their leadership development strategy. These include

• Intel: Intel’s coaching program focuses on high-potential leaders, helping them build strategic thinking, emotional intelligence, and effective decision-making skills. One success story involves a senior leader who, after undergoing coaching, successfully led a global team through a significant organizational change, aligning the team with the company’s vision.
• Microsoft: Microsoft’s corporate coaching program has fostered a growth mindset among its leaders. Coaches collaborate with leaders at all levels to help them embrace change, think creatively, and develop new strategies for business success. The program has contributed to a more agile workforce, with leaders using coaching skills to drive better results in their teams. 

Executive coaching is a powerful tool for organizations looking to enhance leadership capabilities and achieve measurable returns.  Ask yourself this question: what will my leadership look like if I don’t include executive coaching?  Will I still be able to have a thriving, engaged workforce?   As Alan Faulk expressed earlier, “measuring actionable outcomes helps quantify growth and the consequences of inaction.”

Realize the transformative impact of executive coaching, by making it a top priority for your business.  It may just be the smartest investment you make this year.