ROE Vs ROI
The two most prevalent measures being used in the leadership coaching profession today are Return on Investment and Return on Expectations. The latter is growing in popularity and usage due in large part to the significant challenges that come with calculating a meaningful ROI. ROI does not lend itself particularly well to many “soft skill” development initiatives and those who have worked in learning and development have known this for a long time. The popularity and growth of ROE is a result of the ability to use it to measure things in a targeted way. It still not a bulletproof methodology, but it is much more connected to bottom line type measures than ROI, and therefore has more credibility with corporate decision makers. One of the key differences is that this allows organizations to measure the impact of leadership coaching through other metrics already being tracked.
Researchers have attempted to quantify the business impact of leadership coaching through a series of surveys and other investigations. According to the reading “Executive Coaching Yields Return On Investment Of Almost Six Times Its Cost,” areas where results can be quantified include productivity, quality, organizational strength, reducing customer complaints, retention, cost reduction and bottom-line profitability (Jacksonville, Florida, Business Wire, January 4, 2001). The benefits derived from coaching included improvements in the following areas, working relationships with direct reports and immediate supervisors, teamwork, relationships with peers, job satisfaction, conflict reduction, organizational commitment and working relationships with clients.
As an example, let’s consider employee engagement. There is a plethora of data in the marketplace about the value of growing employee engagement – reduced turnover, lower absenteeism, more discretionary effort, etc. Some of these measures can in fact be converted to dollar savings/impact and some are still a challenge. Since most organizations are measuring and tracking engagement, it only makes sense to compliment this measurement through a focus on ROE. By using a ROE approach coaches can partner with organizations to target specific things within employee engagement that we know coaching will specifically impact.
It is very challenging to make those same types of direct linkages using ROI. By taking a step back to metrics the organization has already decided are worth the business investment (in this case employee engagement), it is easier to strengthen the cause/effect of coaching on key elements within the broader framework. The flexibility and broader scope of the ROE provides the opportunity to consider specific elements that are clear indicators of progression against strategy – something all measures need to consider. The key to getting things done through the people you depend upon is the ability to “inspect what you expect” – both in a way that ensures delivery, but also builds relationships and a sense of team.
The Bottom Line
People are the most important part of any organization. How can we support employee’s growth and support the strategic direction the organization is taking? With new clients, we are often asked how we can help them justify the ROI of coaching. Our response is always consistent. Change your measures and we will help change the behaviours. Much like no two employees are the same, coaching is an art, not a science and how it is rolled out and embraced within your organization will depend on how it is viewed by your leadership team. Is coaching an expense or an investment in people? Forward thinking, top drawer organizations are embracing leadership coaching as an investment.
What Does Your Organization Think?
Manie Walker works with Satori Consulting. She is an Associate Certified Coach (ACC)™ through the International Coaching Federation(ICF). Throughout her career as an HR Leader, Manie has supported large complex global organizations as well as national multi-location and entrepreneurial organizations