“strong consideration needs to be given to using external coaching programs to enhance internal results.”

“The study also indicates that using internal coaches to coach managers or executives is not correlated with coaching success. It appears that using external coaches for those groups is more effective and perhaps confirms that the higher cost of using an external coach may be well worth it.”

New Global Study Tackles What Really Works When It Comes to Coaching Employees

Article Source: American Management Association

American Management Association and the Institute for Corporate Productivity Provide In-depth Look at Successful Coaching Practices

June 17, 2008

At one point, having a coach carried a stigma because it was more frequently directed at problem employees. Today, it’s more likely to be a sign that the employee is on the fast track and that the organization is serious about raising performance levels and developing talent. That’s according to an extensive global study commissioned by American Management Association (AMA) and conducted by the Institute for Corporate Productivity.

Coaching: A Global Study of Successful Practices is based on a survey that included responses from 1,030 managers and executives across a wide range of functional areas. The survey was conducted using AMA’s global network, including Canadian Management Centre in Toronto, Management Centre Europe in Brussels, and AMA’s partners and affiliates in Mexico City, Tokyo, Shanghai, Beijing, and Istanbul and in many other cities around the world.

When asked about the groups that their organizations coach, 60% of respondents said the coaching involved high potential employees to a high or very high extent, and 42% said the same about executives. By contrast, 37% said they coach problem employees to such a high extent.

The study defined coaching as “a short- to medium-term relationship between a manager or senior leader and a consultant (internal or external) with the purpose of improving work performance” (Douglas & McCauley, 1999). And this study showed that coaching is indeed linked to improved performance, both at the individual and organizational levels.

“Executive coaching has become one of the tools to achieve effective leadership in today’s vastly changing corporate culture. As we increasingly learn how to measure executive coaching, we will find that we manage its role in leadership development better,” said Edward T. Reilly, president and CEO of American Management Association. “In going forward, what we have learned from this study will pave the way to a clearer understanding of the possibilities of executive coaching and practice. Change will need to come quickly given the vacancies in top management that are likely to occur due to retirement of the baby boomer generation,” Reilly said.

Respondents from organizations that use coaching more now than in the past are more likely to report two kinds of advantages. First, they are more likely to state that their organizations have higher levels of success in the area of coaching. Second, they are more likely to say that their organizations are performing well in the market, as determined by self-reports in the combined areas of revenue growth, market share, profitability, and customer satisfaction.

“There’s been skepticism about executive coaching in recent years. In some cases, it’s been warranted. Coaching for coaching’s sake is probably worthless. But this study suggests that—when it’s done right—coaching can raise both individual and organizational performance,” said Jay Jamrog, senior vice president of research of the Institute for Corporate Productivity.

The study found that raising individual levels of performance is the number one reason for using coaching and that using coaching for this purpose is highly correlated with the success of coaching programs.

But there are many ways of designing and implementing coaching programs and not all are equally effective, the study found. For one, sending potential coaches to external development programs was more strongly correlated with overall coaching success than more internally focused methods. Yet, those external programs were less commonly used, suggesting that strong consideration needs to be given to using external coaching programs to enhance internal results.

The study also found that clarity of purpose counts. The more a company has a clear reason for using a coach, the more likely that its coaching process will be viewed as successful. Add measurement into the mix and you have a winning formula. The research indicates that the more frequently respondents reported using a measurement method to gauge coaching effectiveness, the more likely they were to report success in their coaching programs. The measurement methods that were most strongly linked to success are individual increases in productivity, impact on engagement, satisfaction with the program, and bottom-line results on the business.

Survey participants were asked to what extent their organizations used certain criteria to match coaches with coachees. By far, the most frequent basis for matching was the area of the coach’s expertise. Almost three-quarters of respondents (74%) said matching decisions were—either frequently or a great deal—based on finding a coach with the right expertise to address specific issues.

Matching the right expertise with the right client is associated with higher success rates.

The study also shows that it pays to interview coaches. Surprisingly, when asked about the criteria they used to select coaches, only 54% say they interview potential coaches frequently or a great deal. Yet, this basic step is more correlated with reported success of coaching than any other selection strategy. Both time and money are wasted when organizations fail to invest time up front matching clients with coaches.

Another coaching best practice is to know when to use an internal versus external coach. The research indicates that external coaches are hired most often to work with executives. External coaches are significantly less likely to work with managers or supervisors. On the other hand, internal coaches are almost equally likely to work with managers as they are supervisors. Internal coaches are significantly less likely to work with executives. Additionally, while internal coaches were assumed to coach employees at all levels of the organization (43%), very few respondents (5%) said that external coaches coach employees at all levels to any great extent.

The study also indicates that using internal coaches to coach managers or executives is not correlated with coaching success. It appears that using external coaches for those groups is more effective and perhaps confirms that the higher cost of using an external coach may be well worth it.

The study found that providing coaching to expatriates is associated with success and improved market performance. Yet, few companies report that they offer coaching to this segment of their employees, suggesting that there’s an opportunity for competitive advantage here.

The study also found that there’s room for improvement in various areas related to coaching. For example, only about a third of respondents (32%) considered peer coaching (in which each participant acts as both coach and coachee to a partner within the organization to improve growth and development) to be very effective or extremely effective. That finding indicates that most organizations have yet to determine how to reap maximum benefit from their peer-coaching programs.

In general, the researchers believe that coaching remains an untapped opportunity for many organizations. Only about half of responding North American companies said they have coaching programs in place, and the same was true for just 55% of respondents in the international sample. This suggests that there’s considerable room for coaching to expand and mature, becoming a critical variable in developing and retaining scarce talent in the future. Companies that learn to leverage coaching and build their programs on what works will have a significant competitive advantage in the global marketplace.

The complete report, Coaching: A Global Study of Successful Practices, is available at www.amanet.org/research

About AMA

American Management Association is a world leader in talent development, advancing the skills of individuals to drive business success. AMA’s approach to improving performance combines experiential learning—learning through doing—with opportunities for ongoing professional growth at every step of one’s career journey. AMA supports the goals of individuals and organizations through a complete range of products and services, including seminars, Webcasts and podcasts, conferences, corporate and government solutions, business books and research. Organizations worldwide, including the majority of the Fortune 500, turn to AMA as their trusted partner in professional development and draw upon its experience to enhance skills, abilities and knowledge with noticeable results from day one.

In a study conducted by MetrixGlobal, LLC, the Return on Investment of coaching was calculated to exceed 500%.

A summary of that study can be seen below.

Case Study on the Return on Investment of Executive Coaching
Prepared by:
Merrill C. Anderson, Ph.D.
MetrixGlobal, LLC
November 2, 2001

This executive briefing was excerpted from the final report of the study conducted at a Fortune 500 firm and is intended for the private use of MetrixGlobal clients and professional associates.

Bottom Line: Coaching produced a 529% return on investment and significant intangible benefits to the business. Including the financial benefits from employee retention boosted the overall ROI to 788%. The study provided powerful new insights into how to maximize the business impact from executive coaching.

Introduction

A Fortune 500 firm launched an innovative leadership development effort that was expected to accelerate the development of next generation leaders. The participants in this effort were drawn mostly from the ranks of middle managers and from many different business units and functional areas. Leadership development activities included group mentoring, individual assessments and development planning, a leadership workshop and work on strategic business projects.

Coaching was considered to be a key enabler for this approach to leadership development because the participants could work privately and individually with his or her coach to develop specific leadership competencies. The client organization engaged the Pyramid Resource Group to provide coaching to the leadership development participants. While participants spoke very highly of their experience with coaching it was decided to conduct a formal assessment of the effectiveness and business impact of coaching. It is intended that the results from this study be used to determine:

How did coaching add value to the business and what was the return on investment?

How could coaching be best leveraged in the future, especially if coaching was to be expanded to other business regions?

Data Collection Procedures

It was decided that the best way to isolate and capture the effects of coaching on the business was through a questionnaire. This questionnaire had two parts. Part one was completed electronically via email and examined clients initial reaction to coaching, what they learned, how they applied what they learned and captured their initial assessment of business impact. Part two was conducted over the telephone with each respondent and probed more deeply into business impact and the financial return on investment.

The target population for the survey was 43 leadership development participants. These participants were drawn from two regions: Eastern United States (37) and Mexico (6). These participants represented a cross section of the business and included those in sales, operations, technology, finance and marketing. All had been identified as potential leaders and executives. Thirty (30) of 43 leadership development participants returned their surveys for a 70% response rate.

Results

Coaching was a very effective developmental tool for the leadership development participants, producing financial and intangible benefits for the business. Coaching sessions were rich learning environments that enabled the learning to be applied to a variety of business situations. Decision-making, team performance and the motivation of others were enhanced. Many of these business applications contributed annualized financial benefits. Other applications created significant intangible benefits. Overall, the participants appreciated their coaching experiences and would highly recommend coaching to others.

Three-quarters (77%) of the 30 respondents indicated that coaching had significant or very significant impact on at least one of nine business measures. In-depth discussions were conducted over the telephone with each respondent to further explore the business impact of coaching. Sixty percent of the respondents were able to identify specific financial benefits that came as a result of their coaching.

Overall, productivity (60% favorable) and employee satisfaction (53%) were cited as the most significantly impacted by the coaching. Respondents defined productivity in this context as relating to their personal or to their work group productivity and half (50%) documented annualized financial benefits. Employee satisfaction was viewed both in terms of the respondents being personally more satisfied as a result of the coaching as well as the being able to increase the employee satisfaction of their team members. The respondents could not quantify this benefit in financial terms. Employee satisfaction, then, was a significant source of intangible benefits. Customer satisfaction (53%) was also a significant source of intangible benefits.

The next most frequently cited as being significantly impacted by coaching were work output (30%) and work quality (40%). Twenty percent of the respondents identified financial benefits as a result of increased work output. Many respondents reported improvements in work quality, however, they were not able to quantify these improvements in terms of dollar benefits. Work quality improvements were considered an intangible benefit of the coaching.

Program costs were tabulated for all 43 leadership development participants in determining the return on investment. Overall, the coaching process produced a 788% return on investment. Given the client company’s downsizing activities and the general state of the telecommunications industry, the client was reticent to fully factor in the financial benefits from retention.  Excluding the benefits from employee retention, a 529% return on investment was produced. While those clients who had customer or people responsibilities produced proportionally greater financial benefits, the realization of benefits to the business was fairly widespread throughout the group involved in this study.

Recommendations were made to maximize the business benefits from executive coaching:

Manage the entire coaching process to ensure consistency and quality. Though the content of individual coaching sessions should always be confidential, the coaching process itself needs to be managed to ensure that the coaching clients and the coaches are following the appropriate process and leveraging best practices.

Prepare clients in advance for coaching and don’t force coaching on anyone. Because coaching remains a relatively new development technique, people may not understand how the coaching process can help them become better business professionals. The sooner they understand the process, the sooner they will see results.

Offer clients the ability to select their coaches. Chemistry is important to build an effective coaching relationship.   Provide prospective coaching clients with information about the coaches including biographies, education, coaching credentials, functional expertise, industry experience and other background information.

Provide coaching strong organizational support. Those being coached should receive encouragement and support from their immediate managers. Also, coaching should be conducted in the context of other developmental efforts such as competency development, assessments, mentoring and leadership workshops.

Ensure coaches are grounded in the company’s business and culture.  Coaches are more effective when they can identify with and talk about the realities of their client’s environment.

Allow each coaching relationship to follow its own path. A major difference between coaching and training is that coaching allows the individual to determine what works best for him or her at a very personal level. Coaches need wide latitude to work with “the whole person” and help each client be more effective as a person as well as to be more effective as a business leader.

Build performance measurement into the coaching process. Evaluation of coaching should be designed into the process from the beginning to better set performance expectations and open up new learning opportunities for making coaching more effective while the coaching is being conducted. For example, coaching can be refocused to deal with issues or to ensure that business priorities will be met. In this way, the evaluation of coaching becomes more than just a measuring stick – it becomes a structured approach to deepen the business value of coaching.

About MetrixGlobal, LLC

MetrixGlobal LLC is a professional services firm specializing in performance measurement solutions that increase accountability for bottom-line business results. Whether it’s developing a scorecard for a corporate university, determining return on investment for a human resources program or conducting a business impact study on an organization change initiative, MetrixGlobal consultants partner with clients to create powerful measurement methodology.