The ROI of Coaching
- Research suggests that one-third of the difference between top and average performers is due to technical skill and cognitive ability while two-thirds is due to emotional competence. In top leadership positions, over four-fifths of the difference is due to emotional competence (Goleman, 1998).
- An intensive coaching program for part of the retail sales force at Metropolitan Life Financial Services delivered $3.2 million in measurable gains—productivity increased by an average of 35%, 78% of the sales reps pursued a new license or professional designation and 50% identified new markets to develop. The program cost about $620,000. —Richard Keating and Aaron Becker
- British Petroleum estimated that they saved $30 million in turnover costs as a result of their behavioral coaching program.
- Price Waterhouse Coopers calculated a six to one return on investment from coaching & mentoring their senior staff.
- Employees at Nortel Networks estimate that coaching earned the company a 529 percent "return on investment and significant intangible benefits to the business."
- Booz Allen Hamilton studied its’ return on its coaching program, finding a 689% on every dollar invested—$3.3 million on a $414,310 investment.
- During the year following training, managers at American Express who had completed the Emotional Competence training program grew their businesses by 18.1% compared to 16.2% for those managers who were untrained.
- At L’Oreal, sales agents selected on the basis of certain emotional competencies significantly outsold salespeople selected using the company’s old selection procedure—$91,370 more annually for a net revenue increase of $2,558,360. (Spencer & Spencer, 1993; Spencer, McClelland, & Kelner, 1997).
“Companies are under-investing in human capital, largely due to lack of knowing and measuring the risk. The more uncertainty of inputs and outputs for human capital, the more reluctance to commit resources or withdraw investments in volatile times. We need to stop accounting for human resource expenditures as overhead; instead we need to look at human assets in terms of capital expenditures where returns on current period expenditures are relative to the useful life of the asset.”
— Michael Eckols
ROI | EQ & Leadership | Human Capital Value Chain Leadership MultiplierTM
ROI
Coaching has become the development tool of choice for increased performance succession, results and retention. At Peoplesmith Global, we view coaching strategically as an accelerated delivery channel for change and a critical component of talent management and human capital succession; coaching is transformative learning. By combining the content of EQ with the process of coaching, we accelerate the learning of key leadership skills. The vast majority of major corporations today are providing coaches for their leaders and finding significant returns of their investment.
Development has become the new compensation. Global markets, technology and workforce demographics create discontinuities for winning in the competitive market. Stepping into alien cultures, forging new delivery channels and bridging the human element in virtual teams are the critical success factors in a flat world. Every dollar invested in coaching and development provides a quantitative and qualitative return in attracting, deploying and retaining talent.
While training is important for development of skill, coaching leads to behavior change. When coupled with training, coaching has been shown to add nearly four times the impact of training, increasing behavior change from 22% to 80% (Olivero, Bane, & Kopelman, 1997). A study by Manchester, Inc. showed an average return on investment of 5.7 times the initial investment in a typical executive coaching assignment, or a return of more than $100,000. Further, when the indirect benefits are included, the return jumped to 788%.The study also showed increases in:
- Higher productivity (55%)
- Improved quality (48%)
- Organizational strength (48%)
- Better customer service (39%)
- Fewer customer complaints (34%)
- Better retention of executives coached (32%)
- Cost reductions (23%)
- Bottom line profitability (22%)
Executives who have been coached report:
- Better working relationships with direct reports (77%)
- A better working relationship with their immediate supervisors (71%)
- Improved teamwork (67%)
- Enhanced peer relationships (63%)
- Greater job satisfaction (61%)
- Less conflict (52%)
- Higher level of organizational commitment (44%)
- Improved client relationships (37%)
At the highest levels of the organization, softer skills contribute up to 90% of a leader's success and translate more directly into productive relationships and business results. Good technicians, promoted into managerial positions rise to the level of their intellect, and get stuck at a plateau when their arsenal of skill doesn’t allow them to master themselves and work through others. Some of the hard, bottom line results achieved with the addition of EQ are:
- 125% more incremental revenue from self-management and social skill
- 20-40% increases in sales from learned optimism
- 20% increased sales from EQ training
- Cultures that encourage emotional constraint (non-expression) have diminished peak performance. For a company the size of Sears, a 1% decline in productivity equals about $4million per year in lost profit.
- Emotionally challenged individuals tend to be inflexible and give up easily in the face of disappointment; replacement costs average an estimated 150%
- 8% reduction in health care expenditures typically spent to remedy stress-related illness.
- 50% reduction in accidents for managers and first line supervisors
- 15% decline in employee grievances over a three-year period
- 20-45% increases in plant productivity after EQ training
- 17% less turnover from relationships built on EQ competencies
- 18.1% business growth in 15 months for EQ trained leaders
More than pay or perks, employees evidence a higher level of productivity, creativity and longevity as a result of effective relationships with their immediate manager/supervisors. In effect, employees want from their employers the same things that children want from their parents: Clearly defined limits on their authority and directives, evidence that managers genuinely care about them and validation and affirmation of their capabilities and contributions (Gallup).
EQ & Leadership
Factual data and intellectual knowing are not enough; we need emotional mastery to create context, discern, process and make qualitative decisions. Leaders with Emotional Intelligence inspire performance beyond the global commodities of obedience and diligence to an impassioned momentum to innovate, and create intangible assets. Leaders increase the return on human capital assets. To energize and service an asset that is characterized by emotions, memories and its own volition, leaders must master their own emotional intelligence and inspire initiative, creativity and passion.
- Leaders develop emotional intelligence through four stages, each with its own competence.
- Awareness is foundational as it drives 87% of all successful change.
- Mastery of the self and the ability to modulate one’s own behavior is predicated on successfully navigating level one and two — gaining insight and self-mastery.
- Interpersonal skill is developed to evoke engagement and affiliation built upon mastery of the two levels below.
- The ultimate goal at the top is authentic leadership, where behavior is aligned with organizational goals.
- Peoplesmith Global coaches seasoned executives and emerging leaders to master the ambiguity of change, relationship and innovation as they create the future.
Human Capital Value Chain
“Employees join companies and leave managers.” Strong leadership breeds employee engagement and affiliation such that a 5% increase in customer loyalty drives profit by 25%” -The Service-Profit Chain
Talent drives the bottom line. Effective leadership inspires both the rational and emotional component of human capital. Engagement drives profit by increasing productivity while affiliation reduces cost by increasing retention. Both create value that travels through the talent chain from loyal employees to satisfied clients.
- Engagement of talent drives revenue. Talent is attracted by tangible benefits and organizational brand. Yet, it is Intangible, subjective experience that retains talent; compensation contributes less than 2% to retention.
- The leadership task is to inspire the employee’s delivery of discretionary effort toward organizational goals on a sustained basis and to drive productivity increases (up by 50%) and profitability (up as much as 44%). source: Gallup
- Affiliation counters attrition and reduces overhead. With the replacement cost of talent upwards of 300% of salary (not including the cost of lost productivity or customers), leaders must create an intangible, positive experience by influencing with integrity.
- Developing leadership talent—at 2-3% of payroll—becomes a new kind of compensation and an investment that combats attrition.
- Only through leaders that embody Employer of Choice can talent be attracted, retained and deployed in the competitive market.
- Peoplesmith Global brings emotional intelligence to the leadership foundation that inspires engagement and affiliation.
The Leadership MultiplierTM
Leaders hold the power of leverage in the organization. They are the opportunity capital that drives performance by influencing values through the organization.
The Leadership Multiplier™ illustrates this dynamic in organizations that are linked in networked relationships. A leader tacitly influences more than 70% of behavior in organizations.
A leader impacts an average of 12 people in his or her vertical network who impact another 12 people vertically, or 12N. Lateral social networks average as many as 20 or more people who influence 20 others who influence 20 more, or 20L. The exponential impact of leadership behavior in organizations lead us to conclude:
The Impact of One Leader is:
12N (N = # of people in vertical organizational levels)
x 20L (L = # of people in lateral social networks)
x 70% (learning influenced by leadership)
= Potential Impact of One Leader
- Leaders who are coached effectively permeate every level and accelerate the velocity and impact of leadership brand on organizational talent.
- Peoplesmith Global’s Systemic CoachingTM is a strategic intervention aligning individual development and organizational competency with business strategy.
- Peoplesmith Global’s Systemic CoachingTM uses teams of coaches to drive performance, engagement and affiliation through the entire climate of an organization.