Return on investment (ROI) – How can ROI from coaching be calculated?

It’s difficult to quantify some of the outcomes from coaching and mentoring e.g. happiness, contentment, motivation and feeling inspired, empowerment, feeling less stressed and having better relationships at home or at work or both. Some outcomes are easier to quantify because the changes in behaviour, attitude and skill, have an easily identified financial benefit in business terms . E.g. increased leadership capability can lead to lower staff turnover, greater productivity and lower sickness levels to name but a few.

Coaches often struggle to explain the benefits a client will enjoy in terms that a business might find appealing. To provide a formula for ROI in monetary terms, the benefits will need to be quantified as follows:

Quite simply the formula is this:

100 x (value of return in £ divided by what the coaching cost)

i.e. 100*(return/investment) = ROI %.

Life Coaching Example

A client invests £750 over the course of a year in life / personal coaching sessions.

They identify improvements in their marriage, are able to cope better with and manage their stress levels, and have actually earned £2,500 more than the year before through behaviours implemented as a direct result of coaching. If we quantify marriage and stress improvements at £1000 each for improved quality of life and related health benefits. Our calculation for ROI is 100 x(4,500/750) = 600%

Coaching to Improve Performance

A company invests £1000 in performance coaching over a year for a demotivated manager of a poorly performing team, with low productivity and high sickness and staff turnover.

As a result of coaching, they identify that there has been a lower staff turnover in the division and instead of 20% turnover it is now 10%. They identify that the sickness absence rate of the staff in the division has gone down by 3%, and the productivity of the team has escalated by 15% due to new positive management and leadership behaviours of their Leader. The manager is himself much happier in the role and is generating new ideas for the business for further areas to develop. Let’s say the value of the staff turnover in terms of reduction in training and recruitment costs amounts to £5,000. And the sickness absence rate amounts to £5,000 and the new business generated by the coachee generates £20,000 more business over the following year. The investment was £1000 for 10 coaching sessions plus the time out of the workplace £1000.

Total investment is £2000

Gain from the coaching amounts to £30,000

so the ROI is 100 x (30,000/2000) = 1500%.

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