Let’s talk about ROI (Return on Investment) for leadership coaching at the Corporate level.

There is a lot of confusion between the terms “Leadership” and “Management”. Both are important. One is essential to the running of an organization. The other is essential only if an organization wants to rise above the pack and be an organization that others admire and want to be a part of.

First? What is essential? Management.

You need good management to keep things running well. Managers supervise and direct others in the organization. Everyone from a low level supervisor to the CEO is a manager. Managers implement an organizational process that gets things done. It’s a process driven job that weaves managing resources, people, assets to get certain results. It’s a job. It’s a process. It can be taught. We need good managers or things just fall apart. People leave. Deadlines are missed. Customers leave.

Good managers are important. And good managers can be trained. And you can have great managers and still have an ordinary organization.

But if you want to have something extraordinary, you need leaders.

Leaders inspire. Leaders see what is ahead. Leaders help the people around them rise to higher and higher levels. And if you want to be the best, you need leaders. When you look at great companies, great ministries, great organizations of any sort – they have a core group of leaders that make them what they are. All of us have seen companies, large and small that have risen when they had great leaders, and fallen when those leaders left, or died. You need leaders to be great. Those leaders may be your managers, but often they are not.

Why? Because we have succumbed to a myth.

That myth says that leaders are born. And while it is true that some people seem to have a charisma about them that we call “natural leadership”, the truth is that leadership has been studied long enough that we know what it takes to develop leaders. There is no mystery to it. What there is, is a lack of understanding at the process of developing leaders, and a lack of appreciation of the value of investing in creating leaders.

The value has been well documented, in decades of studies, all with similar results. Some examples:

A 2012 recent global survey by PriceWaterhouseCoopers and the Association Resource Centre studied the ROI on executive coaching – when companies invested in coaching leaders to make the more effective. They found that the mean Return on Investment in coaching was 7 times the initial investment, and over a quarter of coaching clients reported a stunning ROI of 10 to 49 times the cost. The ROI was 456% on a personal basis (when an individual hired a coach) and 1150% on a corporative basis (When a company hired a coach to develop its internal talent).

Another, often cited ROI study of executive coaching done for a Fortune 500 company,” Coaching for Increased Profitability: How to Deliver and Demonstrate Tangible Results to the Bottom Line” by Merrill C. Anderson, Ph.D. MetrixGlobal (2003) had reported an ROI from coaching of 788%.

Other studies (and there are many) regularly report ROI ranging between 221% and over 700%.

To make it simple, for every dollar invested in coaching, organizations realized several more dollars profit and productivity. This is measurable. What is not measurable in the same way is the effect that coaching has on your people. People who are coached into leadership, instead of being told merely “You are in charge” report more satisfaction, better relationships in and out of work, higher productivity, increased loyalty and more satisfying home lives.

But coaching is not training. Leadership training has minimal long term impact. Why?

Training is one size fits all, and people are different. A coaching program doesn’t teach techniques, it teaches principles, and then helps individualize that knowledge to each person, helping them take advantage of their unique mix of skills, strengths, and weaknesses.

Training is an event. Coaching is a process. You can’t expect an event to develop anything but enthusiasm. To make substantive changes takes time. A typical coaching engagement runs a year or more.

Training carries no accountability. Coaching does. This is important, because growth happens in accountability.

Want to become a great company? Build good leaders. Invest in the process.

And reap the profits.

Be well. Travel Wisely,

Tom

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Next week, I will talk about ROI for individual coaching. Stay tuned! (update, now you can read it here.)

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