Building Credibility for the ROI Evaluation

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The Leadership Advisory Board at OptiCom readily accepted the

notion that coaching could produce tangible, monetary value for the

business and that this value could be documented. Unfortunately,

this ready acceptance of the tangible value of coaching is the exception,

not the rule. In fact, hard-nosed skepticism exists among many

organization leaders about whether coaching actually produces

monetary value. The best antidote for this skepticism is to build

credibility for the ROI evaluation. Coaching sponsors, initiative

managers, coaches, and others can use the following five proven

credibility builders to soften the blow of even the harshest skeptics:

1. Tell a story with business value as the punch line. The trials,

tribulations, and ultimate success experienced by Jacqui is a

great story, but it is a story that no business leader would be

interested in if there was no business payoff. Sometimes, HR

or learning and development people are accused of being

internally focused. That is, they are perceived as being more

interested in their initiatives per se rather than how these initiatives

impact the business. HR initiatives, such as coaching,

are a means to an end, not the end itself. The harsh reality is

228 Coaching That Counts

that an initiative that has little business value has no business

being in the organization. The OptiCom story began with

a real business need (market penetration) and ended with

meeting this need (increased sales). Jacqui gained tremendous

credibility throughout this process and, in the end, earned the

right to expand the coaching initiative.

2. Tackle the isolation issue head on. The greatest challenge for any

evaluation is to isolate the effects of coaching from other

potential influencing factors. You know that you have successfully

isolated the effects when the business leaders and sponsors

agree you have isolated the effects. Isolation is in the eyes

of the beholder. Therefore, it is important to address this issue

early on—the earlier the better.Meet with the business leaders

and share with them the evaluation strategy in which isolation

is prominently featured. Put their concerns on the table and

address each one. If they have additional ideas for isolating the

effects, even better. You know you have gotten past this hurdle

when the leaders sign off on the evaluation plan.

Because so much of isolating the effects of coaching relies

on expert estimation, this is often viewed as the soft spot in

the evaluation strategy. This is especially true if estimation is

the only isolation tool used. Here’s a little secret: Business is

estimation. Anyone who has valued inventory, accounted for

goodwill on the balance sheet, or determined the cost of

quality knows how critical estimation is as a business tool. All

we are doing here is applying estimation as a business tool to

isolate the effects of coaching. In fact, we even go beyond what

many others do in their valuation of hard-asset initiatives

when we account for the error of the estimate. Inventory managers,

accountants, and quality engineers typically do not take

into account the possibility of error. So in a sense, our use of

estimation is more conservative than other estimation techniques,

which are commonly used.

3. Be conservative at each step along the way. Credibility of the

evaluation often depends on the day-to-day decisions made

Demonstrating the ROI of Coaching 229

throughout the evaluation. The golden rule is to always take

the more conservative path. The more conservative the evaluation,

the more credibility it is likely to have. Here are some

guidelines:1

_ Always take the lower ends of the estimates. If product

margins range from 20 percent to 28 percent, then take the

20 percent figure. If a coaching client says she saved three

to five hours per week, then take the three-hour figure for

the ROI calculation.

_ Throw out the extreme high scores. Before tallying all of the

monetary benefits, identify the highest monetary value and

discard it from the evaluation. This removes any potential

criticism that one extreme score skewed the results.

Also, consider validating the higher monetary values. For

example, a large rates increase can be validated by reviewing

monthly revenue statements.

_ Assume that people who were part of the target population,

but who could not participate in the evaluation, created no

value from the coaching. If, for example, 50 people were

coached and comprised the target population for the

evaluation but only 40 could participate in the evaluation,

then assume that the 10 who could not participate created

no value.

_ Base the ROI calculation on the costs for everyone in the target

population regardless of whether they were included in the

evaluation. So, in this preceding example, the costs would

be based on all 50 coaching clients, while the benefits would

be drawn from the 40 who were part of the evaluation.

_ Use fully loaded costs in the ROI. Costs must include more

than just the professional fees, travel, and other outof-

pocket expenses. Fully loaded costs also include the

following:

1 Phillips (1997).

_ Opportunity costs (e.g., the cost of people’s time to participate

in the coaching)

_ Facility costs (e.g., the use of conference rooms and

offices regardless of whether these facilities were charged

for)

_ Administrative costs (e.g., time and expenses of all staff

who worked on the coaching initiative, the time of the

Leadership Advisory Board, and others who manage and

deploy the initiative)

_ Deployment costs (e.g., usage of telephone, conference

bridges, video conferences)

_ Evaluation costs (e.g., all of the time and materials that

were used for the evaluation, even if these resources were

internal and there were no direct charges incurred)

_ Communicate these conservative decisions and actions to the

business leaders and sponsors. Don’t be shy about sharing

each of these decisions with the powers that be. They need

to understand how thoroughly you approached the evaluation,

and their confidence in the outcome of the evaluation

will be enhanced. It will soon become clear that in

the final analysis, the bottom-line monetary benefits likely

represent the lower end of the benefits realized by the

business.

4. Enlist the support of credible sources. Business leaders often have

a go-to person in the finance department on whom they rely

to sort through financial data and reports. Identify this key

financial resource and buy him or her lunch every now and

then. Share with this person how you are approaching the

evaluation and gain his or her perspective on how best to

proceed. Gaining early buy-in from this kind of credible

resource will pay big dividends later.

5. Ensure the perceived independence of the evaluation. In the case

of OptiCom, Jacqui had engaged the services of an outside

evaluator. This external resource brought with him a tremendous

amount of ready-made credibility that cast a positive

Demonstrating the ROI of Coaching 231

halo over the entire evaluation. Also, as an outsider, he was

perceived as having little vested interest in the outcome of

the evaluation. It is not always possible to engage an external

resource, so ensuring the perceived independence of the evaluation

is a critical issue. How can this be done? Here are some

proven ideas:

_ Engage the internal accounting group to oversee the evaluation.

The accounting group can be brought in at certain

milestones to review and sign off on the progress of the

evaluation. For example, they could approve the evaluation

strategy, certify that all costs and benefits were appropriately

determined, and approve the final report.

_ Have another group within the company conduct the evaluation.

The quality group is often well-versed in statistics and

data collection and may be willing to serve as an evaluator.

The challenge here, of course, is gaining their agreement to

serve in this role. Another option is to have them handle

only certain aspects of the evaluation (e.g., the data collection),

which would be more limited in scope and not place

such a big demand on their resources.

_ Engage an outside consultant on a more limited basis. The

outside consultant could be brought in to develop the

evaluation strategy, and if, for example, the quality group

did the actual data collection, the consultant could come

back to write the final report. The consultant would then

be in a position to certify the evaluation process and results.

_ Clarify upfront with the business leaders and sponsors who

will conduct the evaluation and make sure they perceive no

issues with the independence of the evaluators. The more

business leaders buy into the evaluation process, the less

concerned they may be with who actually does the evaluation.

Enhancing the perceived independence of the evaluation

may be increased by emphasizing the integrity and

conservative nature of the evaluation process.