HR Strategy Forum Los Angeles January 28, 2009 ROI of Executive Coaching

1. HR Strategy ForumLos AngelesJanuary 28, 2009ROI of Executive Coaching Steve Tibbs, Global Practice Lead, Leadership Consulting Craig LaFarge, SVP, Leadership Consulting, San Francisco

2. The secret of all success and victory lies in the organization of the non-obvious. - Oswald Spengler

3. Working Definition for Today

4. Four Things We’ll Do Today Examine the context around “Executive Coaching” 1 Share experiences and insights with colleagues around ROI 2 Provide views on trends we are seeing in the marketplace 3 Hear from our Panelists about their experiences 4

5. Fast Look at Recent History 2004 “Executive Coaching is an experimental and individualized leader development process that builds a leader’s capabilities…” - “The Executive Coaching Handbook” 2005 The Hay Group reported that executive coaching is on the rise, noting that more than 50% of the 170 HR executives they surveyed have set up a coaching program within the 18 months prior. SHRM reported that Executive Coaching was “…a young profession still forming its identity…”

6. Rationale for Using Executive Coaches 2008 • Improve individual performance/productivity—79% • Address leadership development/succession planning—63% • Increase individual worker skill levels—60% • Improve organizational performance—56% • Address specific workplace problems—44% • Boost employee engagement—41% • Improve retention rates—38% • Improve performance of employees whose supervisor is being coached—26% • Improve recruitment outcomes—24% (AMA/Institute for Corporate Productivity, 2008)

7. Coaching Within the Context of Development (Chartered Institute for Personnel & Development)

8. The Need for ROI is Strong 2009 The Harvard Business Review states that of the 140 experienced coaches and 5 experts they recently polled, “…commentators and coaches alike felt that the bar needs to be raised in various areas for the industry (executive coaching) to mature, but there was no consensus on how to do it…” and “…the reasons companies engage coaches has changed. 10 years ago it was to “fix” behavior at the top. Today, most coaching is about developing the capabilities of high-potential performers.”

9. And the Challenge “A big problem that tomorrow’s professional coaching firm must resolve is the difficulty of measuring performance…I am aware of no research that has followed executives over long periods; most evidence around effectiveness remains anecdotal.” - Ram Charan; 2009 Interview in HBR

10. Fundamental ROI Formulas Benefit to Cost Ratio w/variables (O’Neill Model) Benefit to Cost Ratio (traditional) ROI (Phillips Model) BCR = Program Benefits Program Costs BCR= % of Coaching Impact x Bottom-line Result Benefits ROI% = Net Program Benefits Program Costs X 100 Coaching Costs $200,000 $ 50,000 = 4:1 ratio $200,000 $ 50,000 = 400% .40 x $500,000 = $200,000 $50,000 BCR = 4:1 ratio X 100

11. Common Measures of Coaching Outcomes • E.g. Overall Program benefits compared to program costs Financial (ROI) • E.g. Better and more productive relationships – all levels • E.g. Improvement on specific behavioral indicators Behavioral Relationships Business Outcomes • E.g. Increased Business Unit Revenue

12. Table Assignment Based upon the preceding model, share your experiences (or third party accounts) of where Executive Coaching programs were deemed successful (or unsuccessful) based upon the Common Measures of Executive Coaching Outcomes. Please note any trends, conditions, methods or other commonalities from the experiences shared and be prepared to share them with the larger group.

13. When Coaching Works Well • Define desired outcomes • Organizational Support • Culture of development & support • Developmental; not corrective • Individual is ready and open for it • Supervisor is on-board and supportive

14. Current Trends in Measurement Why Coaching is being Measured • Justify the financial expense • Need to demonstrate results • Justify the intervention • Illustrate the application (results) of coaching • Promote coaching as a viable development solution Few organizations evaluate coaching • 10% in the U.S. • 19% in the U.K. When coaching is evaluated • Affective reactions • “Perceptions” of success • Short-term focus • By consulting firms who do coaching (De Meuse & Dai, 2008) • Challenges to Measuring • Cost of evaluation • Expertise to conduct the assessment • Lack of tools • Ability to isolate the effect of coaching

15. Tabulate Program Costs Collecting Post Program Data Isolate Effects of Program Convert Data to Monetary Value Calculate ROI • Evaluation: • Instruments • Purpose • Timing • Levels Indentify Intangible Benefits Basic ROI Evaluation Model Phillips Model

16. LHH Results Based Coaching Model

17. Five Stages of LHH Behavioral Shift Model Low % of evaluation Highest ROI potential High % of evaluation Lowest ROI potential

18. Considerations When Measuring the ROI of a Coaching Engagement • Depth of ROI Study • Effectiveness (participant learnings & application) • Type of Intended Study • Quantitative; Qualitative; Anecdotal • Data Collection Sources • Existing; Interviews; Survey; Instruments (self; 360; organization-wide) • Level of Intervention • Individual; team; companywide • Data Collection Process • Timing; Out-factors (control groups, etc); Who collects? • Planning the Work • Confidentiality of data collection and results; who owns report; who is consultant working for?

19. Panel Discussions Implementation & Measurement of Coaching

20. Our Panelists for Today Zoe Bennett, Sr. Manager OD, Disney Consumer Products (The Walt Disney Company) Ken Goldstein, Director OD, Mattel Corporation Bernadette Robertson, CHRO, United Way of the Bay Area

21. Process Interactive is more fun. 1 hour – so be crisp (in both questions & responses). Prepared questions – but may deviate depending on interest. I will pose prepared question to panelists. After they respond, I will ask audience for additional questions on that topic before moving on to next question – except for questions 1 & 2. Will not have time to answer every question from audience, so I will decide when to move on.

22. 6 Questions Tell us about your organization and your role as it relates to coaching. Tell us about your use of coaching.  What have been the results of coaching in your organization?  What would you do differently regarding the implementation and measurement of coaching? If the CEO of your organization asked you to justify the expense of coaching, what would you do? If you had a “magic wand” to change anything you wanted in your organization, what would you change about coaching for executives?

23. Question # 1 Please briefly tell us about your organization and your role as it relates to coaching How large is the organization in terms of revenue and employees; What are its major products or services; Where are you located; What is your role as it relates to coaching?

24. Question # 2 Please tell us about your use of coaching.  How much coaching does your organization do?  Who receives it – Senior executives, Middle Managers, Supervisors?  How is the purchasing of coaching managed Is it managed centrally by HR or does each manager buy their own?

25. Question # 3 What have been the results of coaching in your Organization? What evidence do you look at to determine the results?

26. Question # 4 Based on your previous experience with implementing coaching for executives, what would you do differently regarding the implementation and measurement of coaching?

27. Question # 5 If the CEO of your organization asked you to justify the expense of coaching, what would you do?

28. Question # 6 If you had a “magic wand” to change anything you wanted in your organization, what would you change about coaching for executives?

29. Thank You! Panelists Audience