ROI Battle: Executive Coaching vs Corporate Crisis

May 28

Amidst the insanity of our modern-day corporate crisis of conscience, it is imperative for companies with staying power to reflect on the impact that their leadership–strong or toxic–has on the future of their organization.

We’ve all heard the saying, “you don’t leave a bad job, you leave a bad manager.”

The banality of this saying evokes a collective cringe–most of us have endured this corporate experience, perhaps as the “bad manager,” the “disgruntled employee,” or both.

If this is a commonly known truth, why aren’t organizations more focused on making sure their managers are not, well, bad?

Oh, because it’s expensive!

But do you know what else is expensive?

Employee turnover, short term disability for mental health leaves, recruiting, onboarding, disengagement, and, oh yeah, lawsuits.

So often, I hear leaders describe leadership development programs and executive coaching engagements as “nice to haves,” something to implement when business is already flourishing.

When times are tight, money that could have been allocated here has to go into something more foundational, more impactful to the business in the near-term.

To which I say–what is more foundational or impactful to your business than your people?

And herein lies the problem. Executives are making decisions based on data and bottom lines, but they fail to successfully correlate ROI data to their most valuable asset–their people.

So let’s speak their language, shall we?

The Cost of Not Investing in Executive Coaching

For those who are nervous about the investment required for effective executive coaching, I get it. A six month executive coaching package can cost upwards of $50K depending on project variables–and that’s just for individual coaching!

It would be irresponsible to spend that kind of money on executive coaching without exploring what not investing looks like.

So, what are some of the “costs” to organizations who choose to de-prioritize executive coaching and leadership development?

Stagnant Leadership Alignment–when senior leaders are out of sync, the fallout cascades to everyone who is under their leadership umbrella. At the highest levels, misaligned priorities lead to a duplication of effort, stalled initiatives, and lack of clarity in decision making. According to McKinsey, ineffective decision-making in large organizations wastes an average of 530K days of senior leadership time annually. This is worth about $250 million in wasted labor costs each year.
Case Study: Boeing (737 MAX crisis): Leadership misalignment and a lack of feedback-culture contributed to catastrophic failures that ended up costing the company $20+ billion in settlements, lost contracts and reputational damage (Source: Harvard Law School).
Loss in Talent Retention and Productivity–poor leadership is the single strongest predictor of attrition and disengagement, yet leaders and HR Business Partners spend the majority of their time managing low level under-performers instead. When it comes to running strong teams, you can either chase your tail trying to teach someone how to stay dry in a rainstorm, or you can focus on upskilling the person holding the aforementioned umbrella so they know how to cover the team properly—freeing those underneath to spend their time on what needs to happen for the business instead of the simple task of just trying to stay dry.
Case Study: Arden Coaching reviewed a study conducted by Merrill C. Anderson, PH.D. of Metrix Global, LLC, involving a comprehensive assessment of executive coaching’s effectiveness within a Fortune 500 firm. Participants were primarily drawn from middle management and represented a cross-section of the company’s ecosystem. Ultimately, the coaching initiative achieved
- 529% ROI, excluding benefits from employee retention
- 77% of the 30 respondents indicated that coaching had a significant impact on at least one business measure
- 60% improvement in productivity reported by coached executives
- 53% reported feeling more engaged and content
- 60% of leaders coached directly linked coaching to financial benefits
Poor Decision Making–McKinsey estimates that poor decisions waste up to 3% of profits annually–in a $1B company, that’s $30M left on the table each year. With this in mind, it stands to reason that companies who make informed, aligned decisions will fare better than those who squander time and money on poor decisions.
Case Study: Tesco reported massive losses in 2015 (£6.4 billion) as a result of a CEO transition, a miscalculation in property value, and an accounting scandal where they overstated their profits by £263 in October 2014. Several poor decisions were made by leadership that could have been avoided with the proper frameworks, checks, and balances strong executive coaching provides organizations. Specifically, if Tesco had implemented executive coaching along with their leadership transitions, they could have avoided key pitfalls like overconfidence bias, lack of self-awareness in global model effectiveness, poor listening and feedback loops when it came to the concerns of frontline managers, and short-term decision making without considering the long-term impact. This simple investment could have saved Tesco billions of dollars in challenging executive over-confidence, developing cultural intelligence, creating psychological safety so employees can raise red flags, and providing guard rails for ethical and strategic decision making.
Lack of Talent Development and Continuity–McKinsey reports extensively on the many reasons why corporate leadership programs fail. There are a variety of factors that contribute to this, such as using a “one size fits all” approach, decoupling talent development from the actual work, insufficient practical applications, neglecting necessary behavioral or mindset shifts, focusing on metrics of convenience, absence of senior leader support, sporadic and piecemeal programs, and poor integration with company strategy. What is the one practice that can actually teach executives how to address all of these factors in real-time? Executive Coaching.
Hypothetical / Illustrative Case Study: A company chooses not to invest in executive coaching or systematic leadership development tied to the business. When their CMO leaves, the VP of Marketing (or next in line employee) has never had leadership coaching and has had only minimal exposure to stretch assignments and constructive feedback. They step in for the CMO, but make poor cross-functional decisions and struggle with stakeholder management. Meanwhile, the mid-level managers are growing increasingly frustrated, and see no path to growth. As a result, they leave for other companies that are providing development opportunities and coaching. The company has no choice but to hire an external candidate. This is expensive, requires a longer onboarding, and lowers morale across high potential employees who want a shot at tangible growth.

To summarize, the cost of not investing in Executive Coaching is drastic. Specific risks include:

Underutilized / underdeveloped talent pools when leaders are not coached or developed themselves
Insufficient or nonexistent succession plans, driving a lack of continuity and leaving internal candidates unprepared to take on more responsibility
Suffering employee morale and engagement with employees worrying that there is no growth path and that their leadership isn’t invested in them
Decision making and alignment is at risk when a leader leaves or retires, with organizations more likely to struggle, lose direction, or suffer decision gaps.

You could try risking it. Or, you could invest. Would it be worth it?

The Cost of Investing in Executive Coaching

As I stated earlier, I understand apprehension around the investment required for effective executive coaching. You might believe that investing the same amount of money into other areas of the business would be more beneficial–tech updates, operational efficiencies, modernizing working conditions, or avoiding another RIF (reduction in force), to name a few.

If you are, in fact, avoiding another RIF, I’d argue that it would be irresponsible to not invest in Executive Coaching immediately.

Let’s imagine that you have an executive leadership team of eight people–Chief Executive Officer (CEO), Chief Operations Officer (COO), Chief Product & Tech Officer (CPTO), Chief Marketing Officer (CMO), Chief Financial Officer (CF), Chief Revenue Officer (CRO), Chief People Officer (CPO), and Chief Legal Officer (CLO).

You engage with a credible coaching firm like Silver Thread Executive Coaching for six months of individual coaching with each executive plus team cohesion development. For each participant, this includes:

Bi-weekly 60 minute coaching sessions
Leadership Assessment + debrief (i.e. Hogan, DISC, ProfileXT)
360 Assessment with three checkpoints (launch, midway, conclusion). Includes feedback from direct reports, peers, and board members
Quarterly group check-ins for 12 months
Two day leadership development offsite during month five focused on culture-building, leadership alignment, and employee development/succession planning
Coaching “Report Out”: A confidential, aggregated leadership themes report for the CEO/board (without exposing individuals) to demonstrate ROI
Peer coaching pod facilitation for 12 months

This type of in-depth, highly-personalized, strategic work would likely cost in the range of $300-$400K for six months. That amount of money could pay to hire a full time senior-level employee (or two executive assistants) to try to manage C-suite relations in lieu of actually fixing the problem.

Can we explore that option? Slow down, Cowgirl. We’ll get there!

First, let’s take a moment to look at the benefits that might come with this $300-$400K investment.

Stronger Leadership Alignment–fewer misaligned initiatives leads to less time wasted on expensive clean-ups
Example: If misalignment causes one failed project at a $1M cost, strengthening leadership alignment through coaching to avoid that misalignment would have covered 3-4x the cost of the coaching engagement
Improved Talent Retention + Productivity–according to Gallup, replacing employees can cost up to 200% of their salary. Additionally, employees who are left behind and disengaged due to the corporate shuffle can cost up to an additional 34% of their salary in lost productivity. And don’t forget, these metrics also apply to highly-paid executives, which has a huge influence on talent retention ROI.
Example: If even one executive stays at a company due to better leadership culture, that alone would save the company $500-$750K, thus covering the coaching investment
Better Decision Making–investing in the continued development of executives is a sharp tool when it comes to making responsible and transformative business decisions. Coaching helps executives hone skills around biases and emotional reactivity, structuring complex choices, exploring different perspectives and stakeholder alignment–creating habits of reflection and learning, and sharpening strategic foresight.
Example: For a project with a $100M budget, even a 1% improvement in decision making would yield a $1M impact.
Succession Planning–coaching provides executives with the tools and frameworks necessary to grow the leaders below them and plan for long-term development. Coaching resources have an umbrella effect on the team below each Coachee, who have the skills to build strong benches that can transition more seamlessly into increased scopes.
Example: According to a study done by Wharton management professor Matthew Bidwell, promoting from within typically saves about 17-20% over external recruiting. He also found that external hires had lower performance ratings during their first two years of employment.

The Bottom Line

Looking at all of this combined, let me remind you that, at the beginning of this section, you spent a theoretical $300-$400K for a six-month coaching engagement for your eight executives.

If the coaching prevents even one regrettable executive departure, one failed initiative, or one major missed deal, you’ve just paid for the engagement.

But like I said before, coaching has an umbrella effect–the benefits are not for the Coachees alone. This “umbrella impact” indicates that an engagement like the one described here would be massive, with long-term net-positive business growth and revenue implications.

Studies by the International Coaching Federation (ICF), MetrixGlobal, Arden Coaching Survey, and SparkEffect indicate that executive coaching can deliver substantial returns, with reported ROIs ranging from 5x to over 50x the initial investment (variability influenced by factors such as company size, industry, and specific coaching goals).

To get back to your earlier question about whether we could spend $300-$400K to hire someone to manage C-Team relations–you could try that!

But would that actually solve any of your problems?

In fact, it would likely be extremely expensive to continuously have to re-hire every time someone in that role burns out, likely wreaking havoc on the executives in the process.

And it would likely impact the morale and engagement of all who sit under the shadow of the organization’s leadership umbrella.

How do you feel about your options now?

Looking to the Future

No one is denying that our world–including our corporate world–is evolving. AI is completely changing the business game, and organizations know that they need to grow technologically if they are going to have long-term success.

But in the spirit of duality, the introduction of AI simply means that human connection is more important than ever. This includes human connections between leadership teams, amongst leaders and their employees, and within peers and cross-functional partnerships.

Nothing is more human than coaching–one person helping another person improve–a practice that exists solely for the advancement and development of the human race, and the gifts we give to the world.

As our world evolves, so does coaching. So what will this look like going forward?

Move from being an elite perk to a scalable development tool

In the past, coaching was reserved for CEOs and executives. Now, it is moving downstream, and is standard for managers and high potential employees at organizations that value leadership, growth, and development.
Companies are recognizing that coaching has direct ROI not only in “fixing” executives, but also in building bench strength and continuity.

Integration with Technology and AI

AI-driven platforms like BetterUp, Torch, and CoachHub are scaling access, matching coaching placements with best-fit coaches, and providing data dashboards to clients on engagement and growth
Today’s data analytics demonstrate coaching ROI in more tangible, behavior-linked ways

Holistic Leadership Focus

Move beyond tactical performance to whole-person development, including resilience-building, emotional intelligence, purpose alignment, and wellbeing
As leadership evolves, executives benefit from coaching that addresses the intersection of work and life

Diversity, Equity, and Inclusion Emphasis

Coaching is a powerful tool to accelerate underrepresented leaders into senior positions, leading to diversity in leadership that has a material impact on lower level employee engagement, not to mention revenue and growth

Team and Group Coaching Models

Team coaching (i.e. leadership team cohesion) and peer coaching groups are increasingly common
Coaching at the highest level allows executives to scale coaching competencies to the next layer of management

ROI Transparency

Organizations are able to tie hard ROI evidence to coaching practices via data like engagement scores, retention rates, promotion velocity, and financial performance metrics

Customization and Personalization

Coaching engagements are becoming increasingly modular and are no longer one-size-fits-all. All elements are customizable from the topics to the cost to the success metrics
Coaching firms are able to tailor journeys for specific engagements and can include bespoke elements like leadership assessments, 360s, offsites, pulse surveys, and blended digital + human coaching experiences.

To bring this full circle, the investment in executive coaching is mighty, whether you are an individual looking to grow yourself–which by the way, is generally cheaper!-- or a corporation looking to grow your leaders.

So ask yourself…

In a world where change happens the moment you are comfortable, what will truly have the largest return on your investment?

I hope you say, yourself. I hope you say, your leaders. I hope you say, your people.

And if you’re a visual processor, I got you: