ARTICLES - ALTERNATIVE WAYS TO DO BUSINESS

Effective Executive Leadership

The value of executive leadership has been difficult to measure.  However, the recent studies examining the effectiveness of coaching suggest that leadership can be a prime factor in the success on an organization and that the one-on-one guidance and accountability provided by a coach can substantially increase effectiveness.

There have been few studies looking at the outcomes for executive coaching, but those that have been done have consistently shown dramatic results.  Most of the studies have measured the return on investment in excess of 500 percent!  Several of the studies have pushed those numbers even higher. 

Initially these results were very exciting for me.  It was verification of the benefits to the executive coaching I offered for my clients on the bottom line of their organizations.  I told everyone who would listen. 

What happened next was disconcerting for me.  When I shared the results of the executive coaching studies, I received little response.  I could see the disbelief in the eyes of my audience. 

Too Good to be True?

These results are too good to be true. 

We are used to hearing about the most recent scientific breakthrough, only to find that the studies were flawed or that some other researcher obtained contradictory results.  It is all very confusing, so after a while, we stop listening. 

How could the ROI be that good?  We are delighted if a stock offering yields a 20% return at the end of a year.  (Right now we might be grateful if we could at least break even.)  A return of 500% seems impossible.  And we assume that later studies will offer a necessary corrective to these numbers.  If there is a positive ROI, it must be more modest. 

After my excitement wore off, I wondered about the same questions.   

Statistical results often become more modest as more and more samples are gathered.  The technical term is “regression to the mean,” which describes the tendency for results to become “average” as the number of samples is increased.  There were several studies that all pointed in the same direction, but coaching is still a new profession that has received very little research. 

How robust were the measures in the studies that were done?  Some studies obtain dramatic results in one area, but those effects are mitigated by other factors that might be negatively affected.  Organizations are systems, and changes in one area might have unintended consequences in another.  I knew of no studies, so far, that suggested there might be mitigating factors, but those factors could occur. 

Of course, coaching services are a relatively small investment for an executive.  Let’s assume that your organization pays $800 per month for four hours of coaching.  In order to obtain a 500% return, the executive would need to generate only $4,000 per month more for the bottom line.  Over a year’s time the investment ($800 X 12 months) would be $9600.  The expected increase in the bottom line would be $48,000. These are modest numbers for a medium to large sized company.  (The impact, of course, grows exponentially as more members of the leadership team are involved.) 

And then it struck me.  This number is only too good to be true if we really do not believe that leadership has an impact on results. 

Too Important to be Missed!

The studies on coaching were demonstrating that leadership matters.  The effective coach is working, one-on-one, to improve the leadership of the organization by listening, advising and holding the executives accountable.  The ROI is not about coaches, it is demonstrating that good leadership makes a positive impact on the bottom line. 

Many organizations have under-invested in the leadership resources they have.  Individuals are promoted through the company because they have excellent performance in the technical skills of their profession.  That does not make them good leaders.  In other companies, the executives are drawn from those with business acumen or solid financial training, but without much background that prepares them to deal with the “people problems” of the organization. 

Seminars and training sessions are helpful and also show good (if more modest) return on investment for leadership training.  In the best of these seminars, training focuses on the skills necessary to lead people, not simply to manage events or control inventory. 

But the most effective leadership training takes place in the one-on-one relationship that characterizes executive coaching.  It is here that all of the knowledge and skill that an executive brings can be applied to the real life, day-to-day situations that this company faces.  It is here that the theories become reality.  It is here that good habits are formed.  It is here that "leadership potential" becomes leadership. 

I actually hope for the day that the ROI for executive coaching may become more modest because it will mean that executives are leading more effectively. But it will never become optional in an organization that believes that leaders are important.  

The ROI for executive coaching is not too good to be true, it is too important to be missed.