While coaching is widely recommended as one of the most effective leadership development techniques, there’s one frequently cited reason deterring leadership coaching adoption – costs.
Given the high-value nature of leadership coaching, sessions can cost anywhere between $200 and $3,000 per hour, with end-to-end executive coaching programs costing up to $100,000 for one or two quarters. This (perceived) formidable cost of coaching takes away from the conversation around ROI, and the costs you might be incurring by not coaching your leaders. In fact, the returns from your investment in leadership coaching can be as high as 529%, going up to 788% if you consider intangible improvements to the business. Clearly, the benefits far outweigh the initial cost of coaching. And, without it, you risk spending a lot more over time than you would possibly save by holding back from splurging on an expensive leadership coaching program.
The returns from your investment in leadership coaching can be as high as 529%, going up to 788% if you consider intangible improvements to the business.
The reality is that leadership coaching today offers flexible subscription models and long-term returns, turning into a “gift that keeps on giving” for any enterprise. By avoiding this essential cog of your learning & development stack, you could inadvertently incur the following costs:
- Avoidable labor costs from turnover
- The costs of sluggish business growth
- Loss of competitive advantage from slow technology adoption
- More spends on driving productivity amid a poor work culture
- Potential costs during a crisis due to low resilience
- The risks of paying forward negative traits and learnings
1. Avoidable labor costs from turnover
Poor leaders make bad managers, and bad managers are among the top reasons for voluntary turnover in most industries. A LinkedIn evaluation of 32 million employee profiles found a strong correlation between management/leadership performance and retention.
Companies among the top 5% in terms of good leadership had a 48% chance of retaining their employees for 3+ years. The bottom 5%, on the other hand, had only a 32% chance. When you combine this metric with the fact that it costs up to 213% of the annual salary to replace a highly educated leadership position, you have a massive cost center in your hands.
Companies among the top 5% in terms of good leadership had a 48% chance of retaining their employees for 3+ years.
2. The costs of sluggish business growth
Less tangible than turnover but equally important, poor leadership could be slowing down your business growth and eroding your edge over the competition. Without proper training, it will be difficult for leaders to organically evolve the necessary risk appetite, seemingly paradoxical traits like the “humble hero” complex, and other essential qualities that require careful nurturing. An academic study published for the 2019 International Conference on Social, Business, and Academic Leadership found a clear connection between leadership and success in doing business, with very real implications on a company’s market share.
3. Loss of competitive advantage from slow technology adoption
This is now increasingly relevant for large-scale, modernized business environments. When you compare technology investments with the perceived cost of coaching your leaders, there’s no denying which occupies a larger share of the average enterprise budget. Yet, optimal utilization of technology isn’t possible without leaders who are trained and coached for this responsibility. Deloitte calls this a “kinetic leadership” trait, embodying principles like change readiness, agility, customer centricity, and an eagerness to step out of the status quo. Companies who invest in coaching and have kinetic leadership have a 42% chance of interlinking technology with business value generation, compared to just 14% of laggards.
4. More spends on driving productivity amid a poor work culture
Your leaders are the flag bearers of your company’s culture, imbibing the ethos established at the board or CXO level, and trickling it down to the grassroot employee ranks. Without coaching, leaders will struggle to manifest the desired cultural ethos of a company and break the chain. As a result, the employee is likely to be left in a kind of vacuum, without adequate support, meaningful work relationships, or strong loyalty bonds. Not only does this cause turnover (see point 1), but it also creates an environment that’s not conducive for productivity. You will find yourself funneling investments into boosting productivity – such as monetized rewards, incentivized targets, company gifts, time off, etc. – when what you actually need is properly coached leadership.
5. Potential costs during a crisis due to low resilience
A crisis situation will inevitably shift the organization’s expectations from its leaders. For example, according to research, strategic vision and a strong outcome focus were the top two most valued traits before the pandemic – now they have dipped by 6 and 9 percentage points respectively.
On the other hand, the number of respondents prioritizing resilience has almost tripled. Resilience isn’t a trait commonly associated with new-age, growth-focused leaders, and must be proactively imbibed via coaching. Without it, you risk slowing down business operations significantly, facing sizable loss, and reducing your workforce during unfavorable market conditions.
[Since the pandemic,] the number of respondents prioritizing resilience has almost tripled.
Managers and company leaders will inevitably influence work culture and value – it is vital to ensure that you endorse and pass on the right traits. Take a simple example, someone who is not good with time management will inadvertently teach the same principles to their team members, such as always prioritizing work over personal needs. This multiplies any skills/personality lacuna in organizational leaders by several folds. Just as effective leadership development creates “coaching neighborhoods” – i.e., pockets of learning, development, and self-improvement that pays forward coaching benefits to positively impact organizational culture as a whole – NOT investing in coaching will multiply negative traits in a similar manner.
As you can see, there isn’t just a very clear ROI pull factor for investing in coaching.
Just as effective leadership development creates “coaching neighborhoods,” NOT investing in coaching will multiply negative traits in a similar manner.
Companies must learn to look beyond the apparent costs of coaching and recognize the very real push factors in play. There will be (and are ongoing) severe lost opportunity costs from turnover, slow business growth, delayed technology adoption, productivity hurdles, low resilience, and the risk of persistent negative traits. A well-thought-out coaching program that’s deeply embedded in your L&D strategy can help garner impressive ROI and unlock a surprising amount of bottom-line benefits.