Considering the cost and ROI of CEO Coaching are naturally elements of determining a good pairing between an Executive Coach and the leader of your organization. While many people look at the cost alone first, I invite you to consider that the more important element of the process is actually the ROI. Think about it: if you knew your ROI would be 50 times or even 5 times your investment, wouldn’t it be a good one? Most likely, yes. So really then, the actual questions are: what’s the ROI, and is it worth it?
But to get the cost issue out of the way, let’s address it: A 2012 report from the Conference Board stated that executive coaching rates ranged from $200 to over $600 per hour. In 2009, Harvard Business Review placed the median Executive Coach cost at $500/hour with a range of $200-3500 per hour. Figures for 2013 are not yet available, but we can assume that they are slightly higher as the economy recovers.
With a typical CEO Coaching Engagement lasting from 6-12 months, with an average of four hours per month of coaching, plus assessment tools and possibly some shadowing of the CEO, you can expect the Executive Coach is working about 50 hours. At $500/hour, that puts a six-month engagement at $25,000, and a year-long engagement at $50,000. We don’t charge that much at Arden, but let’s use those numbers to look at ROI, to give you a higher end estimate:
I’ll use the formula for ROI laid out in this article: ROI of Executive Coaching.
By that formula, the ROI is calculated at % ROI = [(benefits achieved – cost of coaching)/cost of coaching] x100
That means, that if the benefit achieved from the coaching is worth, say, $200,000 and the cost of the coaching is $25,000: the %ROI is 700%.
Many studies show that the typical % ROI on Executive Coaching is actually much higher than that, but again, let’s use a conservative approach.
So now the question is: Is a 700% ROI, or a $200,000 benefit to your company worth it?
Well, if you’re a small company, probably; especially given that the skills a coach will work on with the CEO will continue to pay benefits long after the engagement is complete. That is, if it’s a $200,000+ return each year for every year the CEO is in that role, is that worth it?
Of course, the larger the organization, the larger the impact coaching will have: the leader impacts the entire organization, so impacting the leader of a 50 person company is one thing; impacting the leader of a 5000 person company is a whole different ballgame.
If Coaching the CEO will give that leader a clearer understanding of her/himself that results in a new strategy for the company, how much is that worth? $200,000? $2,000,000? In many cases, much more. If CEO Coaching results in a new way of working internally or of dealing with clients, might it retain three valuable VP’s at a replacement cost of $300,000 each, plus resulting in more business with new clients that is worth millions? Of course.
So now the question is really: What are you looking for the CEO Coaching to achieve and do you see that having the necessary impact?
In other words, if you are looking for the CEO to be more inclusive and mentoring to her direct reports, what impact do you say that will have on her and the work of all those direct reports? If you’re looking for a CEO who’s recently taken over the role to clearly define his mission and re-create the company vision, what impact do you say that will have over the next 10-20 years?
These are all questions that are important to work out as you enter the coaching engagement: be sure to discuss these factors with the coaches you are considering. If you’re stuck or need assistance in determining this for your own company, please contact us for a complimentary consultation regarding your CEO Coaching.