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ROI is a poor measure of coaching success: Towards a more holistic approach using a well-being and engagement framework

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In this article, it is argued that financial return on investment (ROI) is an unreliable and insufficient measure of coaching outcomes, and that an over-emphasis on financial returns can restrict coaches’ and organisations’ awareness of the full range of positive outcomes possible through coaching. Furthermore, poorly targeted coaching interventions that myopically focus on maximising financial returns may actually inadvertently increase job-related stress and anxiety. The well-being and engagement framework (WBEF) is presented as an example of a potential approach for evaluating the impact of coaching in organisational settings that can give a richer overview of coaching outcomes than financial ROI. Although financial ROI may well be an attractive metric for some managers and organisations, it is proposed that frameworks such as the WBEF and goal attainment can provide a far more comprehensive and meaningful metric than financial ROI.
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ROI is a poor measure of coaching success: towards a more holistic
approach using a well-being and engagement framework
Anthony M. Grant*
Coaching Psychology Unit, School of Psychology, University of Sydney, Sydney, NSW 2006,
Australia
(Received 28 February 2012; final version received 1 March 2012)
In this article, it is argued that financial return on investment (ROI) is an
unreliable and insufficient measure of coaching outcomes, and that an over-
emphasis on financial returns can restrict coaches’ and organisations’ awareness
of the full range of positive outcomes possible through coaching. Furthermore,
poorly targeted coaching interventions that myopically focus on maximising
financial returns may actually inadvertently increase job-related stress and
anxiety. The well-being and engagement framework (WBEF) is presented as an
example of a potential approach for evaluating the impact of coaching in
organisational settings that can give a richer overview of coaching outcomes than
financial ROI. Although financial ROI may well be an attractive metric for some
managers and organisations, it is proposed that frameworks such as the WBEF
and goal attainment can provide a far more comprehensive and meaningful
metric than financial ROI.
Keywords: coaching; return on investment; ROI; well-being; workplace
engagement; evidence-based coaching
Introduction
As financial uncertainty and constraints increasingly become central features of the
economic and business landscape, those that provide coaching services to organisa-
tions tend to turn their attention to means of validating their coaching services and
demonstrating that their coaching does indeed deliver value for money. One of the
first metrics that may come to mind is the financial return on investment (ROI).
After all, it might be argued, organisations are generally in business in order to make
money, so organisational coaching initiatives are best evaluated by the amount of
money they return to the organisation. This is especially poignant in tough economic
times, and thus ROI may well be an attractive metric for some managers.
The view that financial ROI is a vital measure of organisational coaching success
has received some considerable mileage in the coaching literature (Hernez-Broome,
2010; McGovern et al., 2001). Although the proposition that the success or failure of
This article is based, in part, on a presentation given at the Association for Coaching on
‘Leadership Coaching: Developing Elite Performance’ held at the University of East London,
London, July 2010
*Email: anthony.grant@sydney.edu.au
Coaching: An International Journal of Theory, Research and Practice
2012, 112, iFirst article
ISSN 1752-1882 print/ISSN 1752-1890 online
# 2012 Taylor & Francis
http://dx.doi.org/10.1080/17521882.2012.672438
http://www.tandfonline.com
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an organisational coaching intervention can be reduced to a single financial metric
may give some purchasers of coaching services some comfort and reassurance about
the perceived value of coaching, the ROI metric is not without its critics (De Meuse,
Dai, & Lee, 2009). Certainly, it is important that organisations are attuned to the
amount they spend on coaching and are able to justify such expenditure: that point is
not in debate. What is in debate is the notion that financial ROI can provide a
fundamental or meaningful benchmark of coaching success.
In this article, I draw on past scholarship in this area (e.g., Anderson, 2010; Grant,
Passmore, Cavanagh, & Parker, 2010), and argue that although financial ROI is an
accepted metric, flaws and weakness is in the overly simplistic way that it is calculated
mean that financial ROI is an unreliable and insufficient measure of coaching
outcomes. Organisational coaching initiatives should of course be evaluated, but we
need far more comprehensive measures for this task than financial ROI.
As most organisational trainers and coaches who deliver training, education or
coaching recognise, evaluation is not just about financial payback. The issue of how
best to measure the impact of training and coaching has exercised researchers for a
very long time. In this article, I aim to contribute to this debate. I initially explore the
concept of financial ROI and show why financial ROI is indeed an unreliable and
insufficient metric. I then present a humanistic framework that I argue has the
potential to provide a taxonomy from which to more comprehensively evaluate
organisation coaching interventions, and discuss some quantitative measures that
might be effective in its operalisation.
What is ROI?
The ROI metric is typically positioned as being an extension of Kirkpatricks (1977)
classic four-level taxonomy for evaluating training programmes which has often also
been used for evaluating coaching programmes (e.g., Kampa-Kokesch & Anderson,
2001; McGovern et al., 2001; Phillips, 2007; Rock & Donde, 2008).
In Kirkpatricks original taxonomy level one is about evaluating trainees reactions
how much a participant likes or enjoys a training programme. This level focuses on
participants feelings, rather than assessing is any learning has taken place.
Level two is about evaluating learning measuring the knowledge acquired, skills
improved or developed or changes in attitudes. Level three is about assessing change
in behaviour the extent to which learnings acquired are subsequently manifested in
the workplace though observable behavioural change. Level four focuses on results
that occur due to the training programme. These could include increased sales,
reduced costs or any business-related metric.
It is of note that Kirkpatrick argues that, in order to fully understand the impact
of a specific training programme, all four levels should be evaluated, and that it is
important that the relative costs and benefits of specific training programmes be
evaluated, although he did not use the term return on investment (for a detailed
discussion see Kirkpatrick, 1996).
The notion of a Level Five as being an explicit ROI step is typically credited to
Phillips (1997) and is now commonly viewed as a logical extension of Kirkpatricks
model.
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Calculating ROI for coaching
In brief, the standard formula for calculating ROI involves subtracting the costs of
coaching from the estimated value of the outcomes of coaching and then expressing
this as a percentage ((estimated coaching benefits costs of coaching/costs of
coaching)100%).
However, there are number of different applications of this formula reported in
the literature; for example, deliberately underestimating the financial return figure,
thereby producing a conservative estimate, or including a rating of the coachees
level of confidence that all or some of the perceived benefits were in fact due to
coaching (De Meuse et al., 2009; Parker-Wilkins, 2006; Phillips, 2007).The impact of
these varied applications is that the meaning of the ROI metric varies considerably
between different studies, making the ROI metric unreliable and this makes
meaningful comparisons between studies difficult if not impossible.
A broad range of ROI figures for coaching has been reported. These
include estimates of 221% (Phillips, 2007), 545% (McGovern et al., 2001) and
788% (Kampa-Kokesch & Anderson, 2001), with figures of between 500% and
700% commonly reported as being the ROI for executive coaching (Anderson,
2008).
Why ROI is an unreliable and insufficient outcome measure
In understanding why ROI is an unreliable and insufficient coaching outcome
measure, it is important to note that the ROI metric depends on two things: (1) the
total costs of the coaching intervention including the amount charged by the coach
and (2) the financial benefit obtained.
Using an extreme and highly simplistic example: Organisation X employs a coach
who charges $5000 for the coaching engagement. The coach works with an executive
who is working on a deal that will produce $10 million profit. The deal is successful,
and in retrospect the executive estimates that 50% of the result is due to the coaching
(and let us assume that the executive is correct in making this estimate). Using our
standard formula, this would result in an ROI for executive coaching in the region of
99,900%. This would undoubtedly seem attractive to management, but we must
acknowledge that the metric is probably misleading because of the flaws in the way it
is calculated.
At best this figure might be indicative of the ROI for this specific engagement.
Even that is not clear. It must be noted that a key factor in determining a ROI figure
is the degree to which revenue can be attributed to the actual work of the coachee and
the extent to which such work has been enhanced by the coaching. Where the
coaching engagement with one individual is aimed at enhancing a predefined specific
set of behaviours that are directly linked to a specific outcome that is in turn directly
linked to a financial value, it may be possible to draw a reliable direct causal line
between coaching and financial return. However, whilst organisations often seek to
improve financial performance as a result of coaching, clearly defined financial
metrics are typically not the direct focus of coaching interventions and the estimated
financial benefits often represent highly subjective and contextually bound variables
(Grant, Green, & Rynsaardt, 2010).
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Furthermore, where the coachees work involves managing or directing others in
order to attain organisational goals, the causal chain between coaching and eventual
financial outcomes become even more tenuous. It is often extremely difficult to
delineate specific causal relationships between a coaching intervention and improve-
ments in organisational metrics. In addition, ROI calculations tend to ignore the
impact of other variables such as market context and team input (e.g., Rock &
Donde, 2008). Moreover, while there can be reasonable certainty about the direct
costs of coaching, indirect costs (e.g. opportunity costs) tend not to be included. It
should be noted that these issues have not typically been satisfactorily factored into
ROI studies to date (Grant et al., 2010).
Even if such factors can be satisfactorily accounted for, at best a financial ROI
metric can only be indicative of the actual coaching engagement in question. In order
to meaningfully compare ROI across different coaching studies to determine the
financial ROI of coaching all facets of the coaching engagement must be similar
across the studies, including coaching costs and the opportunities that the coachee
has to shape the outcomes of the revenue stream.
Unless such issues are specifically and adequately addressed, the financial ROI
metric has limited validity. If these issues can be satisfactorily addressed in any
specific intervention, then ROI may be able to provide some indications about the
financial impact of that specific coaching intervention. However, whilst this metric
might be a useful means of approximating the financial benefit of a specific coaching
engagement, I would argue that it is not a comprehensive measure of the broader
impact of coaching interventions in the way that it is currently applied.
Is ROI primarily about marketing, rather than measurement?
There are other contextual issues at play that may be further undermining the
credibility of the ROI metric. Virtually, all ROI research is conducted by
organisations that supply coaching services, or by the human resources professionals
that have contracted them to supply coaching services to their organisation. It is also
clear that much of the ROI literature that is presented as being academic research
bears more resemblance to marketing material promoting a specific proprietary
coaching service rather than a rigorous peer-reviewed scientific evaluation.
In this literature, then, due to vested interests in emphasising commercial success
it is possible that there is some level of unconscious bias at play when reporting the
results of the coaching intervention. Of course, this is not to imply purposeful
misrepresentation of data. However, there may be some unrecognised and
unintended demand characteristics at play which effect participants responses and
the way that data are collected, reported and interpreted (Grant et al., 2010).
The use of non-validated questionnaires of uncertain reliability is an issue of
particular concern. Much ROI research is conducted by practitioners who may not
have explicit training in developing reliable questionnaires, increasing the risk that
the questionnaires used may elicit-biased responses (for a detailed and thorough
discussion on the development of customised assessments of coaching interventions
and some of the major potential pitfalls see Peterson & Kraiger, 2004).
Furthermore, where there is a particularly close relationship between the coach,
coachee and organisational representatives, respondents may unconsciously feel
under pressure to report favourable results or overstate the effect of coaching. This is
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particularly the case in retrospective studies, a category within which most ROI
studies fall. The negative effects of recall bias have been well-established in a wide
range of areas (Chouinard & Walter, 1995; Infante-Rivard & Jacques, 2000; Mathews
& Bradle, 1983).
In addition to the problems presented by recall-based retrospective research, is
the fact that many ROI studies fail to adequately detail the methodology by which
they arrive at the supposed ROI figure. For example, Rock and Donde (2008) claim
an ROI of 17 times the organisational investment, yet beyond reporting a single
dollarised ROI amount (p. 79) they provide no details of how this figure was
calculated. For this reason, such research should be interpreted with some caution. In
contrast, there are a number of studies that exemplify good practice in this area. For
example, Levenson (2009) and Phillips (2007) both provide detailed and thorough
accounts of how ROI data are obtained and calculated, and future researchers might
like to include such detailed analyses in future studies of ROI in coaching.
Towards a more comprehensive approach to measuring coaching success
Given that financial ROI can be considered a somewhat unreliable measure of
organisational coaching outcome, what might be a more appropriate means of
evaluating organisational coaching success?
To answer this question, we need to recognise that overly focusing on the
potential monetary gains to be made from coaching gives an extremely limited view
of the potential benefits of coaching. Furthermore, poorly targeted coaching
interventions that myopically focus on ensuring financial returns may inadvertently
increase job-related stress as the coachee struggles to achieve unrealistic or
inappropriate goals (for an informative discussion on the effects of inappropriate
goal setting in organisational contexts see Ordo´n
˜
ez, Schweitzer, Galinsky, &
Bazerman, 2009; Schweitzer, Ordonez, & Douma, 2004)
Such outcomes are avoidable as it is clear from the literature that well-
targeted workplace coaching has the potential to deliver a wide range of positive
outcomes including increased workplace engagement (Arakawa & Greenberg, 2007),
decreased stress (Gyllensten & Palmer, 2005) depression and anxiety, increased
resilience and well-being (Grant et al., 2010), as well as goal attainment (Linley,
Nielsen, Gillett, & Biswas-Diener, 2010). It is important to note that all of these
variables can be satisfactory assessed using pre-existing, validated measures which
are preferable to the non-validated questionnaires typically used in assessing ROI.
Two important variables for coaching in organisational settings are well-being
and workplace engagement. Organisations function better with mentally healthy
employees who are engaged in their work activities, and these I argue should be some
of the key metrics in evaluating coaching success. These humanistic metrics are able
to give a far more meaningful and holistic view of the impact of a coaching
intervention than a single monetary figure.
Well-being is more than the absence of mental illness, and involves high levels of a
number of facets of psychological well-being, including self-acceptance, purpose in
life, positive relations with others, environmental mastery and autonomy (Ryff &
Keyes, 1995). Individuals high in well-being are designated as flourishing in life,
whereas those low in mental health symptoms are designated as languishing (for
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further information on the concepts of flourishing and languishing see Keyes &
Haidt, 2003).
Workplace or employee engagement, the positive opposite of job burnout, can be
understood as a state of high energy, strong involvement and strong sense of
commitment to the performance of work functions (Maslach & Goldberg, 1998).
The well-being and engagement framework
The well-being and engagement framework (WBEF; Figure 1) first articulated by
Grant and Spence (2010) and outlined below has two dimensions: a well-being
dimension (high-low) and a workplace engagement dimension (high-low). Please note
that the areas within this diagram are qualitatively representative only and are not
meant to reflect the quantitative distribution of individuals across the various
quadrants.
Area of flourishing
The area of flourishing is located in the upper right area of Figure 1, where
individuals experience elevated well-being and high levels of engagement. Individuals
in this area would be highly involved with and absorbed in their work, have a well
developed sense of work-related meaning and purpose and enjoy positive relations
Figure 1. The well-being and engagement framework for assessing organisational coaching
interventions.
Note: The WBEF may be freely used for coaching and consulting practice and research
provided that appropriate authorship acknowledgments are made.
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with work colleagues. In an organisational or workplace coaching context, this area
may well represented the ideal (or target) state.
Area of acquiescence
The upper left quadrant represents individuals who have good levels of well-being
but low levels of workplace engagement. Employees who acquiesce can be described
as happy but disengaged. These are employees who are physically and emotionally
present but who are not actively engaged with the organisations goals or its day-to-
day work. Although some individuals may well prefer employment in contexts that
do not demand such engagement, it can also be expected that those in this quadrant
would become increasingly cynical about their work over time, eventually drifting
into a state of languishing.
Area of languishing
The area of languishing spans the lower quadrants of the framework and represents
individuals who have relatively low levels of well-being but not high levels of
depression, anxiety and/or stress and also have only moderate levels of workplace
engagement. Individuals who are languishing may be trying to become more engaged
and involved with their work (possibly with the assistance of a coach or mentor), but
in general their working lives are lacking the vigour, energy and resilience usually
associated with high levels of workplace engagement and personal flourishing
(Maslach & Goldberg, 1998).
Area of the distressed but functional
The lower right area is the area that delineates distressed but functional individuals
who have comparatively high levels of workplace engagement. Individuals here are
highly functional in terms of work performance but they may also be dysthymic
(a form of mild but chronic depression), have high levels of anxiety or be chronically
stressed. Depending on the nature of the organisation, there may well be a significant
percentage of the organisations employees in this category. Mental health issues in
this quadrant can range from moderately dysthymic or distressed to high levels of
distress. Coaching in this quadrant can be a significant challenge for coaches who do
not have clinical or counselling training in issues related to mental health (Cavanagh,
2005). This is because, contrary to popular belief, it is often quite difficult to identity
depression or anxiety. Indeed coachees in this area may not even be aware that they
have mental health problems and are thus not likely to seek out treatment. It is more
likely that coachees here will present with issues in line with the coaching context
such as delegation, motivation, time management, staff retention or interpersonal
communication difficulties or conflicts (Grant et al., 2010).
Area of burn-out and psychopathology: the disengaged and distressed
The lower left area in the model is the area of burn-out and psychopathology.
Individuals in this area may well have relatively high levels of mental illness, and
these might include major depression, major anxiety disorders, chemical dependencies
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or alcoholism, self-defeating behaviour patterns or major personality disorders.
Individuals in this area also would have very low levels of workplace engagement and
may well be experiencing major symptoms of job burnout, high levels of cynicism
and physical and mental exhaustion. Individuals in this quadrant may be more suited
for counselling or a therapeutic intervention than coaching. Coaches and consultants
should to be able and prepared to refer such individuals to appropriate mental health
professionals for help with such issues rather than trying to address them within a
coaching relationship.
Using the well-being and engagement framework
On an individual level, the WBEF or similar approaches could provide useful
evaluative frameworks which could allow coaches, and those evaluating coaching
interventions, to track coachees progress over time, assuming that the goal of the
coaching intervention is to move individuals into the area of flourishing. It could
also be used as a diagnostic tool to help determine whether individuals would benefit
from counselling or coaching. In addition, it could be used to help determine the
focus of the coaching intervention; that is, if the coaching should be primarily aimed
at relieving stress, increasing well-being or enhancing engagement through the
pursuit of workplace goals that are meaningful and poignant for the individual.
In relation to the evaluation of coaching interventions on an organisational level,
by using aggregate well-being and engagement metrics the WBEF might provide a
useful heuristic from which to categorise work groups, managerial teams and even
whole organisations, benchmarking the extent to which an organisation is flourish-
ing, languishing or in a collective state of psychological distress.
The WBEF builds on and extends the core facets of Kirkpatricks (1977)
taxonomy, conjointly placing Kirkpatricks emphasis on; level one: emotions and
reactions; level two: learning; level three: behavioural change; and level four: the
results that occur due to the coaching programme, within a more contemporary
organisational framework of well-being and engagement.
Measurements relevant to the well-being and engagement framework
As regards the operationalisation of the WBEF. At present, the WBEF is primarily a
conceptual model and a specific WBEF measure has not yet been developed.
However, there are a number of pre-existing quantitative measures that could be used
to operationalise the WBEF.
The horizontal axis of the WBEF represents the well-being dimension.
Individuals in the upper section of this dimension would be high in positive affect
and low in negative affect. Conversely, individuals in the lower sections of this
dimension would be low in positive affect and high in negative affect. The Positive
and Negative Affect Scale (PANAS; Watson, Clark, & Tellegen, 1988), a well-used
and reliable 10-item questionnaire that measures the presence of positive and
negative affect, could be used to operationalise the well-being dimension. Other
measures that could be used on this dimension would included the Depression,
Anxiety and Stress Scales (Lovibond & Lovibond, 1995) for the lower section of this
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dimension and the WarwickEdinburgh Mental Well-being Scale (Tennant et al.,
2007) for the upper section.
The vertical access of the WBEF represents the engagement dimension.
Individuals on the right-hand section of this dimension would be high in
engagement, and individuals in the left-hand section of this dimension would be
low in engagement. The are a number of short questionaries that measure workplace
engagement. One of the better known is the 12-item Gallup Q12 and this could
be used to assess this dimension (for full details of the Gallop Q12 workplace
engagement survey see Harter, Schmidt, & Keyes, 2003). Other measures could
include the Utrecht Work Engagement Scale (Schaufeli, Bakker, & Salanova, 2006).
An individuals scores on these measures would locate them within a specific
quadrant in the WBEF, and by taking repeated measures over time it may be possible
to track changes and thus calculate the impact of a coaching intervention on well-
being and engagement.
As previously mentioned, at present the WBEF is primarily a conceptual model.
Clearly, further development is needed, but in time frameworks such as the WBEF
may provide a means of conceptualising the impact of coaching in organisations that
goes beyond the monetary viewpoint inherent in the use of financial ROI.
Using models such as the WBEF we may in time even see a humanistic ROI
developed with could be used in conjunction with the existing financial ROI metric.
This would allow organisations to assess the impact of coaching on well-being as well
as their finances surely a more meaningful and compressive approach than can be
obtained by a myopic focus on financial ROI.
Final thoughts and key points
An explicit focus on well-being and engagement, rather than monetary issues, is
important because people tend to pay attention to what is measured, and such
measurement tends to change behaviour (Morwitz & Fitzsimons, 2004). Thus, the
primary metrics used to assess coaching interventions can have a significant impact
on the coaching agenda. The research clearly shows that coaching has great potential
to enhance the performance, productivity and well-being of individuals, organisa-
tions and the people that work for them (e.g., Grant, 2003).
Organisations and workplaces are more than just money-making machines. They
are social and psychological contexts in which people live, work and relate (Bates &
Thompson, 2007). Of course, money-making is important. But so is the develop-
ment, growth and well-being of the people that constitute organisations and
workplaces (Baptiste, 2008). We do our clients, ourselves and the coaching industry
a great disservice by overly focusing on the financial outcomes of coaching.
Although a monetary appraisal of the financial viability of coaching engagements
is an essential part of the natural due diligence that organisations should conduct, a
myopic focus on financial issues runs the risk of client organisations being blinded to
the very real potential of coaching to create a broad range of positive humanistic
outcomes. With coaching being able to deliver a such rich array of potential human
benefits, financial ROI is indeed a poor and impoverished measure of coaching
success.
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Notes on contributor
Anthony M. Grant, PhD, is widely recognised as a key pioneer of
Coaching Psychology and evidence-based approaches to coaching.
He is the Director of the Coaching Psychology Unit at Sydney
University, a Visiting Professor at the International Centre for
Coaching and Leadership Development, Oxford Brookes University,
Oxford, UK, a Senior Fellow at the Melbourne School of Business,
Melbourne University, Australia, and an Associate Fellow at the Sa
¨
id
School of Business, Oxford University, Oxford, UK. In 2007,
Anthony was awarded the British Psychological Society Award for
outstanding professional and scientific contribution to Coaching
Psychology and in 2009 he was awarded the Vision of Excellence
Awardfrom Harvard University (McLean Hospital) for his pioneer-
ing work in helping to develop a scientific foundation to coaching. He
also plays loud (but not very good) blues guitar.
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12 A.M. Grant et al.
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... He even points out that paying too much attention to financial returns can be limiting for both coaching and organization. Coaching processes focusing too much on maximizing profits can increase employee stress and anxiety (Grant, 2012). While research conducted by J. Phillips, has shown a positive return on investment in coaching (Phillips, 2022). ...
... The subject matter of the results of coaching activities is the subject of numerous and current research both in the quantitative dimension (ROI return on investment) (e.g., Phillips 2022), as well as qualitative (ROE return on expectations) (e.g., 2012 Grant). Cluster 4, with the leading author's keyword management performance, includes, among others, problems of effectiveness, engagement, and competitive advantage. ...
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... А 36% не вярват, че притежават необходимите умения, за да вършат работа си по най-добрия начин . Много често и в практиката, и в литературата се набляга на финансовите измерения на коучинга, например възвръщаемост на капитала, но това е трудно измеримо, а и подобно фокусиране върху финансови измерители може да стесни гледната точка и коучовете, от една страна, и организациите, от друга, могат да не осъзнаят напълно истинското влияние на коучинга (Grant, 2012). Много важно е резултатите да се отчитат в контекста на други фак-тори, например ангажираността и благосъстоянието на служителите, които, както вече коментирахме, индиректно са изключително важни за успеха на организациите (Gallup, 2021(Gallup, , 2022. ...
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Jack Phillips has composed user-friendly ROI calculations, plus: *ten post-program data collection methods *ten strategies for determining the amount of improvement that is directly linked to training programs *ten techniques for converting both hard and soft data to monetary values.