Organizations around the world invest in leadership development to ensure their employees have the critical knowledge, skills, and experience to remain competitive. Industry estimates suggest the global investment in leadership development exceeds 3.5 billion dollars.

The latest research study from Sounding Board and Chief Learning Officer, which surveyed more than 450 learning and development practitioners, shows that 72 percent of organizations offer some type of leadership coaching. From 2020 to 2021, 41 percent of survey respondents say their spending on leadership coaching has increased and 45 percent reported no change. Less than 15 percent of organizations report a decrease in spending on leadership coaching.

Despite the increase in spending, measuring the business impact and the return on investment remains a challenge for most organizations. Leadership capabilities such as strategic thinking, collaboration, and decision making are hard to quantify, and measuring growth and improvement can be difficult. So how are companies using professional coaching for leadership development, and can they measure the business impact?

Coaching for Leadership Development

Organizations are providing leadership coaching to help individuals develop leadership skills they can use to navigate an uncertain business landscape and to develop the strength of their leadership bench. According to the 2021 Leadership Coaching Report, organizations are using leadership coaching to address various talent development needs. Eighty percent of organizations report that their principal need for leadership coaching is to improve skills for specific individuals. Increasing employee engagement and retaining key talent were also identified among the most common needs organizations are addressing with leadership coaching.

Leadership Capabilities

Self-awareness and communication were consistently ranked among the most important

capabilities for leaders at all levels. For emerging leaders, interpersonal skills and execution were also identified among the most important leadership capabilities. For midlevel managers, execution and leading high-performing teams were also reported among the most important capabilities. For senior and executive leaders, strategic thinking and setting vision and direction were among the most important leadership capabilities. Self-awareness and communication were also reported as the most difficult capabilities to develop in organizations, followed by managing change and strategic thinking.

Confidence in Measurement

Most organizations are not confident in their ability to measure business impact, but those who are report more positive outcomes and fewer challenges. Twenty-eight percent consider their ability to measure the business impact of leadership coaching to be high or very high and are more likely to use leadership coaching to retain talent (58 percent versus 39 percent) and to gain a competitive advantage (39 percent versus 18 percent).

More than half of these organizations use succession planning to measure the impact of leadership coaching, compared only to 23 percent of those with less confidence in their ability to measure. Customer satisfaction, productivity, and return on investment (ROI) are also used more frequently to measure the business impact of leadership coaching in these organizations.

Challenges and Opportunities

Organizations report a range of benefits from leadership coaching including employee engagement, retention, productivity, and leadership bench strength. But there are challenges as well. Companies not currently offering leadership coaching report budget and lack of resources as the biggest barriers. Among those that are offering leadership coaching, budget also is reported as the most common challenge followed by the lack of ability to measure ROI.

Organizations that have confidence in their ability to measure the business impact of leadership coaching are less likely to report challenges overall. They still report budget as the most common challenge (47 percent), but leadership buy-in is ranked second (27 percent) followed by the lack of technology to manage coaching engagements (23 percent).

Talent development professionals understand the benefits of coaching, but future growth and success depends on the ability to measure and report the business impact. Coaching is an effective method to drive organizational performance and improve the bottom line. Measuring the business impact can unlock the full potential of leadership coaching, providing an unprecedented level of data, transparency, and accountability.

Download the 2021 Leadership Coaching Report to learn more.