As budgets tighten, more organisations are looking for tangible results from coaching – often in terms of hard cash. Alan Ward tries to answer to the tricky question about return on investment.

Can you prove the value of your coaching? It's a perfectly understandable question. 'In fact, in these difficult times, it's almost inevitable. All the same, many coaches dread it.

Instead of hoping it doesn't arise, it's worth thinking about what lies behind the question. Of course, organisations need to spend their money wisely - and they need to be able to justify that expenditure. But, unfortunately, there's no direct link between coaching and profitability. We can't simply say: "If you spend £1,000 on coaching here, I'll guarantee you £10,000 worth of value there."

There are two reasons for this. Firstly, coaching is often intangible. You know the cost but how do you assess the contribution? Sometimes a coaching observation can lead to a behavioural change that has a huge impact on the way an individual interacts with others. Over time, this may have a significant effect on the organisation's bottom line - but by then, the coach has been and gone. The coaching may have been extremely successful but, at the time, the coach couldn’t have answered the accountant's question about return on investment.

"If you are asked about 'return on investment', one option is to say that it's the wrong question. The question should actually be: "Do you believe that coaching is more likely or less likely to have an impact on the bottom line?"

Secondly, even if coaching leads to a tenfold increase in productivity, credit is rarely given where it is due. It's too easy for detractors to dismiss any resultant improvement as being down to other factors: 'the environment improved'; 'ah, but we've also hired this other person' or 'yes that individual improved but he also got divorced so he's been focusing more on his work'.

If you are asked about 'return on investment', one option is to say that it's the wrong question. The question should actually be: "Do you believe that coaching is more likely or less likely to have an impact on the bottom line?" They won't proceed if it's the latter. If you do go ahead, look for evidence to support the impact that coaching has on performance.

Another option is to bounce the question back, with: "What is the return that you're looking for on this investment - and how would you like to measure it?" This gives you a brief that you can respond to. It may be to increase sales, enhance performance, cut staff turnover or reduce errors. Whatever it is, you can then challenge this brief and decide whether coaching is the right route to achieve the objective.

It's too easy for the client or the sponsor to put the burden on the coach by asking: "If I pay you to do this, how will I know it's made a difference?" Throw back the challenge: "What difference are you looking for?"

This is not about being a Smart Alec with a pat answer. It's good coaching practice to ask these kinds of questions. Responding with 'How would you like to measure it?' or 'How will you know if you've succeeded in changing people's perceptions of you?' helps the client to take responsibility for the brief they're giving you - and it helps them to articulate goals.

Often with coaching - and coaches are often at fault for this - there is a general brief to improve someone’s performance, productivity, motivation or whatever. Coaching is subsequently aimed at increasing their all-round performance, as opposed to dealing with specifics.

Coaches need to be very clear when they contract with clients. Always try to align your coaching objectives very specifically to the organisational objectives - and where possible to outputs that are measurable.

Consider, for example, a brief to reduce staff turnover. If turnover levels have been 20% for the last three years and, after your coaching programme, these reduce to 10%, you can calculate a resultant saving (by multiplying out the average recruitment and induction costs for a new employee, which might be two-to-three times the annual salary). If you have a very specific objective which is quantifiable, this can work. Beware, though; detractors will point to all kinds of other reasons why staff turnover levels have reduced.

Contracting for financial measures can create three dilemmas for coaches. These are:

Short-termism: Contracting can shift the emphasis onto short term wins. If you are asked to improve sales in a six-month period, you have to do something pretty fundamental to make a change in that timeframe. You're more likely to do that through some gimmick than by helping a person to change their behaviour. You may get a 'quick win' but you won't achieve a sustainable change because that individual's behavioural issues are not going to go away. In other words, if an organisation is looking at short-term financial measures, coaching may not be the best way forward. If they want longer-term financial measures to be achieved through changes in behaviour, then coaching can help.

Focus: Contracting to specific goals can also create a dilemma around focus - do you stick to the corporate objective or respond to the individual's needs? You may have a specific objective but what if a deeper problem arises - with far-reaching implications - that has nothing to do with your original aim? It may or may not be a complete distraction. Either way, it will be important to re-contract. The coach should say: 'We're moving away from our original brief or getting into areas that we hadn't anticipated, so what's a good way forward?'

What to measure? Perhaps the biggest challenge in trying to calculate a return on the coaching investment is that the benefits of coaching go beyond the impact it has on individuals. Coaching says much about the values of the organisation and it relates to the psychological contact. If your employer cares about your welfare - and they're willing to provide professional and emotional support to help you be more effective in your job - that tends to generate loyalty. It builds a happier, more supportive environment where people want to work and are more able to take on challenges. The opposite is an employer who provides little support and says: "You're paid a lot of money, get on with it or we'll fire you." So, even if you don't measure anything else, consider the value of being seen as a supportive employer and the impact that providing coaching can have on recruitment and retention.

Coaching often involves getting people to think about what they’re doing, what their limiting beliefs are and their points of accountability. It can encourage people to work outside of their comfort zone and to reach higher levels of performance. This moves the organisation on from a state of 'business as usual', where everyone knows what to do and they carry on doing it, often without noticing that the market has shifted beneath their feet. Coaching can help individuals to appreciate that they can't stand still - it can provide the challenge and support that is more likely to help them adapt to the new reality.

So, coaching can position the organisation culturally as a place where people want to work hard for the future of the business, not just for today. If you were to invest in such an organisation, do you think you'd get a return on that investment? I believe you would.

Alan Ward is director of Coach Education at Performance Consultants, which has been running university-accredited qualification programmes in coaching and development since 2003. The firm's postgraduate certificate, postgraduate diploma and MSc are modular, part-time programmes awarded by the University of Portsmouth and accredited by the European Mentoring and Coaching Council