The Value of Emotional Intelligence for Managers and Leaders Research has shown that over 80% of the competencies that differentiate top performers from others are in the domain of EI/EQ, yet the notion of emotions in the workplace is often greatly misunderstood. For many, EQ sounds woowoo and not of high value; and according to Harvard Business Review, managing emotions is anything but woowoo.
A person’s Emotional Intelligence quotient (EQ) is a more significant determining factor in business and career success than IQ, education and experience combined. Business careers, especially at the senior level, are rarely accelerated or derailed because of a person’s intellect, type of experience, or choice of business school. The determining factors usually have to do with EQ related traits such as self-worth, integrity, empathy, and emotional stability.
Unlike IQ, which is set at birth, EQ can be increased during a person’s lifetime with proper training.
General Electric alone reportedly spends over $1 billion per year on social and emotional competencies in leadership programs (Cherniss & Adler). Cherniss and Goleman estimate that EQ based training results in as much as 8x return on investment (ROI) when compared to non – EQ trainings. Cherniss estimates that US businesses lose between $5.6 and 16.8 billion by not having appropriate EQ training.
To calculate ROI (Return On Investment) for EQ, start by looking at the average effect size between top 10 percent and lower 75 percent of leaders. The ‘effect size’ metric is a standardized method for calculating the magnitude of the difference between the two groups. The difference between high and lower EI leaders is 0.72, which is a statistically relevant difference.
Assuming an average leader salary of $75,000 per year, the difference between a high and average EQ leader equates to $21,600 per year. For an organization with 2,000 leaders this figure multiplies to $43.2 million in human capital asset value per year. While this is a large number, it still does not account for the human capital asset value improvement experienced by leaders’ direct reports.
A leaders’ value extends far beyond their individual contributions. Even a slight improvement in EQ would lead to large benefits for an organization. For example, a program yielding a one-percentage point improvement in leader EQ would provide incremental human capital value of $2,160. Even if this program cost the organization $500 per person, the ROI would be 332%.
Clearly, investments in improving EQ have the potential for dramatically improving the productivity and value of leaders in organizations. It also echoes the results of a study conducted by Bloomberg BusinessWeek and Hay Group: companies ranked in the top 20 for leadership acumen significantly outperformed the S&P 500 in both the short and long terms.
- In UK’s Whitbread group, restaurants with high EQ managers had higher guest satisfaction, lower turnover, and 34% greater profit growth (Bar-On and Orme)
- 75% of careers are derailed for reasons related to emotional competencies, including inability to handle interpersonal problems; unsatisfactory team leadership during times of difficulty or conflict; or inability to adapt to change or elicit trust (The Center for Creative Leadership).
- People who accurately perceive others’ emotions are better able to handle changes and build stronger social networks (Salovey, Bedell, Detweiller, & Mayer, 199 cited in Cherniss)
- The reason for losing customers and clients are 70% EQ-related (e.g., didn’t like that company’s customer service) (Forum Corporation on Manufacturing and Service Companies)
- In one year, the US Airforce invested less than $10,000 for emotional competence testing and saved $2,760,000 in recruitment (Fastcompany “How Do You Feel”)
- In a multinational consulting firm, partners who showed high EQ those who took the training reported significant improvements in their sales performance. Now all incoming advisors receive four days of emotional competence training (Fastcompany “How Do You Feel”)
- After supervisors in a manufacturing plant received training in emotional competencies, lost-time accidents were reduced by 50 percent, formal grievances were reduced from an average of 15 per year to 3 per year, and the plant exceeded productivity goals by $250,000 (Pesuric & Byham).
- Top performing sales clerks are 12 times more productive than those at the bottom and 85 percent more productive than an average performer. About one-third of this difference is due to technical skill and cognitive ability while two-thirds is due to emotional competence (Goleman).
- Emotions and reason are intertwined, and both are critical to problem solving (Damasio). Social and emotional abilities were four times more important than IQ in determining professional success and prestige (Feist & Barron, cited in Cherniss).
- At L’Oreal, sales agents selected on the basis of certain emotional competencies significantly outsold salespeople selected using the company’s old selection procedure by $91, 370, for a net revenue increase of $2,558,360. Salespeople selected on the basis of emotional competence also had 63% less turnover during the first year (Spencer & Spencer; Spencer, McClelland, & Kelner, cited in competencies earned 139% more than the lower EQ partners (Boyatzis).
- American Express tested emotional competence training with Financial Advisors; trained advisors increased business 18.1% compared to 16.2% for a control group (Cherniss).