The business case for emotionally intelligent leadership

As leaders around the world learned about emotional intelligence, many immediately saw how these concepts could improve critical areas of people’s performance. Leading global organizations from American Express to Federal Express, and from the US Air Force to Sheraton, are experimenting with emotional intelligence as a component of competitive advantage.

Harvard Business Review (HBR), one of the most respected sources of business best practices, has produced many articles on emotional intelligence. Their 1997 article by psychologist and author Daniel Goleman ranked as the most requested article of all time. This popularity led Harvard Business Review to re-examine the data on emotional intelligence again in 2003. Their conclusion:

“In tough times, the soft stuff often goes away. But emotional intelligence doesn’t seem to be weak. If emotional forgetfulness threatens your ability to perform, fend off abusers, or empathize in a crisis, no amount of caring minimally will protect your career. Emotional intelligence is not a luxury You can go without him in difficult times. He is an essential tool, deployed with brilliance, that is the key to professional success.”[i]

Your organization is made up of people, processes, and properties. For a long time, the “common wisdom” was that returns come from investing in the latter two. However, in the past decades, new research has challenged this assumption and increasingly demonstrated that company employees are the differentiating factor.

Indeed, for most firms, products and properties produce little competitive advantage. You develop a new process, and within a week your competitor is duplicating it. You can increase efficiency and reduce the cost of the product, and next month a better version is produced for cheaper in another country. You invest in specialized equipment – and so does the man in the street.

So where can businesses today find a competitive advantage? With a mobile workforce, globalization, on-demand information, products and properties are not enough. Exceptional organizations invest in their relationships with customers, employees, and leaders—and over the coming decades, the people side will increasingly become the only meaningful competitive advantage. And if emotional intelligence helps build customer and employee loyalty, helps people innovate and perform, and helps leaders build value, then these competencies are essential for world-class performance.

Emotional intelligence affects employee performance in multiple ways. An employee’s EQ, employee interaction, and emotional tone—or climate—all greatly influence the way employees feel about work, and the effectiveness of the work they do.

I worked for the Six Seconds team with Sheraton Studio City in Orlando in a very difficult work situation. They were experiencing very high levels of executive turnover, their customer satisfaction results were suffering, and they were losing market share. Our new general manager, Grant Pannen, came in, and we were involved in a year-long project to improve performance. As Grant put it, employees needed more “bounce in their steps,” so we used the Enterprise Vital Signs Scale ( [] ) to identify specific areas where the climate was not suitable. We then conducted a series of emotional intelligence exercises to enhance dialogue, increase awareness of the emotional drivers of performance, and increase the team’s efficiency in managing the emotional side of employees. In all, the executive team had just over 20 hours of training, the selected individuals had a total of less than 20 hours of training, and the line staff had between 2 and 8 hours of EQ training.

The results have been a significant increase in customer satisfaction and market share, and a significant decrease in customer turnover.[ii] The customer experience was so great that the hotel group started sending VIPs to this 3 star hotel instead of the 5 star they have. We held our fourth NexusEQ conference at the Sheraton Studio City and the feedback was the most positive we’ve had of any hotel. A rep shared this story about an interaction that came to represent Sheraton Studio City line employees: “I asked someone from the hotel where I could get a chocolate bar. She asked what I liked, then told me she’d be back right away. Turns out she crossed the street and bought me one—unbelievable!”

Focusing on emotional intelligence changes the way employees interact with customers. This improves customer loyalty and increases sales. At L’Oréal, sales agents who are selected on the basis of certain emotional competencies significantly outperform salespeople who are selected using the company’s standard selection procedures. On an annual basis, salespeople selected on the basis of emotional competence sold $91,370 more than other salespeople sold, for a net revenue increase of $2,558,360.[iii]

Joseph Hee-woo Jae, of the Ateneo de Manila University in the Philippines, assessed 100 college-educated employees on the front lines of a major Asian bank. found that while IQ scores had almost no predictive value (0.07 association with performance, or less than 0.5%), EQ scores predicted 27% of job performance.[iv]

In a landmark study showing how emotional intelligence predicts real-world performance, David Rosette assessed leaders at the Australian Taxation Office using a combination of evaluation tools, performance measures and ratings by employees. Emotional intelligence predicted 25% of high performance, compared to cognitive ability, which predicted less than 2%, and a personality test that predicted nothing.[v]

In one of the UK’s largest restaurant groups, there was clear evidence that emotionally intelligent leaders were more effective. Managers with emotional intelligence had restaurants that outperformed others with higher guest satisfaction, lower turnover, and 34% more profit growth.[vi]

Drawing on your emotional assets, understanding what makes you tick, and staying awake on a daily basis are all things that emotional intelligence facilitates. Perhaps this is why emotionally intelligent leaders are more effective in running a business.



i Harvard Business Review, “Breakthrough Ideas for Tomorrow’s Business Agenda,” April 2003

ii Joshua Friedman, Case Study: Emotional Intelligence at the Sheraton Studio City Hotel, Six Seconds Institute for Organizational Performance ( [] ), 2003

iii Spencer & Spencer, 1993; Spencer, McClelland, & Kelner, 1997 (cited in Cherniss, 2003)

iv Research report by Multi Health Systems, published at ( ), 1998.

v EQ and Leadership – This study used the MSCEIT, an ability measure of emotional intelligence. David Rosette, A Leader’s Edge – What Traits Make An Effective Leader, NexusEQ ( ), 2005

VI Reuven BarOn and Geetu Orme, 2003, reported in Orme and Langhorn, “Lessons Learned from Implementing EI Programs” pp. 32-39, Competence and Emotional Intelligence, Volume 10, 2003

Copyright 2006 Joshua Friedman

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