Emotional Intelligence and its financial impact 

According to Kim Morris Lee, Director of Organisational Effectiveness at the University of Illinois, when the American Air Force started considering emotional intelligence during their selection of recruits, their financial loss through recruiting the wrong type of people went down by a huge 92%. 

A 2022 Forbes article tells us “Various studies on EI in the workplace suggest a retention rate of 400% higher, employees who feel 50% more inspired by their work, up to a 50% decrease in lost-time accidents and more than 40% improved productivity. In fact, in one such study, the ROI of EI training was nearly 1,500%.”

With such a compelling result, you’d think emotional intelligence would be a must have for every organisation, but surprisingly it seems that the emotional intelligence ‘buzz’ might have gone unnoticed. Or maybe with the pandemic and other crises, we might have just simply forgotten about the importance of Emotional Intelligence.

So let’s go back to basics by understanding exactly what is emotional intelligence and the benefits it brings to wellbeing, productivity, psychological safety and much more.

How did the term ‘emotional intelligence’ (EI) emerge? 

It was Daniel Goleman’s bookEmotional Intelligence: why it can matter more than IQ’ that put EI on the map in the mid-1990s (following Peter Salovey and John Mayer’s studies five years before), though the term had actually been coined first in the 1970s in a doctoral dissertation by Wayne Payne. Signs of acumen other than cognitive intelligence (IQ) had emerged much earlier, however, in the 1920s, when psychologist Edward Thorndike studied what he termed social intelligence: “the ability to understand and manage men and women and girls, to act wisely in human relations”. 

Going back further, it was the demands of living together that drove our need for emotional intelligence, as our brain development proves. According to the Smithsonian, the human brain had a growth spurt between two million and 800,000 years ago, when early humans started to move around the globe and interact with others. Growth was even greater (doubling the brain in size) between then and 200,000 years ago when these early humans began living together in larger, more complex groups and communities. For the first time they now had to learn to manage multiple relationships and communicate with language. This all required a greater mental capacity and therefore a larger brain. Interestingly, this social development (EQ: Emotional Quotient-related) stimulated far more brain growth than previous societal developments such as learning to make and use tools (IQ-related). 

What exactly does emotional intelligence entail? 

There are differing models for EI but they broadly encompass two main areas: 

  • The ability to understand and manage ourselves and our emotions in any situation – understanding what made us the person we are today (values, beliefs, experiences) and what triggers us to react to a situation or something that people have said. Learning to feel and interpret the emotions that come over us, knowing how to manage them and how to adapt our behaviour accordingly. Being motivated to set and achieve our goals. Having self-compassion and self-control. 
  • The ability to understand and manage relationships in any situation – using empathy to relate to other people, understand their emotions and predicaments and adapt our behaviour around those. Understanding the wider business needs and collaborating with others through teamwork. Helping other people develop through coaching, influencing and inspiring. 

To this mix we could add ‘caring’ and ‘kindness’. You could say that whether a person cares or not is usually part of their personality which, like our IQ and unlike EQ, is fixed early on. However it is with the building of our EQ skills, along with self-compassion, that our softer qualities are given the chance to surface naturally. As Nelson Mandela said “No one is born hating another person because of the colour of his skin, or his background, or his religion. People must learn to hate, and if they can learn to hate, they can be taught to love, for love comes more naturally to the human heart than its opposite.” 

Why is EI so important in business? 

If these abilities aren’t evidence enough of the importance of EI to an individual’s business relationships and perfomance, then the statistics are. For a so-called ‘soft’ skill, there is a remarkable amount of research that measures the impact of a high EQ compared to a low EQ. The overwhelming evidence: the higher a person’s EQ, the more likely they are to perform well. 

‘Of all the people we’ve studied at work, we’ve found that 90% of top performers are also high in emotional intelligence…. just 20% of bottom performers are high in emotional intelligence. You can be a top performer without emotional intelligence, but the chances are slim.’ TalentSmart 

And the higher proportion of high EQ-ers in an organisation, the more successful the organisation is likely to be. 

‘When senior managers had high emotional intelligence capabilities, their divisions outperformed yearly earnings goals by 20 percent.’    Kim Morris Lee 

And all this leads to financial benefits for individuals. 

Naturally, people with a high degree of emotional intelligence make more money—an average of $29,000 more per year than people with a low degree of emotional intelligence. The link between emotional intelligence and earnings is so direct that every point increase in emotional intelligence adds $1,300 to an annual salary.’    Travis Bradberry 

And the same goes for the aggregate of EQ in organisations. Professors Malcolm Higgs and Victor Dulewicz concluded through their research, as published in their book ‘Making Sense of Emotional Intelligence’, that the aspects in a corporate strategy that involve emotional intelligence are equally as important to performance results as the more rational aspects. 

‘Investing in EI training improved individuals’ EI by 18%…… Conservative estimates suggest that [this] would lead to a 150% increase in pre-tax profits.’      Zenger 2009 

Building EI for the future 

Looking to the future, we find other developments that suggest the need for a focus on emotional intelligence. One in particular is the very real and imminent advance in the automation of jobs. According to the BBC website, 35% of jobs in the UK are in danger of being replaced by automation and robots, whilst an Oxford University study indicates that 47% of the US labour force could be replaced by robots in 20 years’ time. 

Thankfully, it is well recognised that some skills cannot be replicated by an automated machine, and it’s these which will make the perfect partnership in the future between robots and their human colleagues. It’s these skills that already link with high performance, but in the future will also ensure maintaining jobs for people as opposed to robots. These important skills include good judgment, creativity and – you guessed it – emotional intelligence. 

Get to know us…

We are committed to changing the way we speak at work.

We are a consultancy specialising in psychological safetycommunication training and coaching and conflict resolution, based in the South West of England, and operating worldwide.

Since 2005, we have made it our mission to find ways of bringing compassionate and authentic principles into the workplace, so that employees may experience connection of a different kind; one that cultivates a healthy working environment, stimulates high performance and unlocks true potential.

In this aim, we have developed multiple tools and programmes to help organisations embed these vital skills within their teams, their management and their culture.

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