Leading through the Crisis – A Matter of Emotional Intelligence

In times like these, during which the financial crisis and economic downturn are omnipresent in the media and people’s minds, companies seek security and stability. Leaders have to effectively manage their teams and deal with a work environment characterized by continuous change. Therefore, obtaining the trust and support of employees is crucial, and social and emotional competencies as well as man-management skills become important abilities for a successful leader.

Aethos™ looked into the concept of “Emotional Intelligence” and how its components, emotional and social competencies, are a vital part of a leader’s skill set.

Top management positions across the globe are now, more than ever, tasked with successfully handling the challenges of the market place. So what are the skills that managers need to bring along in order to succeed? Not long ago, it was a common notion that the IQ is a key indicator of success. However, more and more academics agree that leaders who excel in their career are those whose skills are gained from the competencies which derive from high emotional intelligence (Goleman, 1998).This notion explains why “individuals with identical IQs may differ markedly in regard to their effective ability to cope with the environment” (Wechsler, 1940 in Mayer, Salovey, Caruso, 2000). Additionally, research indicates that organizational effectiveness and performance are positively related to emotional intelligence (Goleman, 1995; Foo, Elfenbein, Tan & Aik, 2004).

But what is “Emotional Intelligence”? In simple terms, it may be defined as “the conscious management of our own emotions” (Cherniss & Goleman, 2001), which includes “perceiving emotions, facilitating thought with emotions, understanding emotions and regulating emotions” (Mayer, Salovey & Caruso, 2000).

The theory of “Emotional Intelligence” has been discussed and reviewed by many scholars. It is, however, very much influenced by the work of Daniel Goleman, author of the books “Emotional Intelligence” (1995) and “Working with Emotional Intelligence” (1998). According to Goleman, there are five elements, which are at the core of the Emotional Intelligence model: self-awareness, motivation, self-regulation, empathy and adeptness in relationships. Furthermore, Goleman talks about “Emotional Competencies”, which he defines as the learned capabilities based on an individual’s emotional intelligence, and indicate how much of that person’s “Emotional Intelligence” potential is translated into actions.

Based on this concept, the question remains how both leaders and organizations can benefit from Emotional Intelligence. The answer to that is multi-facetted.

Firstly, Emotional Intelligence influences the style of leadership a manager chooses to adopt and can thereby significantly influence the work climate and outcome (Goleman, 1998).

Research has identified six different styles of leadership (Fullan, 2001):

• Coercive
• Pace-setting
• Authoritative
• Affiliative
• Democratic
• Coaching

Two of these, namely the coercive and pace-setting styles, have negative effects on the work climate and overall performance, as they rely too heavily on leadership compliance without taking into consideration the needs of the employees. The other styles have been found to positively affect work climate and performance. This has been attributed to the fact that they display the characteristics of an emotionally intelligent leader by managing/controlling emotions, encouraging interaction and communication, sharing the company’s visions and goals, and ultimately increasing trust. In return, these styles keep motivation levels amongst employees high and encourage staff to assume accountability and to be innovative, which eventually improves the performance and competitiveness of the company.

Secondly, it is also important to note that Emotional Intelligence helps to manage and motivate staff more effectively.

The hospitality industry, in particular, is struggling with the attraction and retention of skilled labor and is characteristic for its culturally diverse workforce. The competencies of emotionally intelligent leaders can help to increase retention and employees’ commitment to the company, as it is a leader’s social skills and relationship with the employees which are most important to them (Goleman, 1998; Zipkin, 2000 in Cherniss & Goleman, 2001). By showing empathy and understanding of how subordinates feel in specific situations (e.g. downsizing or salary cuts), successful leaders manage to establish a rapport with employees. Hence, through the process of communication, employees get involved in the decision making process and better understand the reasoning behind certain actions of the leader. As a result, they are more likely to back-up difficult decisions which have to be made during a time of economic downturn.

Moreover, the notion of managing staff includes both the creation of knowledge and transferring of skills. The sharing of knowledge and the creation of learning opportunities, as well as the exploitation of untapped tacit knowledge/talents are two of the cornerstones of effective leadership and sources of competitive advantage in today’s market environment. This, however, is more and more difficult to achieve given high turnover rates, poaching amongst industries, as well as a generally lower level of commitment between employer and employees. Yet according to Fullan, “information only becomes knowledge through social processes” (2002), and it is therefore the Emotional Intelligence of a supervisor or manager, or the ability to encourage communication, honesty and trust, build relationships, promote innovation and foster an environment in which criticism is accepted and welcomed, which helps to transfer skills, create knowledge and endorse learning opportunities.

Thirdly, and probably most importantly, Emotional Intelligence can hold the key to long-term success by fostering strong ties and networks with both internal and external stakeholders of the company and hence set the foundation to withstand such economic crises as the current one.

To elaborate on the internal relationship management it is necessary to understand that a leader cannot accomplish any set targets without the full support of his subordinates. Therefore, it is crucial to identify, develop and promote future leaders at different levels within the organization (Fullan, 2002) who also standout with high Emotional Intelligence coefficient. Groups which are formed by emotional intelligent members are believed to generate better performance and more valuable outcomes on a collective level than groups with little Emotional Intelligence. They display the behavior (i.e. cooperation, commitment and creativity) necessary to build and nurture relationships, promote internal learning opportunities and deal effectively with innovation and change (Cherniss, 2001).

The development of strong and lasting relationships with external stakeholders (i.e. business partners, suppliers or customers) is a more complex issue, but ultimately also relies on a manager’s ability to establish trust and a personal relationship with his/her counterparts. Problems often arise through a lack of communication or misinterpretation, and it is therefore in the interest of all involved parties to understand each other’s concerns and goals. Being able to handle difficult situations with diplomacy and tact and regulate disputes are skills which are innate to emotionally intelligent people and which help to manage conflict situations and create win-win scenarios (Goleman, 1998).

In summary, researchers have found that emotionally intelligent managers are better prepared to face the challenges of an unstable market, as they are able to increase trust and commitment amongst their employees, and to foster innovation and motivation. Also, operational effectiveness has been linked to Emotional Intelligence, which influences the talent development and retention process, and facilitates the knowledge creation and strengthens networks with both internal and external stakeholders. Emotional Intelligence furthermore supports organizations in dealing with change and therefore, especially in light of the current financial and economic crisis, helps them to stay competitive.

The implication of all this leads to the conclusion that Emotional Intelligence is an important element to consider when recruiting in today’s environment. Firms are aware of the added value a man-manager and true team player can add to their company and therefore put increasingly more emphasis on the Emotional Intelligence of their leaders.