Does EQ Improve Your Bottom Line?

I am quite often faced with the question from my clients whether Emotional Intelligence (or Emotional Quotient – EQ) has any relationship at all to bottom line results in organizations. They ask whether EQ was not something fuzzy? Whether it was not just another passing fad? Whether it was not just a mushy, feely thing, something that caused people to get emotional and burst into tears? And most importantly, whether it actually produced any measurable results at all to the organization?

I learnt astonishing facts during my EQ certification program. EQ has an impact on financial performance, profits, leadership, customer loyalty, employee star performance, employee retention, ethical behavior, work life balance, and productivity.

The Data About EQ

I would like to share some highlights of this information here, and is an effort to present the positive impact EQ has on various aspects of business results and growth. Most of the information is from a white paper by Joshua Freedman, “The Business Case for Emotional Intelligence”, and more details about the information that is presented here can be got from this white paper.

NOTE: In case you find this to be too much of data, then please feel free to skim through this data section, and then go and read the CONCLUSION section below.

Financial Performance: the Bottom Line Perspective

a) Gallup:

Gallup findings indicate that almost 3/4ths of the workforce is disengaged. Leaders who use their emotional resources to foster “engagement” (a sense of caring and commitment) deliver significant bottom line results. Teams with higher engagement are:

  • 50% more likely to have lower turnover
  • 56% more likely to have higher-than-average customer loyalty
  • 38% more likely to have above-average productivity
  • 27% more likely to report higher profitability

b) British Royal Navy

In a study of relationships between emotional intelligence and leadership, 261 members of the British Royal Navy were studied. The results showed that, compared to both managerial and IQ (Intelligence Quotient) competencies, the EQ competencies were better able to predict both overall performance and leadership.

c) Technology Professionals in India

In a study of 81 technology professionals in India, higher EQ was linked to resolving conflicts in a manner that supported mutual gain.

d) One of UK’s Largest Restaurant Groups

This study showed there was clear evidence that managers high in EQ had restaurants that outperformed others in terms of increased guest satisfaction, lower turnover, and 34% greater profit growth.

e) Pepsico

Executives selected for EQ competencies far outperformed their colleagues, delivering:

  • 10% increase in productivity
  • 87% decrease in executive turnover ($4m)
  • $3.75m added economic value
  • Over 1000% return on investment.

Ethical Leadership

In the wake of the happenings at global companies Enron and Worldcom, the Indian company Satyam, and the 2009 economic crisis, the issues of ethical leadership are gaining more attention.

a) A study by Kidwell and Valentine in 2008 found that in a more positive workplace, people were more ethical.

b) In a 2009 study of business students, it was found that emotional awareness is tied to ethical awareness.

c) A similar experiment with physicians and nurses in a US hospital found that higher EQ scores predict higher performance in ethics.

Productivity

a) A major sales study showed top performing sales clerks are 12 times more productive than those at the bottom and 85% more productive than an average performer. Two thirds of this difference is due to emotional competence.

b) A 2008 study assessed 229 entrepreneurs and small business owners in Canada, and found that leaders who created more positive climate had more revenue as well as increased growth.

c) After a Motorola manufacturing facility used stress and EQ programs, 93% of employees had an increase in productivity.

d) After supervisors in a manufacturing plant received training in emotional competencies, lost-time accidents were reduced by 50%, formal grievances were reduced from an average of 15 per year to 3 per year, and the plant exceeded productivity goals by $250,000.

Sales and Customer Loyalty: the Customer Perspective

a) A powerful study by Benjamin Palmer and Sue Jennings demonstrates that after a group of 40 salespeople atSanofi-Aventis, a pharmaceutical company, received EQ training, they out-sold the control group by $2 million per month. The company calculated that they made $6 for every dollar they invested in the training.

b) At L’Oreal, salespeople selected on the basis of emotional competence sold $91,370 more than other salespeople did, for a net revenue increase of $2,558,360.

c) Extensive studies the Forum Corporation on Manufacturing and Service Companies showed that while 30% of the reasons why customers left vendors was related to product quality and technical excellence, a whopping 70% left due to emotional and relationship factors.

d) When MetLife selected salespeople on the basis of optimism, one of the emotional intelligence competencies, they outsold other MetLife salespeople by 37%.

Star Performance and Retention: Internal Business Perspective

a) In a study by Six Seconds in partnership with Dubai Knowledge Village of 418 leaders living in the Middle East, it was found that high EQ scores predict over 58% of the variation in critical professional and personal success factors such as effectiveness, influence, relationships, financial and career status.

b) Distinguishing High Performers: Analysis of interviews of 108 people from an international petroleum corporation in 2006 found that emotional intelligence factors such as achievement motivation, empathy and self-confidence, rather than expertise and cognitive factors, are what differentiate between average and superior performers.

c) US Airforce: The net savings of selecting Pararescue Jumper candidates based on EQ competencies was $190 million.

d) Retaining Talent: In one hospital with employee turnover of 28%, an EQ and stress reduction program cut turnover by almost 50%, and within the core team turnover dropped to under 2%, saving $800,000 in less than a year.

Conclusion

Jack Welsh said, “No doubt emotional intelligence is more rare than book smarts, but my experience says it is actually more important in the making of a leader. You just can’t ignore it.”

It is also clear that “Leaders influence people’s mood. People’s mood drives performance”. EQ helps influence people’s mood and so helps drive performance.

So, in conclusion, it could be definitely worth investing in yourself and your people to develop EQ, which will help you and your organization grow the various bottom line results such as those listed above.

References: The Business Case for Emotional Intelligence – by Joshua Freedman.

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Binod Maliel
 

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