The Impact of Emotional Intelligence on Financial Performance

In recent years, the business environment has become turbulent

The business environment has become turbulent, and businesses have to recruit employees who possess various skills that will enable them to cope with these changes appropriately. An essential factor in the contemporary workplace is emotional intelligence that affects performance both at the group and individual levels. Emotional intelligence (EI) is the capability of a person to identify the present situations and monitor one’s emotions based on these situations. Today, EI is an integral part of the corporate world as it reinforces an individual’s capacity to interact and work well with others, make effective decisions, and manage stress. Good et al. (2015) assert that EI determines successful business outcomes and individual effectiveness. Therefore, it can be used to differentiate high performers and propel leaders and organizations to higher and more sustainable levels of success.

Financial Benefits of Emotional Intelligence Adoption

There exists a direct link between the emotional capacity of an organization, organizational culture, and financial performance. Emotional intelligence is essential to the optimal performance of a business (Spradlin, 2015). The cognitive and emotional resources of the subordinates determine the resilience, health, and future performance of an institution or business (The Mindfulness Initiative, 2016). According to Good et al. (2015) companies whose leaders have implemented EI get a 71 percent higher profit margin than those whose culture does not take into account the emotional intelligence of its employees. Several pieces of research have acknowledged the economic value or financial benefits of emotional intelligence. The research evidence has revealed that emotional intelligence has more impact on the outcomes of business and performance of an individual more than knowledge, technical skills, and other traditional measures of intelligence (Good et al., 2015). Furthermore, EI has the ability to reduce significantly the costs incurred in retention. A study was conducted on the U.S. Air Force recruiters that linked EI to success. The United States Air force was using approximately $30,000 on every lousy recruiter that was hired (United States General Accounting Office, 1998). The Air Force decided to adopt the Emotional Quotient Inventory (EQ-i) assessment among its highly-ranked recruiters. The Air Force began using the central cluster of emotional intelligence competencies that were recognized among the top-ranking recruiters to select future recruiters. The retention rate within the U.S. Air Force increased by 92 percent, and it was able to save more than $190 million in high-value training by screening for emotional intelligence among para-rescuers (Bar-On, 2010). Also, the successful candidates were able to cope with and excel during demanding onboarding.

Measuring Success of Investment in a Government/Military Organization

Measurement of performance and effectiveness are invaluable practices that are employed to enhance the performance of various organizations such as governmental organizations, financial institutions, and the military, among others. Measurements have the ability to motivate or discourage subordinates, alert stakeholders, and persuade decision makers. Many performance measurement systems have been developed in the private and public sector that focused mainly on financial and accounting measures. However, in recent years, the business environment has become highly dynamic, and new performance measurement systems have been adopted. The U.S. Armed Forces use their improved war fighting readiness, achieving a balanced program, and building a larger, more capable, and more lethal force as its measure of success (Department of Defense, 2017). A standard approach used in measuring the success of an investment in government organizations is the balanced scorecard approach that was developed by David Norton and Robert Kaplan. It combines historical financial data with significant qualitative information to help lead a company to future success.

The Balanced Scorecard Approach

The scorecard is a conceptual framework that is used to transform the vision of an organization into a set of performance pointers that are categorized into customer, learning and growth, internal business processes, and financial. These indicators are utilized to check the progress of the business towards achieving its vision while others are retained to assess the long-term backers of success. A balanced scorecard helps monitor the current performance, including business processes, customer satisfaction, and finances, and the organization’s efforts to enhance its informational systems, its capacity to improve and learn, motivate and educate employees, and improve processes.

Financial

It monitors the financial performance of an organization to assess whether the strategy employed, the execution and implementation are contributing to its improvement. The financial goals of a business are measured in terms of profitability, growth, and increased shareholder value. However, a majority of government organizations have not placed economic considerations as their primary objective for the business systems. Instead, the organizations in the public sector are aimed at fulfilling political goals and the success of policy initiatives (Al-Raisi and Al-Khouri, 2010). They measure their success by examining how efficiently and effectively it has been in meeting the needs of the constituencies.

Customer

An organization assesses its performance by looking through the eyes of its customers. The business is expected to translate its customer service mission such as delivery time, cost, quality, and service into specific measures that reflect the factors that involve them. The customer perspective is measured through service level and complaints and satisfaction rates among others.

Internal Business Processes

It provides information about the internal business outcomes alongside measures that ensure satisfied customers and financial success. It highlights the critical business procedures within an organization that have a significant impact on the results and customer’s satisfaction.

Learning and Growth

This perspective reflects the commitment of a government organization to grow and adapt to change. It captures the capacity of information systems and employees within an organizational setting to adapt to change and manage the business. The ability of the organization to learn, improve, and innovate is measured by using metrics such as employee skills development, innovations, and intellectual assets.

Impact of Emotional Intelligence Program Adoption on Budgeting and Project Prioritization

Critical project constraints such as quality, schedule, budget, and scope are affected by inadequacies of required skills in project leadership, rapidly changing economy, regulatory-driven impediments, and external dependencies. Budgeting is a process that involves strong emotional intelligence implications as those engaged interact with different stakeholders during the process. The budget preparation process is a routine practice, and emotional intelligence plays an enormous role in controlling the financial habits within an organization. The process involves making financial decisions that require strong people competence to supplement the financial and technical strengths that financial managers possess. A business leader should be spontaneous in making decisions and judgments as well as determining the capability of other members to design and conceptualize solid financial goals successfully.

Project prioritization and selection is a valuable exercise that is carried out before the project is initiated to ensure that the outcomes are consistent with the strategic objectives of an organization. Some projects are forced to terminate in the middle of its life cycle and result in a huge sunk cost to the company as well as a waste of invaluable organizational resources due to the wrong selection and prioritization of the project.

Impact of Emotional Intelligence Program on Recruitment, Training, Retention, and Resource Management

There is a significant cost that is associated with attracting and selecting new employees. These costs are spread over multiple budgets, including recruiting, training, retention, and operations. For an extended period, organizations have been focused on reducing the costs by employing rigorous testing in their hiring process to test the personality, cognitive, and mental ability of individuals. Today, more organizations are integrating EI into recruitment, training, and hiring of staff to gain a competitive advantage. High-performing organizations are increasingly adopting emotional intelligence, and they have revealed that using EI in recruitment, training, retention, and resource management can help reduce costs associated with low performance, absenteeism, and turnover. According to Good et al. (2015), EI is a reliable indicator of the performance of an employee and is an indicator of leadership behaviors. Individuals who have a high level of emotional intelligence have lower levels of anxiety and stress and higher levels of job satisfaction, which are essential factors for an organization. Therefore, there is more focus on testing for emotional intelligence in the recruitment, training, and retention processes.

The contemporary corporate world is characterized by increasing mobility and fierce competition for talent. Therefore, businesses are focused on attracting and retaining their key employees. People are forced to quit their job because of some reasons, including the type of relationship they have within their workplace. The quality of the relationship that an employee and his/her manager or supervisors share is an important determiner of whether one leaves a job or not. EI helps managers to become mindful of their thoughts, perceptions, and emotions. McCormick and Hunter (2008) define mindfulness as observation of the emotions, thoughts, and perceptions of an individual in the present moment.

The Relationship between EI and Decision-Making

Emotional intelligence involves the ability to identify, access, and control one’s emotions and those of others. According to Good et al. (2015), EI has several unique elements that play an essential part in managerial decision making. Self-motivation helps managers to understand their personal feelings better whenever they are confronted with a threat or opportunity that requires their reaction or decision. Self-control allows managers to control their internal attitudes and beliefs while self-motivating increases their desire to respond to the issues at hand in an active way. Managers can connect with their subordinates through social communication. They make suitable decisions and facilitate their implementation. Managers who possess emotional intelligence understand the importance of effective communication with their staff members who form the human resource of an organization. According to Sousa et al. (2015), military leaders must lead by example and be able to manage the emotions of those around them. Latour and Hosmer (2002) add that they must utilize their EI skills and techniques to be effective.

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References

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United States General Accounting Office (1998). Military recruiting: DOD could improve it’s recruiter selection and incentive systems. Retrieved from https://www.gao.gov/assets/160/156077.pdf

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Sousa, P., Rouco, C., Nogueira, F., Carvalho, A., & Dias, D. (2015). The impact of leadership behaviors and communication styles of military leaders on the performance of followers. Retrieved from http://cmich.idm.oclc.org/login?url=https://search-proquest-com.cmich.idm.oclc.org/docview/1738817429?accountid=10181

Karas, R. S. (2017). New Air Force Group Devised At Corona To Oversee Futureforce Planning. Inside the Pentagon’s Inside the Air Force, 28(48) Retrieved from http://cmich.idm.oclc.org/login?url=https://search-proquest-com.cmich.idm.oclc.org/docview/1970590029?accountid=10181

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