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ECONOMIC
VALUE OF
EMOTIONAL INTELLIGENCE
TRAINING AND COACHING
By
DR. PHILIP J. SMITH, Ph.D.
Vice President of Assessment Services
For twenty years,
Drake Inglesi Milardo, Inc. has been in the business of measuring
and evaluating personality, motivational, and cognitive characteristics
associated with success in the workplace. In the past several years,
a new conceptual framework has appeared that holds some promise
for identifying and developing critical work related competencies.
Emotion Intelligence (EI), although a relatively new term,
is not something that past organizational psychologists or human
resource specialists have been unaware of. “Human Relations
Training” occurred as early as the 1950’s with a Penn
State program that targeted self-awareness, empathy, and leadership
competencies in supervisors. Numerous other studies have demonstrated
strong results from training and competencies such as self-management,
achievement orientation, self-awareness, empathy, and social skills.
Quite aside from formal studies, astute observers have long noted
that many top performing supervisors and managers possess such personal
skills that separate them out.
A number of influences have no doubt converged to concentrate attention
on the area of emotional intelligence. Howard Gardner’s work
introduced the concept of multiple intelligences. This is a broader
concept than EI as it includes non-emotional abilities, but it certainly
started people thinking about attaching other concepts to the term
“intelligence.” Changes in the workplace are also contributing
to the interest in EI. It is a truism at this point to talk about
the rapid pace of change, the knowledge worker, and horizontally
organized companies; however, these realities require more flexible,
emotionally perceptive, and interpersonally skilled leaders. Another
influence is the awareness that intelligence alone has only limited
predictive power in selecting at the highest levels. There is a
restricted range of intellectual abilities among top performers,
however, the range of the EI competencies shows considerable variability.
In addition to the growing body of literature suggesting that EI
competencies are related to managerial and leadership effectiveness,
there is also evidence that EI competencies contributed to bottom
line results. Goleman (2001) suggests that the business effects
achieved by leaders with EI strengths are mediated through the climate
the leader creates (climate reflects people’s sense of their
ability to do their jobs). He sites an insurance industry study
in which climate created by CEO’s among their direct reports
predicted business performance of the entire unit. It should be
noted that there is considerable controversy in the EI field concerning
how to best measure these competencies, as well as some confusion
about the concept itself. The research cited below used behavioral
event interviews with high reliabilities to assess EI. Whatever
controversies may exist in the field, EI competencies continue to
be researched vigorously and some early results are too promising
to ignore.
The Emotionally Intelligent Workplace, a recently published collection
of articles on EI’s relation to the workplace, includes an
article by Lyle Spencer on the economic value of EI Competencies
and EI Based HR Programs. This intriguing article presents a number
of approaches to calculating the economic benefits of elevating
EI competencies in employees. As the author notes, “economic
value added data can provide powerful measures of an HR programs
quality.”
Spencer defines Emotional Intelligence Competency as an underlying
characteristic of an individual which is causally related to effective
or superior performance on the job. Superior performance is defined
as the top 14 % or roughly as the top 1 out of 10 employees. The
author then presents a number of approaches to finding the economic
value added by increasing performance to the superior level. The
most conservative approach is represented in a study by Hunter Schmidt
and Judiesch (1990) The authors looked at increased productivity
by job complexity as illustrated in Figure1.
It should be noted that the percentages given in the figure are
actual productivity figures, not estimates. Using the Hunt et al
findings, one way of valuing a superior performance at a sales job
(average salary $100,000) is to multiply by 100% plus the additional
percentage of productivity contributed by superior performance status,
in other words, a productivity salary of $148,000 in this example.
Other studies of economic value added by top performers strongly
suggest that the above method of calculating value is conservative.
For example, Figure 2 depicts the increased productivity associated
with top construction project managers (Spencer, 1997).
Figure 2 indicates
that the average salary of an engineering construction manager is
$87,000 a year. It was found that top performing managers had 47%
more economic value which translated to $27 million. This superior
performance was attributable to avoiding costs and time overruns
and selling additional engineering changeovers. The $27 million
in economic value represents 310 times salary. Other findings presented
by the author show impressive economic value added by top performers,
among them computer programmers (11.7 times salary), sales people
(88 times salary), and account managers (600 % increased productivity).
The above results give an eye-opening look at the economic value
of top performance. However, they do not answer the question of
what percentage of the superior performance is attributable to EI
competencies or to what degree intervention such as coaching or
training can increase EI competencies of employees.
In addressing the first question the author cites a study of executives
from an industrial control firm. Figure 3 depicts the relationship
of Emotional Intelligence Competencies to a criterion variable (branch
managers performance). Other than 10% of the explained variance
in performance accounted for by the previous year’s branch
revenues, 80% of the remaining variance is accounted for by emotional
intelligence competencies. It should be noted that a measure of
intellectual ability did not account for any of the variance in
performance in the study. The author notes that concurrent and predictive
validities of emotional intelligence competencies against economic
criterion variables range from r=.10 to r=.90 with R2=.15-.35. The
author suggests a number of important implications that can be drawn
from these findings. “Many employees leverage incremental economic
values much greater than their salaries…the more complex the
job the more economic value it leverages, the more superior performance
is worth. Identifying EICs for these jobs and developing HR programs
that can improve them adds the greatest economic value.”
The author goes
on to give instructions for calculating economic value associated
with positive shifts in employee performance in a number of different
types of jobs. The author also discusses the economic value associated
with competency based selection systems as well as the return on
investment of training programs in emotional intelligence. This
is definitely an article worth reading in it’s entirety.
Most managers and HR professional who have been involved in observing
or selecting individuals in leadership positions have experiential
understanding of Spencer’s points. Selection for top positions
has tremendous financial implications and personality/emotional
IQ, Emotional Intelligence factors, often make or break a candidate’s
success or failure. Often, individuals with a strong resume, high
motivation, and excellent knowledge of an industry, fail when brought
into a new situation. This often results because their EI competencies
aren’t a good match with the specific demands of the position.
For instance, in one of the examples used by Spencer we can imagine
that an engineering construction manager who lacks influencing skills
and the ability to motivate and understand the needs of his crew
would not deliver superior financial returns. At another level,
we frequently see top management candidates with a great track record
fail when they are brought into a new situation. Senior managers
can face very different situations in terms of the challenges (for
instance operations versus public relations) and the type of culture
(for instance consensus building versus confrontations they encounter).
It can be critical to look at the profile of Emotional Intelligence
Competencies required for a position to avoid hiring missteps. Is
the ability to handle difficult people and to use diplomacy to defuse
conflict essential--then you are looking for someone with good emotional
awareness who is skilled at managing emotions in him or herself
and others. Do you need someone to drive change and open new markets--then
initiative, achievement orientation, and openness and flexibility
are essential.
Emotional Intelligence gives us a framework for thinking about competencies
that can play a critical role in an individual’s success. These
dimensions also can provide useful perspective for thinking about
the types of competencies that are most essential in your business
or in different sectors of your organization. Development and training
can focus on increasing targeted competencies.
If you have questions about the assessment of the EI competencies
you can contact Phil Smith at psmith@dimihr.com
or you can call him at 207-772-2823
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