Emotional Capital and Leadership

The most critical asset to bottom line performance has emerged – Emotional Capital. 

Dr Martyn Newman explains how this key indicator reveals much about the health of your business at any given moment. Here’s why it matters and how to multiply its positive impact on the bottom line.

There’s money in emotion

Changes in technology, demographics, the workplace and the economy have had a profound impact on how businesses evaluate and create value. In the ‘age of participation’, employees, customers and suppliers have higher expectations of business, their values have changed, and they care about different things than before. Employees want to work for more than just a pay check; they want their work to matter. Customers expect to buy from organisations they like and who are like them. Feelings shape our behaviour, our relationships, our most important decisions and even our economy. That’s right, there is money in emotion.

Leadership and extra effort

In one recent wide-ranging study, Mary Sully de Luque and her colleagues examined leadership data and financial performance from 520 companies in 17 countries. The question they wanted an answer to was: what is the financial impact of visionary leaders who inspire performance through articulating broad stakeholder values, compared to leaders perceived as more autocratic with a narrow focus on financial targets? The study revealed that leaders described by their people as “visionary”, who emphasised values such as meaning and purpose, inspired “extra effort” to achieve the goals of the organisation. Furthermore, employees in these organisations reported increased collaboration, higher levels of innovation, and heightened resilience — in other words, higher levels of emotional capital.

Yes, but hang on a minute…

Of course, to all but the most cynical, this makes intuitive sense anyway. But as compelling as these findings are, they remain of limited value unless the specific components that comprise Emotional Capital can be carefully defined, rigorously measured and systematically developed to create value in the organisation. Over the last ten years, most frameworks for understanding these specific skills have been associated with Emotional Intelligence (EI), but few models have been developed specifically to measure how these competencies work to predict performance in business.

EI and leadership – ten years of discovery

Following an extensive review of the research on the relationship between several models of EI over a 10-year period, we identified 10 social and emotional competencies linked to workplace performance. We described this model as Emotional Capital because it focussed sharply on the value that these competencies add to driving success in business. Research in applied business settings using the model culminated in the publication of a psychometric scale specifically designed to measure these competencies — the Emotional Capital Report (ECR). Understanding and developing such competencies such as Empathy, Self-Knowing, and Adaptability are the biggest predictor of future leadership success.

Wrapping up

Emotions are involved with everything a company does and emotions determine whether or not people will work well with you, buy from you, hire you, or enter into business with you. Importantly, emotional capital eventually shows up in financial performance.

*Members of The Clubhouse had the rare opportunity to join Dr Martyn Newman to hear more about Emotional Capitalists in an intimate Members Breakfast on Wednesday 30 January 2019 at The Clubhouse, Bank.

This article was originally featured in The Informer – January 2019. To read the full magazine please click here