Does coaching ultimately increase profits for the organization? Research on that question is tricky. There are many, many factors that determine whether a company makes a profit. Some are under the company’s control, and others are not. That said, research cited in Primal Leadership: Realizing the Power of Emotional Intelligence (Daniel Goleman, Richard Boyatzis, and Annie McKee) presents some compelling information that suggests that coaching can have a major impact on profit.
The authors reported that an organization’s emotional climate determines 20 to 30% of its profitability, i.e., companies with emotionally unpleasant climates make less money than companies with emotionally positive climates. That’s huge, given that many factors which influence profitability are outside of a company’s control. Such factors include macro-economic conditions, the actions of competitors, supply chain issues, pandemics, and so forth. But company leaders can directly impact their organization’s climate. In fact, Goleman et al found that leadership style controls 50% to 70% of climate.
Implications for you as coach? You can help client organizations be profitable by helping their leaders learn the skills required to create a positive climate. Those skills are largely EQ-based.
Let’s define what the authors mean by climate. As you read about climate, you will begin to see how EQ and your coaching can play a central role in its creation. (We will look at six leadership styles and their effect on climate in subsequent posts.)
Primal Leadership defines climate as having six elements:
Flexibility: The extent to which employees feel free to innovate, vs. a perception of being constrained from using their own judgment.
Responsibility: The extent to which employees feel responsible to the organization.
Standards: How high are the standards that employees set for themselves?
Feedback/Rewards: The extent to which employees feel that the feedback they receive from leaders is accurate, and that the rewards from the organization are appropriate.
Clarity: The extent to which employees understand the mission, vision, and values of the organization.
Commitment: How committed employees are to a common goal.
Flexibility: Workers who believe that their ideas are respected feel better about their company than those who work for someone who thinks like Henry Ford, who once said, “All I want is a pair of hands, and I have to take the whole damn person.”
How might you coach leaders to encourage flexibility? First, flexibility is one of the sixteen EQ skills measured by the Emotional Quotient Inventory2.0. The EQ Leader Program has a collection of ten field-tested exercises designed to help clients become more flexible.
Second, in my experience, many relatively rigid leaders also have a Self-Regard issue. Unconsciously, they tell themselves that they can’t adapt to more than a narrow range of circumstances. As a coach, you can help them challenge that belief. You can help them recognize times when they have learned and adapted. (Even the most rigid people have some.) When they recognize that they can be more flexible than they had thought, they can be more receptive to employees’ ideas that may be different, and may, in fact, be innovative. Remind these leaders that new ideas are often required for higher profitability.
Responsibility: Good relationships bond people and organizations, leading to a feeling of mutual caring, commitment, and responsibility. Where does coaching come in? Most executives don’t know that relationships are built on the exchange of emotional information. As people share emotional information with each other, they usually become more committed to each other. The EQ skills of Emotional Expression and Interpersonal Relationships play a key role in a leader’s ability to form strong connections with followers, thereby enhancing employees’ sense of responsibility to the leader and to the organization, and to the organization’s success and profitability. The company is no longer “them.” It becomes “us.”
Standards: Note that this element of climate is not about the standards leaders set for employees, but rather the standards that employees set for themselves. The more competent employees feel, the higher the standards they will set for themselves. When they live up to their own high standards, employees are in a position to help the organization succeed. Leaders can help employees feel competent by recognizing their strengths and good ideas. But this has to be genuine. To illustrate, my first job was in a healthcare system. One day, the CEO said to an employee she encountered in a hallway, “You do a wonderful job, dear. Just wonderful! . . .You do work here, don’t you dear?” Sigh!
Feedback/Rewards: Clearly that CEO missed out on creating a sense of accurate feedback. Coach your clients to spend time truly engaging with followers, so that they can learn enough to be able to give accurate feedback. Doing so will also help them know how to reward each individual.
Different people prefer different rewards, but many leaders project their own preferred rewards onto others. The EQ skill of Empathy can save your client from making that mistake. One well-meaning CEO, an extrovert who loved attention, brought a high performer up on stage in front of hundreds of people to praise him. Unfortunately, that man hated being the center of attention. He much preferred to work behind the scenes. The CEO unintentionally punished this high performer, not having taken the time to differentiate himself from the employee.
Clarity: Everyone wants to succeed. But an employee’s idea of what constitutes success may not be accurate. Leaders must define success clearly to their followers. When followers know what success looks like, they have a real chance to achieve it. Two EQ skills that help leaders bring clarity to their definition of success are Assertiveness and Self-Regard. Assertiveness helps leaders declare their vision in ways that followers are likely to find inspiring, not threatening. To craft a meaningful mission and vision, leaders must have enough Self-Regard to believe that their ideas, and what they care about, truly matter. If they don’t believe, no one else will.
Commitment: This element of climate depends on Clarity. After all, before followers can commit to a common goal, they have to know what they are committing to. But there’s more. Commitment is also about the extent to which followers find the common goal leaders articulate to be meaningful to them personally. When it’s just someone else’s goal, the employee works for the paycheck. When the leader’s goal becomes the employee’s goal, the employee works for meaning, a much more powerful motivator.
How can leaders create this kind of deep commitment in their employees? Coach your clients to use the EQ skill of Reality Testing. Your clients may have ideas about what will be meaningful to their followers, but nothing beats actually finding out.
Bottom line? Emotions matter in building a profitable company. But they cut both ways. Positive emotions, those that build the six elements of climate, help to create profit. Negative emotions, those that are spirit killers, erode profit. Leaders have a lot to say about which emotions followers bring to the table. You can help leaders bring out the ones that work.