What’s the right recipe for success when starting a business? Most would point to a sound business plan as priority number one, while others may say attaining adequate funds or investors is the first item on their entrepreneurial checklist.
Surprisingly, a new study just released by the Indiana University Kelley School of Business has an unexpected suggestion for anyone planning to start or run a successful business in the future. Work on your emotional intelligence, as it will likely prove just as if not more useful than anything involving book-smarts or numbers.
Study authors defined “emotional intelligence” as the ability to understand, use, and manage one’s emotions to help deal with stress.
“We found that entrepreneurs benefit much more from emotional competences than other competencies — such as IQ — due to high uncertainty and ambiguity that comes with the world of entrepreneurship and even more applicable in a crisis,” says study co-author Regan Stevenson, assistant professor of entrepreneurship and management and the John and Donna Shoemaker Faculty Fellow in Entrepreneurship.
While these findings ring true at any time, researchers say they take on extra importance in light of the COVID-19 pandemic. Virtually all businesses, big and small, have been forced to drastically change how employees work, how products are produced, and how customers are served in the wake of the coronavirus.
With these incredibly stressful circumstances in mind, it isn’t hard to grasp why emotional intelligence is a valuable asset these days for entrepreneurs.
“Being an entrepreneur is not a ‘traditional workplace setting.’ If you are an entrepreneur, you know that managing your business can often feel like you are screaming alone on an emotional rollercoaster,” Professor Stevenson explains. “The extreme nature of this setting makes one’s ability to manage emotions and social connections critically more important, especially so during times of major disruption and crisis.”
“The extreme nature of the pandemic has made one’s ability to manage emotions and social connections critically more important, especially so during these times of major disruption and crisis,” adds Ernest O’Boyle, associate professor of management and entrepreneurship and the Dale M. Coleman Chair in Management.
IQ has long been looked at as the gold standard for assessing an individual’s competence, but measures of intellect that focus solely on memorization or mathematics skills only tell a portion of the story. It’s certainly helpful for an entrepreneur to have a high IQ, but if that person is unable to control their emotions or breaks down after the slightest inconvenience or stressor, chances are their business won’t live to see 2022.
The team at IU reached these conclusions after analyzing close to 40 earlier research projects focusing on entrepreneurs. In total, all of those included studies encompassed 65,826 entrepreneurs. That work led them to the finding that entrepreneurs with high emotional intelligence are better able to self-motivate and enjoy stronger social skills.
“While IQ is unquestionably the better predictor of job performance and career success across all jobs and careers, within the domain of entrepreneurship, emotional intelligence was the stronger predictor of success,” O’Boyle comments. “Those with high emotional intelligence tended to be more successful as business leaders and enjoy success than in more typical jobs and careers.”
Of course, emotional intelligence isn’t just about one’s personal emotions. High emotional intelligence is also associated with a stronger sense of empathy and the ability to relate to others and communicate with them in a caring manner.
This represents a two-fold benefit for entrepreneurs. First, strong social and communication skills make networking and finding new leads easier. Second, empathy and understanding are invaluable resources when in charge of other people. Especially during this past year, workers the world over want to know that their employer actually cares about them. Emotional intelligence can help entrepreneurs/business managers/CEOs foster more positive working relationships with their co-workers and employees.
“Emotional Intelligence is linked to social skills such as accurately perceiving other’s needs, making good first impressions, and influencing others in interpersonal interactions. These skills are important for developing business networks, which can aid in signaling legitimacy and in acquiring resources,” the study reads. “These skills can enhance creativity and opportunity recognition; aid decision making in emotionally turbulent situations and enable adaptive responses to unpredictable events.”
In the world of business, so much is traditionally made of cold hard numbers, estimates, charts, and graphs. While all of that indisputably a big part of running a successful company, at the end of the day every business is dependent on people – and people have emotions. For an entrepreneur just starting out, a leg up on the competition when it comes to emotional intelligence may prove to be the difference-maker between success and failure.
The full study can be found here, published in the Strategic Entrepreneurship Journal.