Author / Personality

The Power of Relationships: ROI of Communication & Emotional Intelligence Training

Originally published for Witz Education.

Why should you care about emotional intelligence and developing relationships?

Regardless of industry or company size, effective communication is the root to success. It is crucial to know how to construct what to say to shape and influence focused outcomes. Leadership responsibilities have expanded beyond metrics to include resolving conflict situations, peak performance motivation, and succession planning while leading in a diverse, challenging, and ever-changing environment. Not only do today’s leaders need to manage their own emotions, they are responsible for supporting the needs of their teams. They need to develop the skills to recognize the connecting statements from their teams and clients, as well as gain an understanding of how to adjust their preferred communication style to have an effective interaction. This is particularly true when interacting with the younger generations, who expect their leaders to be transparent coaches and colleagues rather than the traditional “boss”. In other words, for leaders to be successful they need to know how to build connections.

However, the demand for performance is measured in hard numbers and visible results, which often causes us to overlook the person and focus on tasks. Over time, we see the negative impact this can cause through burnout, unengaged teams, absenteeism, turnover and adherence difficulties. In fact, 75% of careers are derailed for reasons related to emotional competencies, including inability to handle interpersonal problems; unsatisfactory team leadership during times of difficulty or conflict; or inability to adapt to change or elicit trust (The Center for Creative Leadership, 1994). 

Poor communication also has a negative impact on organizations bottom line. The loss in productivity due to miscommunication costs $26,041 per employee per year. This translates to an organizational cost of an estimated $37 billion per year, averaging $62.4 million per company (Holmes, 2011).

Companies risk $135 million for every $1 billion spent on a project and new research indicates that $75 million of that $135 million (56 percent) is put at risk by ineffective communications, indicating a critical need for organizations to address communications deficiencies at the enterprise level. Ineffective communications is the primary contributor to project failure 1/3 of the time, and had a negative impact on project success more than 1/2 the time (Project Management Institute, 2013).

When this trickles down to the customer, we see a decrease in repeat purchases and revenues. This is not surprising when you consider that the reason customers leave are 70% emotional, i.e. the customer service agent only focused on the task, took a negative tone, and did not address the customers emotional needs (Forum Corporation on Manufacturing and Service Companies, 1989 – 1995).

The ROI of communication & emotional competence training

By equipping leaders with emotional intelligence, organizations can greatly diminish these negative symptoms while increasing performance. For example:

  • Top performing sales clerks are 12 times more productive than those at the bottom and 85 percent more productive than an average performer. About one-third of this difference is due to technical skill and cognitive ability while two-thirds is due to emotional competence (Goleman, 1998).
  • Sales agents selected by L’Oreal on the basis of emotional competencies significantly outsold salespeople selected using the company’s old selection procedure for a net revenue increase of $2,558,360. Salespeople selected on the basis of emotional competence also had 63% less turnover during the first year. (Spencer & Spencer, 1993; Spencer, McClelland, & Kelner, 1997)
  • Companies that have strong communication and engaged teams outpreform those without by 10% on customer ratings, 22% in profitability, and 21% in productivity while seeingsignificantly lower turnover (25% in high-turnover organizations, 65% in low-turnover organizations), shrinkage (28%), and absenteeism (37%) and fewer safety incidents (48%), patient safety incidents (41%), and quality defects (41%). (Gallup, 2013)
  • In one year, the US Airforce invested less than $10,000 for emotional intelligence development and saved $2,760,000 in recruitment (Fastcompany “How Do You Feel”, June 2000).
  • Best Buy found that higher employee engagement scores led to better store performance. The company found that for every percentage point it boosted employee engagement, individual stores saw a $100,000 increase in operating income annually (Holmes, 2011).
  • Companies with effective communication have 47% higher returns to shareholders, more engaged employees, and less employee turnover (Holmes, 2011).

Building on studies conducted by Bloomberg BusinessWeek and Hay Group, the Institute for Health and Human Potential (2010) identified an EI effect size of .72 between the top 10% and lower 75% of leaders. Furthermore, they identified that a 1% improvement in a leader’s EI translates to an incremental human capital performance improvement of $2160 per leader.

Research from the Human Capital Institute and MHS Assessments (2013) found that both managers and their teams agree that communication, interpersonal skills and self-awareness are critical to a high performing team. Organizations that integrate emotional intelligence into their training and leadership development report a 16% growth in revenues and 25% increase in role performance. They found leadership effectiveness to be 3.2 times higher in organizations who value and widely use emotional intelligence.

An excellent place to start developing your communication and emotional intelligence competencies is smartMANAGER. The program not only increases emotional intelligence, but also provides tools and techniques to remain assertive and objective in all your interactions.

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