BLOOMINGTON, Ind. – Running a successful business has its challenges, but the COVID-19 pandemic has required many owners to pivot and look for new ways to operate profitably while keeping employees and consumers safe. Research from the Indiana University Kelley School of Business found that emotional intelligence – the ability to understand, use and manage emotions to relieve stress – may be more vital to a business’ survival than previously thought.
“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,” said Regan Stevenson, assistant professor of entrepreneurship and management and the John and Donna Shoemaker Faculty Fellow in Entrepreneurship.
“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,” Stevenson added.
According to recent U.S. Bureau of Labor Statistics, about a fifth of all new businesses fail within their first two years and nearly half are shuttered within five years. More than a million U.S. companies with employees were shuttered in 2020, in large part due to the COVID-19 pandemic. The number of bankruptcies in 2020 and those expected this year likely will approach levels last seen during the worst quarter of the 2008-09 financial 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,” said Ernest O’Boyle, associate professor of management and entrepreneurship and the Dale M. Coleman Chair in Management.
The research found that those with a higher emotional intelligence are better able to be self-motivated and have higher social skills – even under more normal circumstances.
“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,” researchers wrote. “These skills can enhance creativity and opportunity recognition; aid decision making in emotionally turbulent situations and enable adaptive responses to unpredictable events.”
Previous research has suggested that cognitive intelligence was a greater predictor of success among entrepreneurs. The two factors are seldom studied together.
“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 added. “Those with high emotional intelligence tended to be more successful as business leaders and enjoy success than in more typical jobs and careers.”
Their findings are based on an empirical study of nearly 40 previous studies and a meta-analysis of 65,826 entrepreneurs observed through that research. Their paper, “What matters more for entrepreneurship success? A meta-analysis comparing general mental ability and emotional intelligence in entrepreneurial settings,” appears in Strategic Entrepreneurship Journal.
Other authors are Jared Allen, a doctoral student at the University of Central Florida and the corresponding author; and Scott Seibert, professor and chair of human resource management at the Rutgers University School of Management and Labor Relations.
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So glad I stumbled upon this article! I am teaching an Entrepreneurship course in the School of Informatics & Computing: INFO-H 559-Media and Technology Entrepreneurship. I am posting a link today to the course and highlighting the key discoveries you report.
This info about EQ answers the question: “How do folks that seem to be operating with a few eggs short of a dozen make it to the top in their own business?” I suspected luck had a great deal to do with it (and recommended my class read “Lucky or Smart?: Secrets to an Entrepreneurial Life” by Bo Peabody.)
I admit that luck has been the source of nearly all of my success – and I attribute most of luck to networking. But now I’ll explain that much of networking success is the EQ of being a ‘people person’ and it matters as much or more than being a brainiac!
Maybe I should teach more about being an honest person, genuinely interested in others, a good listener and generous and less about accounting!
Thanks again for a great article!
IUPUI SOIC Adjunct
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