The valuation of companies is driven significantly by their intangible assets. In the last decade, competition has become so fierce that any edge gained by the introduction of new processes or technology is short- lived. Companies can no longer rely on investment in capital or physical assets to provide a competitive advantage. People have taken the centre stage in achieving sustainable economic growth. Given the significant financial impact of people in organizations we often refer to them as ‘human capital’.
A survey conducted by TMI across the world and organizations threw up alarming results pertaining to employee engagement at a given point in time in most organizations:
One out of 10 employees was on the lookout for a new job
4 out of 10 employees were not proud of their organization and spoke negatively about it
8 out of 10 were indifferent towards their organization – did not feel responsible for achieving its goals and were at best committed with their minds
Only 2 out of 10 employees were proud of their organization, they were committed both with their minds and their hearts.
80% of decisions are made emotionally. And today’s business winners will be those who best connect emotionally and empathetically. » K. Roberts, CEO, Saatchi & Saatchi
The Need to Develop Emotional Intelligence
At the heart of Building Human Capital, is the leadership of the organization. Research today is attributing almost 40 % of business results in organizations to its leadership.
70% of all change initiatives fail due to people issues – inability to lead, inability to deal with change.
urvey of US employers reveals that:
More than 50% of employees lack the motivation to keep learning and improving
4 in 10 people cannot work cooperatively
Only 19% of entry level applicants have adequate self-discipline for their jobs
Leadership development programs yield disappointing results, wasting billions of dollars
70% of all change initiatives fail due to people
issues—inability to lead, lack of teamwork, unwillingness to take initiative, inability to deal with change, etc.
Primary derailer of top executives: a lack of impulse control
Given below are a few examples of how Emotional Intelligence is a key success factor in organizations across industries:
US Air Force –
Used a EQ module to select recruiters for the Air Force’s front-line HR personnel
The Air Force found that by using emotional intelligence to select recruiters, they increased their ability to predict successful recruiters by nearly three-fold
Savings of $3 million annually
At Loreal –
Sales agents selected on the basis of certain emotional competencies significantly outsold salespeople selected using the company’s old selection procedure
On an annual basis, salespeople selected on the basis of emotional competence sold $91,370 more than other salespeople did, for a net revenue increase of $2,558,360
At Infosys –
Infosys’s 2010 annual report also includes a “comprehensive intangible assets score sheet” that can be used as a decision-making tool to determine how successful the firm has been at investing in its people from year to year.
Research estimates that while companies could easily add 10-20% to their operating income by better utilizing human capital management, only a small number even reached the 0.5% mark. Suffice it to say, companies are leaving a wealth of value in their intellectual assets unrealized.