We are taught corporate finance, financial accounting, management accounting, audit and taxes in our classes or curriculum, but most of us are not taught how to deal with our emotions or emotions of others. These skills are highly valuable and essential but are not taught in classrooms.
Emotional Intelligence, as a psychological theory, was developed by Peter Salovey and John Mayer.
"Emotional intelligence is the ability to perceive emotions, to access and generate emotions so as to assist thought, to understand emotions and emotional knowledge, and to reflectively regulate emotions so as to promote emotional and intellectual growth." - Mayer & Salovey.
As per the mixed model developed by Daniel Goleman, emotional intelligence consists of five components:
Self-awareness is recognizing your strengths, weaknesses, opportunities, threats and emotions. It is knowing your own feelings, assessing capabilities and understanding weaknesses.
Self-regulation is managing your strengths, weaknesses, opportunities, threats and emotions. It is the ability to control out bursts, disruptive impulses and moods. It also encourages"think before acting" attitude.
Internal motivation focuses on meeting goals, taking initiatives, maintaining excellence and optimism. It is the passion to work for internal reasons such as personal joy, curiosity or mental satisfaction.
Empathy is the ability to understand and respond to others people’s feelings and emotions. It requires reading the feelings and understanding the needs of others.
A social skill is the ability to negotiate the needs and feelings of others to that of yours. It is the proficiency in managing relationships and building networks, and an ability to find common ground.
A CFO requires all the competencies acquired through formal professional education and through continued professional education. Are these competencies in the field of financial reporting, management accounting, taxation or mergers and acquisitions are enough for a CFO to be successful in his career? Why are some accounting professionals with average or inferior technical skills more successful than others? Passing CMA, CPA or other professional examinations can be considered as a baseline. Research have proved that it is not only the expertise in the subject matter that makes a finance professional successful, but also a high level of emotional intelligence that makes him a star performer. Emotional incompetency acts as a hurdle to the professionals in reaching their full potential.
The first three components of the mixed model namely self-awareness, self-regulation and internal motivation deals with a person’s internal emotions. An analysis of these three factors will show us “how well we manage ourselves” and the analysis of the other two components namely empathy and social skills will show us “How well we manage relationships”.
The following chart illustrates the four main domains of emotional intelligence.
“The leader must not simply have a vision that inspires others, but be able to execute it successfully to ensure that vision becomes a reality.” D. Dunning
A CFO should possess leadership qualities which will enable him to delegate and oversee the financial operations of the company effectively. Emotional intelligence is widely known to be a key component of effective leadership. The ability to understand yourself, your emotions, as well as having sound situational awareness can be a powerful tool for leading a team.
A CFO lacking in emotional intelligence will not be in a position to effectively understand the needs, wants and expectations of his finance team and the board of directors. Unregulated reactions to emotions can adversely affect the work atmosphere and relations. CFOs must be self-aware and also recognize and manage their communications, both verbal and non verbal, so that it doesn’t negatively affect their team.
"Effective communication by a CFO facilitates information sharing between his team and can substantially contribute to an organisation's commercial success."
As per the research findings of Professor Albert Mehrabian, only 7% of meaning in the words is spoken, 38% of the meaning is para-linguistic and 55% of the meaning is in facial expression. Lack of effective communication is the root cause of conflicts and confusions between people. Ineffective communication at work place leads to confusions, conflicts, distrusts & hatred among employees. Effective communication by a CFO will results in alignment and shared sense of purpose among his team.This will help him to better understand his team’s emotions and to have the ability to resolve the conflicts, thus, leading them to exceed the goals.
"Consciousness is a person's experience of being defined. A sense of one's personal or collective identity, including the attitudes, beliefs and sensitivities held by or considered characteristic of an individual or group."
Consciousness can only be understood through relativity. Relativity is an awareness based on comparison. For example for a CFO to know himself as an expert in financial reporting, he must have something that is relative and can define what “expertise in financial reporting” is. A person can only understand consciousness relative to some other experience that can provide the basis to define a person’s consciousness.
A person’s consciousness can be classified in to four levels. The following chart illustrates the four level of consciousness:
The above illustration can be better explained by the following example.
Level 1: A boy in his childhood is not aware that he lacks the skill to drive a motor car.
Level 2: Few years latter, he realizes that he lacks the skill of driving a motor car.
Level 3: Few years later, he makes an effort to learn driving. While learning and initial days of driving he will be very careful about the vehicles in the next lane, his speed etc.
Level 4: Few years later, we can see him driving the car while talking on the mobile or texting or even having a dress change while driving!
A CFO confronts these stages of consciousness in his daily work place. A CFO in level 1 needs to have a self awareness to proceed to level 2, where he will recognize the skills he lack to be a successful leader. Through self regulation, a CFO can overcome the lack of skills, sharpen his saw and reach the third level of consciousness. Self regulation together with internal motivation will help him to reach the forth level of consciousness.
High intelligence quotient along with a high emotional quotient will make a highly successful CFO. Emotional intelligence is a trait that can either be intrinsic or learned.