Running a startup is nothing if not difficult, but the challenges have been particularly pronounced during a pandemic that has disrupted most of what had previously been taken for granted. New research from the Indiana University Kelley School of Business highlights the crucial role emotional intelligence can play in dealing with this stress and uncertainty.
“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,” the researchers explain.
“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,” they continue. “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.”
Managing uncertainty
The authors highlight the high failure rate of most startups, with data suggesting that as many as 20% fail within the first two years, with that figure rising to 50% within the first five years. This has been exacerbated during the pandemic, with over a million American companies shutting during 2020. It’s a level of failure not seen since the financial crisis of 2008.
“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,” the researchers say.
The researchers found that entrepreneurs with high levels of emotional intelligence were better able to maintain their self-motivation, even during the difficult times of the pandemic. What’s more, they also displayed greater social skills, which also helped them to deal with the uncertainty and maintain focus within their businesses.
“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 researchers say. “These skills can enhance creativity and opportunity recognition; aid decision making in emotionally turbulent situations and enable adaptive responses to unpredictable events.”
Emotional intelligence
The study builds upon previous research that had suggested that a key factor in the success of any startup was cognitive rather than emotional intelligence. The researchers believe the two are seldom studied in unison, which can create blindspots in our understanding.
“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,” they say. “Those with high emotional intelligence tended to be more successful as business leaders and enjoy success than in more typical jobs and careers.”
With this new insight, it’s perhaps time that entrepreneurial training and development programs place fresh emphasis on emotional intelligence to ensure that entrepreneurs have the skills required to succeed, even in these most uncertain of times.
