Emotional Intelligence

The ability to manage one's emotions and the emotions of others

What is Emotional Intelligence?

Emotional Intelligence (EI), also known as Emotional Quotient (EQ), is the ability to manage one’s emotions and the emotions of others. The term emotional intelligence first appeared in a 1964 paper by Michael Beldoch and gained popularity in 1995 in a book written by science journalist Daniel Goleman. Today, emotional intelligence is widely talked about in the scientific and business communities and compared rigorously to intelligence quotient (IQ).  EQ is extremely important for business leaders, as this guide will argue.


Emotional Intelligence Quotient (EQ)


Characteristics of Emotional Intelligence

In Goleman’s book, titled “Emotional Intelligence – Why It Can Matter More Than IQ,” published in 1995, a framework comprised of five elements is used to characterize EI.


1. Self-awareness

The degree to which an individual can understand their own and others, emotions is a main component of emotional intelligence. Self-awareness involves the ability to recognize an emotion and its effects.


2. Self-regulation

The degree to which an individual can control their emotions and impulses. People who self-regulate can avoid allowing their negative emotions to lead to a long-term negative effect, i.e., not making impulsive, careless decisions, and thinking before they act.


3. Motivation

The degree to which an individual is able to motivate themselves and achieve their goals. Those who are motivated are achievement-driven, committed, optimistic, and take the initiative.


4. Empathy

The degree to which an individual is able to identify with and understand the viewpoints and needs of others. An empathetic person often has a high level of emotional intelligence and is able to recognize the feelings of those around him/her even when those feelings may not be readily apparent.


5. Social skills

The degree to which an individual is able to communicate with others and build and maintain relationships.


The more an individual is able to manage each of these areas, the higher their emotional intelligence is.


The Importance of Emotional Intelligence

For business leaders, possessing a high EQ is essential to success. Let us revisit the five elements of a person’s emotional intelligence quotient (EQ) and their importance to characterizing a successful leader.


1. Self-awareness

Being self-aware means getting a clear picture of your own strengths and weaknesses. Leaders understand their own capabilities and are able to leverage their strengths while at the same time, improving on their weaknesses.


2. Self-regulation

Leaders are able to regulate themselves effectively and control their emotions and impulses. For example, leaders do not make rash emotional decisions, verbally attack others, or compromise their own values. Leaders hold themselves accountable, are calm, and understand their values.


3. Motivation

Leaders are motivated and formulate a goal that they consistently work toward. They hold themselves to a high standard and take the initiative when needed.


4. Empathy

Possessing empathy is crucial to team or organizational management. Leaders take the time to develop and understand the people on their team. They recognize the body language and feelings of others and are able to act accordingly in any situation.


5. Social skills

Leaders communicate effectively and are good at identifying and resolving conflicts. Leaders inspire others by leading by example and giving praise to others when earned.


From the list above, you can see that the elements are highly similar to important leadership traits. Leaders must gain a sound understanding of their emotions and the impact of their actions on the people around them.


Emotional Intelligence vs Intelligence Quotient (EQ vs IQ)

Emotional intelligence quotient (EQ) and intelligence quotient (IQ) are often contrasted with each other – which is more important? There are arguments for and against each side, but the general consensus is that both are important.

Originally, IQ was viewed as the main determinant of success. However, critics pointed out in the past that IQ did not guarantee success in life. Therefore, the concept of emotional quotient was introduced alongside IQ as determinants of success. In fact, in the business world, many companies put in place mandatory emotional intelligence training and utilize emotional intelligence tests in the hiring process. Emotional intelligence is an important quality for business leaders and managers.


 Emotional QuotientIntelligence Quotient
TermAbility to manage, identify, assess, and control one’s emotions and the emotions of othersAbility to understand and apply information to logical reasoning, skills, spatial thinking, etc.
Used to identify:Leaders and team playersHighly gifted or capable individuals


Success results from many factors. It is important to not undermine IQ and EI as they both play an important role in influencing overall success.


Tests for Emotional Intelligence

There are several tests that can be taken to help an individual determine their level of emotional intelligence. The two most popular emotional intelligence tests are:

  1. Mayer-Salovey-Caruso Test
  2. Daniel Goleman Model Score


Additional Resources

Thank you for reading CFI’s guide to better understanding EQ and IQ. Below are additional resources from CFI, the global provider of the Financial Modeling & Valuation Analyst (FMVA) designation.

  • Listening Skills
  • Interpersonal Skills
  • Leading by Example
  • Personal Brand
  • Take the FREE DISC Assessment and take the FREE Personality Testing Using DISC online course through Getting People Right

Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes and training program!