Introduction
It was only in the last decades that the concepts of Emotional Intelligence and Risk Management were developed as serious principles that companies and organizations need to take into consideration in order to achieve greater results, to overcome a set of situations that can be easily solved and to improve the employees’ productivity within the organization.
Leading Risk Management through Emotional Intelligence can seem an interesting subject to be discussed by all the managers an organization have and most of them are actually doing this, but unconsciously, without naming it like this. Nowadays, it has become just like a cliché to say that a team is based on communication and collaboration, also they need to know each other in order to perform and have teamwork abilities.
I am currently working at a company who offers teambuilding and training services on the Romanian market and we often work with a various types of customers from Bucharest and other big cities from Romania on organizing teambuilding events for their teams following a set of specific objectives in order to be met. In this way, we have been getting to know a lot information about the employees’ profiles of all types of industries, with all types of ages, gender or professional abilities. Working directly with them, has been giving us a lot of insight information about the organization structures, culture, types of employees and how they use to communicate and collaborate with each other, business status and usual processes they run in order to complete their activities.
The aim of this paper is to see how Emotional Intelligence can impact Risk Management activities in organization from the Romanian market in order to improve their incomes and ensure a smooth running of the developed activities. The theoretical framework will be the basis of the conducted research, in order to fully understand the concepts and to see if in real life the principles are applied or not in the Romanian organizations, to see which are the practices and tools used and at the end to draw some conclusions about this subject of matter.
Paper structure
The paper starts with presenting the theoretical framework that consists in three subchapters where can be found information about: emotional intelligence studies and development, principles and characteristics; risk management definitions, risk culture and its characteristics. Also the theoretical framework presents how emotional intelligence impacts professional activities in terms of decision making processes and stress management at work.
The practical framework is represented by the information gathered from nine different persons who constantly work with all types of companies and interact with a lot of employees at teambuilding and training events we organize every year for them. Their professional experience at this kind of events make them understand better the companies problems they are facing in terms of human resources, to know what kind of approaches they need in order to change mindsets, to gain new abilities and skills or to understand better why specific concept like: collaboration and teamwork help them achieve their results.
In conclusion, the reason why I have chosen to conduct this research is the fact that Emotional Intelligence represents an important concept that have helped me, personally, to develop my skills, to improve my abilities, to change my mindset and to become more aware of my own emotions. Leasing risk management activities through Emotional Intelligence represents from my point of view the perfect combination to grow a business, to efficiently develop processes and to use people skills in order to achieve great results.
CHAPTER I – Theoretical Framework
1.1 Emotional Intelligence
When I have first heard about Emotional Intelligence was when I started volunteering for an international youth organization during my first year of faculty. I found it very interesting and I wanted to know more about this subject, because it seemed to be a complex term that can be explored further.
After few months, I realized that this kind of activities – volunteering – are the perfectly occasions to grow ones EQ and to become more aware of what this ability can bring to your professional and personal life. Volunteering is not the only option to develop people’s EQ, but there are also other things like participating at trainings, workshops, working in a strong leadership environment and exploring different opportunities that might give you personal examples of how should you react to different situations. Also, a person’s attitude to failure and success is a key to develop or not Emotional Intelligence.
1.1.1 Definitions and Characteristics
It was only in the early 90’ that people started talking more about Emotional Intelligence and its role in our lives. A lot of authors, psychologists and sociologists discovered and wrote about this subject underlining Emotional Intelligence importance in establishing communication relationships between individuals. Later on, while defining how a leader should be, it was discovered that most of them had not only a high IQ, but also abilities that define Emotional Intelligence at its greatest.
Considering the above, few definitions of Emotional Intelligence are: “The capacity to reason about emotions to enhance thinking” and this describes one’s ability to understand his/her emotions and control them, thing that can be observed in their mindset, acts and communication.
Emotional Intelligence or what was once called “Interpersonal intelligence” represents “the capacity to understand oneself, to appreciate one’s feelings, fears and motivations”.
Daniel Goleman is a well-known author, especially after he wrote and created the Emotional Intelligence Model based on the five characteristics a person should be aware of while taking into consideration this subject of matter. He developed and described the following topics of the model: self-awareness, self-regulation, social skill, empathy and motivation. All of them are skills that everyone should want to have or to develop, because they are the ones that Goleman says, “makes a person a good leader”. A person with a higher EQ will know how to deal with out of the comfort zone situations, with problematic team members, crisis management or any kind of moments that require social adaptability, quick responses or just not having the pride of asking for help.
Emotional Intelligence is nowadays a mandatory ability in being successful. “For most people, emotional intelligence (EQ) is more important than one’s intelligence (IQ) in attaining success in their lives and careers. As individuals our success and the success of the profession today depend on our ability to read other people’s signals and react appropriately to them.” This is because EQ can be boosted, increased by practice and experience and mostly because social life tends to play an important role in our lives. And a higher EQ allows us to be sociable enough to find and have good friends, to adapt better and faster to our workplace, to be liked by the co-workers and managers and to find better paid jobs.
1.1.2 Emotional Intelligence in Leadership and professional Work field
Leadership is a strong and complex concept that cannot be fully understood, because it depends on human beings and their abilities to lead other human beings, groups, teams, entire organizations or even countries. It can be a natural skill or an acknowledged one during a period of practice. It has few things that define it, such as: effective communication, emotional intelligence, authenticity, flexibility, and accountability. But it can always be improved, developed and changed.
Exploring further this subject of matter, we discover that the basis of Emotional Inte
lligence lays on Communication and one’s ability to efficiently communicate with others: friends, colleagues, superiors, partners, clients. Communication has always been a debatable topic, mostly because is in the same time such a complex and simple thing. Effective communication is so hard to be achieved, because people are different and they react accordingly while communicating with them. It is well known that non-verbal communication plays the most important role in our relationships with others, because it has the biggest impact on the other interlocutor. Non-verbal communication is a process that takes place using body language, image, facial expressions and gestures. Their relevance lies in their natural and simply way of showing them while communicating. They are said to be born expressions of us and a reflection of our emotions. But, this kind of language can also be taught and practiced during years, thing that can help improve our communication.
Very close to communication lies the concept of feedback, which is strongly related to emotional intelligence. Giving and receiving feedback is nowadays an ability to constantly improve ourselves and to help others improve beside us. Feedback helps us to communicate better, to point out the importance of individuals in a team or in a social environment, improve and manage crisis situations, help us understand better what others think of us and what their expectations are and also, it develops trust among people.
There are different types and techniques of giving people feedback. For example there are positive feedback, negative feedback, evaluative feedback, prescriptive feedback and descriptive feedback. Each one of them has different characteristics and meanings, also each one of them can bring up different results or attitudes, but the process of feedback is important no matter what type we are using. Giving feedback also represents making sure that the interlocutor understood the information and advice you gave, in order to have a positive impact on him/her and to help in a further improvement of skills, abilities, and behaviors. Not all the people have a positive reaction to receiving feedback. Some of them disagree and this happens because there is a perception discrepancy, some of them become emotional and they get mad and this is because they did not expected to this or they are not open in receiving feedback, some of them become angry because this is usually a protection mask to negative feedback, some of them are totally uninterested in receiving feedback because they are not motivated enough to care about their performances and some of them can simply reject your right in giving them feedback because they feel like they are threatened. There are some tips and tricks in giving feedback and information about how to react when you are put in the situations mentioned above. Using phrases like “I observed that…” or “What if I help you with…” can improve the communication with the others while giving feedback. Also, being open to their suggestions, active listening to them while talking, being aware of non-verbal communication and not being intimidated by their reaction are things to take into consideration if you want your feedback to be effective to others.
Communication, feedback and emotional intelligence are in a strong relationship with one another, they are interconnected and represent important assets for individuals who keep their mind open, who understand and use their emotions in positive ways for better results and objectives fulfilled. Taking all of the above into consideration, we can easily say the Leadership concept in represented by EQ. There are some studies, which describe different types of formal and informal leaders who where on top of big corporations around the world. All of the great results they experienced came from specific actions and attitudes which could be defined as EQ skills.
Every recruiter is looking for candidates with higher degree of EQ and this is because experience has showed that this kind of candidates can adapt better to the job itself, to the social environment of the job, to new challenges and crisis situations. From Daniel Goleman model, there were created a lot of tests that can tell how high our EQ is. These tests are used in recruiting interviews, in communication trainings and workshops, in promoting employees from one level to another, in building a new team and see which is the grade of EQ of the team members.
The results of these tests are not the most accurate ones, mostly because the persons who complete them can be very subjective about herself/himself and also, the results can be influenced by the emotional state and previous professional experience of the persons who fill them in.
During the last years, EQ has become a skill that a lot of people is talking about and it has a lot of other characteristics that are strongly related to who we are as persons and how we react in different situations we are put through. To sum it up, it is all about our attitude while facing different people, situations, coping with stress and crisis and also, enjoying and embracing new opportunities and challenges. Our attitudes describe who we are, how open our mind is, how flexible we can be and how we manage to make important decisions in our personal or professional life.
1.2 Risk Management
The Risk Management concept is present in all areas of matter – personal or professional. We are inclined to face different risks everyday of our lives at home, at work, with our family and friends, with our colleagues and managers, with our clients, partners or suppliers. Most of us correlate risks with negative actions or reactions that can happen, but in theory and practice there can also be positive risks that can impact our lives in a good way. The importance of risk management has grown during the years, mostly because of the insecurities, the unpredictable environment and nature of human beings.
1.2.1 Definitions and development
Right after the second World War, while a lot of various accidents produced serious losses to companies, the risk management concept appear as “being associated with the use of market insurance to protect individuals and companies.” There were developed a series of instruments to be applied in order to implement risk management strategies, companies started to hire new employees and create a risk management department within the organizational structure, to create internal models and specific actions that should be taken in order to prevent economical, financial or organizational crisis.
Risk management can be defined as “the process of identifying, assessing and controlling threats to an organization's capital and earnings. These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters. IT security threats and data-related risks, and the risk management strategies to alleviate them, have become a top priority for digitized companies.”
As mentioned above, the element of risk can appear in every situation we are facing. Managing the risks represents planning and preventions, evaluate and respond accordingly if the risk appear and impact the activities, minimize unfortunate events and maximize opportunities.
1.2.2 Risk Management as a culture in professional work field
Even though risk management appeared more then 70 years ago, risk culture within an organization has grown over the past two decades while other psychological discoveries appeared. Risk culture is a set of behaviors and attitudes that influence the decision making process, the adaptability to change and the responses one can give while facing crisis situations.
If we were to define risk culture, we can say that it “is a term describing the values, beliefs, knowledge, attitudes and understanding about risk shared by a group of people
with a common purpose. This applies to all organizations – including private companies, public bodies, governments and not-for-profits.”
Risk culture means mindset, a mindset that gives an organization the opportunity to implement it along with all the other characteristics. It involves knowing very well what the organization can offer, can cope with, can change, can provide to the employees, to the market, to its clients, partners and suppliers. Risk culture is represented by a series of other derivatives such as: risk tolerance, risk appetite, risk capacity, risk limit. All of them are important for an organization while evaluating, which should be its culture of risk and how should they implement it in order to manage all the incoming risks that the organization might face in the near future or for a long-time goal strategy.
It is said that it all starts from the top. More exactly from the top management of the organization, because they are the formal leaders and they are supposed to be also the informal leaders within the organization. They are the ones who should set up the tone, to lead all the other employees into the desired path in order to achieve a healthy risk culture that can improve the decision making processes into a consistent approach, that can change behaviors and create the perfect environment to bring the expected results.
This means, that the recruiters should pay attention from the beginning to hire personnel who manifest interest in adapting into an organization who’s culture of risk is a well-known practice, to hire people who’s values and principles integrate into the organization’s values, to hire people who’s skills can give an added value to the organizational plan to reach the set objectives. Moreover, after the personnel is hired, there is recommended to be implemented an educational system with trainings and workshops whose purposes are to give the employees an idea about the risk culture, the organizational mission and values and how should they integrate in, also to tell them which are the organization’s expectations from them in order to reach the expected results. The employees need to learn and experience each set of activity it takes for them to be successful and to join the culture set by the top management.
Risk tolerance in few terms means how many risks an organization can manage in order not to negatively impact their revenues and profit. "To determine risk tolerances, an entity needs to look at outcome measures of its key objectives, such as revenue growth, market share, customer satisfaction, or earnings per share, and consider what range of outcomes above and below the target would be acceptable.”
Risk appetite means how much an organization wants to risk and pursue this risk strategy. “Risk appetite is a broad-based description of the desired level of risk that an entity will take in pursuit of its mission. Risk tolerance reflects the acceptable variation in outcomes related to specific performance measures linked to objectives the entity seeks to achieve.”
These kinds of derivatives are important tools for organization to determine their risk level and to examine and evaluate previous situations in which they had to face different risks and how they handle them, to analyze their capabilities and to explore which are their future options.
1.3 Emotional Intelligence in Risk Management
Ever since Emotional Intelligence concept started to grow and develop among people all around the world, once it was defined and analyzed, people started realizing its importance in all kind of matters related to the personal and professional life. Risk Management activities appeared and were discussed few decades before EQ, but from the moment people understood what was all of this about, all type of organizations started to value the correlation between EQ and Risk Management. An organization risk culture means communication, feedback, ethical behavior, working together, adapting to change, being flexible and motivated enough to lead the actions to meet the objectives. In few words, the persons who implement and work in an environment which consist in risk management and being part of a risk culture need to have higher EQ in order to be successful. Or that specific persons need to be trained and taught how to grow their EQ and what are the actions they should take for greater results.
1.3.1 Risk attitudes in companies
Attitude towards risk means how the company and its employees react to different situations of risk. Their risk attitude can be influenced by a lot of factors: organizational values and mission, personal beliefs and principle, EQ, mindset and culture.
Figure 1 – Attitudes – Behaviors – Consequences
Attitudes conduct to some specific behaviors, which are based on people’s perception of the reality. Individual perception is a strong and very hard to break human being way of thinking, of perceiving the reality, of mindset, of creating an idea about general or specific actions that happen. Perception is associated very easily to people’s attitudes, because if something happen, a person reacts after his perception about that thing already has been formed and the person’s attitude towards that thing was influenced by it and he acted accordingly to it.
There are two extreme ways of perceiving the reality: good or favorable situation and bad or unfavorable situation. Both ways show us how people can react differently to the same situation. The attitudes, driven by the perceptions people have, are transformed in behaviors, which have final consequences.
In general, a good perception of the situation leads to a behavior, which is based on an attitude and a bad perception of a situation leads to a behavior, which is based on a direct reaction to the situation.
Please see the figures below:
Figure 2 – Good perception of the situation
Figure 3 – Bad perception of the situation
Risk attitudes in companies depend on how employees perceive the reality, on how they are influenced to react to crisis situation, on changes, on how they make decisions and on how they were taught to do it. Their perception can also be influenced by the organizational culture, by their EQ level and by the leaders behaviors.
That is why companies have different types of employees, have different types of management and leadership strategies, use different approaches in managing and considering risks or different risk culture within the organization.
1.3.2 Decision making processes
Decision-making processes are used in the everyday life in the professional and personal aspects and they are based on specific structures and formal or informal procedures.
In a professional environment the decisions can be take individually or in group, depending on the decision that has to be made, the level of impact that decision has upon the organization and the information and expertize needed in order to make that decision.
If the decision is taken individually, there are decision that are taken out of reflex – that are decisions that are part of other similar decision taken in the past and the individual knows the impact they have on his professional outcome; and also there are decisions that are taken after a serious documentation on the situation the person has. All the decisions taken individually are firstly filtered with one’s perception of the situation in order to categorize it in different types: bad/good situation, easy/tough decision to be made, similar or not with other decisions taken in the past. Secondly, they are usually based on good argumentation because individual responsibility and accountability is bigger than the group ones. Individual decisions are time efficient and tend to be more focused.
If the decision is taken in a group, the arguments that are grounded to it can be more accurate, because of the fact that are more people
involved in that decision and can provide different and more important information in the decision-making process. But, it takes longer time and more effort, involves more perceptions and views of the people taking the decision and sometimes cannot cover all the people’s interests and opinions.
In companies, there are a lot of moments when decisions need to be taken and also all the companies’ levels are involved in decision-making processes depending on the decisions.
There are two types of processes: top down and bottom up. “The difference between these two styles of decision making is that the top down decision making is done at the higher levels of the hierarchy and the decisions are passed down the corporate ladder to be implemented. On the other hand, bottom up decision making is done by giving autonomy to the middle managers and the line managers to take decisions based on the conditions and circumstances existing in their teams.”
In the corporate environment, group decisions are more of the time expressed by consensus or the contrary of it. The few people you have to make a group decision the most likely to have a consensus. Also, it is important to have a person who leads the discussion of the making a decision and to facilitate the process for the group. The group must be informed about all the aspects that can impact the subject of matter and to analyze the data and the risks involved while making a decision.
Decision-making group should be characterized by rational way of thinking without lacking creativity, open minded, and flexible, ethical and informed.
1.3.3 Stress management
Present in all our lives, personal or professional, stress is a mind and body response to different conditions and negatively influences our future actions. Stress is manifested when people feel overloaded, when they feel like they can’t handle to much of what is disturbing them, when people face different kind of personal or professional problems, when there are external or internal factors which cause them an uncomfortable feeling of what is going to happen next and how the problems can be solved. People have different ways of responding back to the stress: some of them are shaken, some of them are angry, some of them are feeling sad and become depressed or some of them start working harder and harder in order to find solutions and ways to fix what is causing them feel stressed.
Stress management is a set of techniques that helps individuals to cope with different levels of stress. Stress management is a concept that all the organizations need to implement for their employees and help them handle and pass over it. In a corporate environment, stress is a usual thing to happen to its employees, especially in the last years when the time seems to pass to quickly, everything is on fast-forward, every client needs the work done very fast, employers demand to the employees to be quick and efficient and in the same time the workload is growing faster and faster and deadlines are daily missed and postponed.
In a company, with an impregnate risk culture, people need to say focused to what their work is, leaving beside the stress or handling it smoothly. Stress influence people motivation and decision-making processes, because stressed people can easily become demotivated of what they are doing, can become predisposed in lacking their interest in successfully performing their work activities and can make decisions that negatively impact the set objectives and the organization’s expected results.
Stress management is an important asset to individuals and managers should take this into consideration while leading a team. Managers should know how to find for his team members ways of calibrate stressing situations by offering alternatives, offering support and implementing different educational and teambuilding programs that can improve people’s soft skills and get them a motivational boost.