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Emotional Intelligence is the Secret to Leadership in Times of Crisis

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September 30, 2020 6 min read

Opinions expressed by Entrepreneur contributors are their own.

Amid the chaos of recent months, the world has latched onto leaders who seem capable of righting the ship. Some we may have expected, such as heads of state like New Zealand’s popular Prime Minister Jacinda Ardern and Germany’s longtime Chancellor Angela Merkel. Others were perhaps less obvious, including Commissioner Adam Silver, 3M CEO Mike Roman, and New York Governor Andrew Cuomo.

However, the connection between all of these figures can be found in the words used to describe their styles. Ardern’s response to the pandemic has been characterized as “empathetic,” Silver’s as “honest,” and Cuomo’s as “reassuring.” They each have a relational approach to leadership that enables them to cultivate a positive emotional climate and obtain buy-in for a shared vision of how to weather our current crises. For instance, after Ardern was turned away from a crowded café due to social distancing rules, her office said that “she just waits like everyone else,” demonstrating her willingness to share the same hardships as her fellow New Zealanders.

It’s all comes down to feelings

Our research over the past two decades demonstrates that emotional and social competence are essential components of effective leadership, particularly the kind of entrepreneurial leadership needed to navigate the uncertainty and ambiguity we currently face. Entrepreneurial leaders have an outward focus and a growth mindset that empowers them to work collaboratively with others to solve complex, undefined problems and generate new opportunities. They draw on their social and emotional skills to promote a positive emotional climate and meet the needs of employees and citizens for trust, security, and connection in the midst of turmoil.

Related: 5 Reasons Why Emotional Intelligence Is the Future of Work

Emotional and social competence are critical for entrepreneurial leaders navigating one of the most challenging moments in our lifetimes. In our research, when we ask people across cultures and contexts to talk about the leaders in their lives, they consistently focus on how these leaders make them feel. Qualities traditionally associated with leadership, such as intelligence, strength, and expertise, are rarely mentioned. These traits are important, to be sure, but our research shows that emotional and social competence are what truly differentiate effective and ineffective leaders.

Emotional engagement boosts employee performance 

Research also consistently demonstrates that leaders’ emotional and social competence produces a number of positive business outcomes. Emotional engagement is linked to managers’ performance and commitment, and positive emotion boosts employees’ job performance, lowers organizational turnover, and helps individuals thrive during times of uncertainty. By reducing the internal noise employees face from workplace stress and negative interactions – especially in challenging times – emotionally competent leaders clear the way for productivity, creativity, openness, and collaboration.

Businesses are currently facing multiple overlapping crises: the financial fallout of the pandemic, the disruptive shift to remote work, and the renewed focus on issues of racial justice and inclusion. To steer their teams and organizations effectively in the coming months, entrepreneurial leaders must attend to the emotional climate of their organizations and create a shared vision for weathering the storm. Based on our work at Babson Executive Education training entrepreneurial leaders and teaching emotional and social competence, we offer five recommendations for how to lead in the current moment of crisis.

Communication is key

In times of uncertainty, employees want to hear from their leaders. Several of the most widely praised government officials, including Ardern and Cuomo, held daily coronavirus briefings to keep citizens informed. Past research has found that in a moment of crisis, employees similarly value continuous communication from corporate leaders. Executives like Mark Zuckerberg who have been silent on either the pandemic or issues of racial justice have been heavily criticized by employees.

Related: How Emotional Intelligence Can Improve Your Productivity

Second, keep in mind that staying connected from afar takes an emotional toll on employees. Leaders must be more engaged with employees, both through formal communications and informal check-ins. Frequent contact with employees can help managers identify when morale is dropping and offer techniques for coping with stress. Communicate with empathy to reassure employees that everyone is in the crisis together.

Third, make space for employees to process their stress and emotions. Effective entrepreneurial leaders create containers for employees to work through their struggles, and encourage workers to take time for themselves and do what they need to avoid burnout. In addition, make it clear that employees’ voices matter. After Starbucks barred workers from wearing Black Lives Matter gear, the backlash was swift and severe. Allowing workers channels to express themselves helps them process stress, fosters transparent dialogue with managers, and increases employees’ trust in their organizations.

Fourth, find ways to prevent remote work from eroding social connection. As employees have become increasingly tired of non-stop video meetings, conversations among coworkers have dwindled. Build time into meetings to check-in and rekindle social connections. Recognize that sometimes the most “efficient” method of communication isn’t the most effective, as the scooter startup Bird learned after laying off 400 employees over Zoom. When possible, pick up the phone rather than send an email or hold one-on-one conversations over the phone instead of video chat. These small changes can help reduce “Zoom fatigue” and inbox overload.

Finally, leaders should make it clear to workers that the company is looking out for their well-being during a difficult time. At the outset of the pandemic, Smuckers issued hardship grants to employees, declared it would pay for all employee coronavirus testing, and dramatically expanded sick leave. Tech companies like Google have responded to anxieties about returning to the office by announcing they will permit remote work through 2021. Individual managers should work to accommodate the schedules of employees balancing multiple responsibilities, particularly childcare.

Whether you’re managing a small team or a large organization, emotional and social competence will be critical to navigating the turmoil of the coming months. Entrepreneurial leaders succeed by acting decisively, encouraging feedback, fostering collaboration, and managing the emotional climate of their organizations. By strengthening connections with employees and setting a positive tone, you can create a shared vision and commitment to weathering the storm.

Related: How to Raise Your Emotional Intelligence in 3 Steps

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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