Leveraging Emotional Intelligence in Treasury: A Change Management Tool

In today’s world, Emotional Intelligence (EI) skills often seem undervalued, especially as we observe leaders as people exhibiting narcissistic and populist behaviors. Empathy appears diminished amid ongoing global conflicts lacking resolution. Even in business, where pragmatism and long-term focus are paramount, the lines between politics and corporate interests blur, challenging the role of EI. Despite these trends, EI remains crucial for individual success and societal well-being. A deeper understanding of our own and others’ emotions, coupled with actions rooted in this awareness and positive intent, can lead to a more harmonious world.

Imagine a Treasury leader – let’s call him John – who is self-focused on his own success, to the detriment of those around him. He views each interaction as a zero-sum game. Would others be willing to collaborate with such a person on labor-intensive tasks, where the Treasury function often plays the role of project manager? Would interaction with such a person help the Corporate Controller – let’s say Clare – overcome her natural resistance to, for instance, the implementation of a Treasury Management System (TMS) that might delay the rollout of a new ERP system? If Clare knows that John typically acts out of self-interest, will she trust him enough to focus on the company’s overall benefits? Will she be open to hearing why the ERP implementation, which directly benefits her function and several others, should be delayed to accommodate the TMS, regardless of how justified the reasons may be?

Research shows that EI skills have a significant impact on the success of leaders:

By 2030, the use of social and emotional skills is expected to increase by 24% compared to 2016 (McKinse y)
EI skills influence 75% of decisions regarding promotions and salary increases by people managers (LHH)
Leaders with strong EI skills earn, on average, $29,000 more annually than those with lower EI scores (TalentSmart)

These findings hold particular relevance for Treasury leaders, who must operate and lead change in an increasingly uncertain environment. As Treasury professionals, we are entrusted with safeguarding cash and managing financial risks. To do this effectively, we must not only understand and manage our own emotions but also connect with and work collaboratively with others.

What is Emotional Intelligence and why are these soft skills so hard?

Let’s start with a definition of what Emotional Intelligence (EI) is. As defined by psychologist Daniel Goleman, it encompasses the ability to recognize, understand, and manage our own emotions, as well as the capacity to recognize, understand, and influence the emotions of others. Goleman’s model outlines four key components:

Self-Awareness: Recognizing and understanding one’s own emotions and their impact on thoughts and behavior.
Self-Regulation: Managing or redirecting one’s disruptive emotions and impulses and adapting to changing circumstances.
Social Awareness: Understanding the emotions of others and considering their feelings, especially when making decisions.
Social Skills: Managing relationships to move people in desired directions, including influencing, communicating, and leading effectively.

These components collectively contribute to effective leadership and interpersonal relationships, highlighting the importance of EI in both personal and professional contexts.

These skills fall into the category we typically call “soft skills,” but contrary to their name, they often prove quite challenging to develop. The good news is that these skills are not set in stone. While some individuals may have a better starting point in some areas – or, for a lucky few, most areas – these skills can be cultivated with focus and determination, regardless of one’s background, IQ, circumstances, or other external factors. We have the power to influence and strengthen these skills through intentional practice and effort.

First, let’s explore some practical applications of these skills in Treasury, particularly in managing change. Then, we’ll shift focus to how one can assess and improve these skills individually and within Treasury teams.

Practical application of EI in Treasury Change Management

There are several ways a Treasury leader can leverage emotional intelligence to enhance both their own and their team’s performance. I deliberately avoid the term “manager,” as leadership or influence can be exercised regardless of one’s position within the team or company hierarchy.

First, a leader with highly developed emotional intelligence skills fosters a culture of open communication and trust among team members and stakeholders. Such a culture is crucial for the success of any change management initiative, as it ensures that individuals feel heard and valued, creating a solid foundation for collaboration. Emotional self-awareness and self-control enable such a leader to discuss upcoming projects openly, welcoming diverse suggestions and ideas. They can process all types of feedback constructively, recognizing when emotions might trigger a defensive reaction. By managing these responses, the leader ensures feedback is fully considered, ultimately benefiting the project as a whole.

Second, emotional intelligence is instrumental in generating buy-in from stakeholders who will be involved in or impacted by planned changes. Organizational awareness allows a skilled leader to assess group dynamics, identify key influencers, and understand their interests. This awareness enables the leader to communicate the project’s importance effectively, emphasizing its benefits not just for the organization but also for individual teams. By addressing the interests of key stakeholders, a leader can significantly boost alignment and commitment.

Finally, such a leader inspires and motivates project team members as they navigate the challenges of change. Empathy helps the leader recognize and address the anxieties that naturally arise during transitions, fostering a sense of reassurance. Additionally, skills like a positive outlook and adaptability empower the leader to provide a compelling vision—a “guiding star” that the team can rally around. These qualities also help the leader anticipate and overcome obstacles, ensuring the team remains resilient and focused on achieving their goals.

EI skills are not static and can be trained

One of the most important things to remember about Emotional Intelligence skills is that they are not static. While we all have different starting points in life, with varying levels of development in EI skills, these skills can be improved over time. Importantly, those with already strong EI often recognize the need to continuously evolve, understanding that there is always room for improvement.

To this end, the Emotional and Social Competency Inventory (ESCI), developed by Korn Ferry Hay Group and Daniel Goleman, is an excellent tool for measuring EI skills. It is a 360-degree feedback tool that allows individuals to measure 12 EI competencies, not only by completing a behavior-based self-assessment but also by seeking feedback from those they work closely with—managers, peers, and subordinates. This provides an overall view of one’s EI skills, highlighting areas that may require focused development at a particular time.

This test is widely used by corporations and can be customized to align with a company’s values by adjusting terminology. It is also frequently employed by personal coaches, who can help individuals create a development plan tailored to their goals. Additionally, progress can be measured over time, as the ESCI test can be retaken after 6 to 12 months to assess improvements empirically.

Conclusion

Emotional Intelligence skills, often regarded as soft skills, are increasingly becoming a critical currency for Treasury leaders. These skills are essential not only for individual success but also for influencing team performance and fostering effective collaboration with stakeholders during change management processes or in response to external challenges.

These skills are not static—they can be developed and measured. Enlisting the help of a professional coach can be invaluable, providing guidance and structure for improving EI skills.

As Treasury leaders increasingly take a seat at the table in discussions about a company’s strategic direction, it is clear that we cannot remain confined to the Treasury room, isolated from other functions. Instead, we must take an active role in understanding how the business operates so the Treasury function can better serve its needs. Thus, it is vital for Treasury leaders to cultivate their soft skills to enhance their relevance and impact on the broader organization.

Join our Treasury Community

Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below.