Investing in emotional capital

Losses. Retrenchment. Downsizing. Scandals. Scams. Quitting. Shutting. These words surround us these days. These situations put companies and people down. These circumstances force companies to take ultimate calls. Calls that are undesirable but the need of the hour. The financial stories start painting a tragic end. The returns over investment plummets. As these investments give negative returns the boardrooms become wary and ready for some pruning of business. Fair enough? On paper yes. When business is costing more than its earning, such actions become inevitable. Numbers are important. Numbers are the measure. Are numbers the point of decision? Yes they are. Do numbers tell the whole story? Not necessarily. Do numbers show the real cause of the downfall? Not always. If the numbers only reflect the reduction in profits or revenue, the decisions would obviously focus on how to save your financial capital from further erosion.

This focus on financial capital normally results in cutting down expenses. This means layoffs, postponement of increments and training, etc. That of course helps margins, for the time being. However, it makes people feel more marginalised. That is a factor that is ignored. That is a factor that may be decisive. That is a factor that is not even considered important. When we talk about emotional capital it is dismissed as something philosophical, some buzzword that is there for social media talks. That dismissal is actually the real cause of the financial capital to go down. Emotional capital is the collective feelings and emotions that people in a company experience that helps them form relationships and put in effort. On paper this looks so far removed from money. On ground these are the very factors that make people like, dislike, engage and disengage with their work, bosses and company. The turbulence in the emotional capital will sooner or later cause turbulence in the financial capital. There are many studies that prove that the emotional balance of the company plays a big role in health of the balance sheet of the company. No amount of investment in the latest software will pay off, if the people using and managing it are feeling tense and upset. No amount of investment in fancy offices will please a team that feels humiliated. No amount of investment in state of the art machinery will pay off if the people managing the machines are feeling anxious and fearful. The financial dip is related to the emotional dip in the sentiments of the people working in the organization. This reality has not sunk in the boardroom power point graphs and presentations. Emotional capital must matter if business profits matter. Some ways to do get the powerful up there to take it seriously is by:

1. Take the bull by numbers— The top is all focused on the bottom line. They see the profit margins, stock values and earning per share. If you want emotional capital to take their attention, put it in numbers. A recent study by Gallup on emotional capital link to financial capital creates this missing link in wealth analysis. The study says that how employees felt about their employer and their level of emotional engagement strongly predicted the outcome on every metric that related to performance such as increased productivity, profitability, safety, and decreased turnover and absenteeism. Gallup’s State of the Global Workplace report documents a powerful relationship between reported levels of emotional well-being, employee engagement and profitability. The analysis of this vast data base shows that an organization’s employee engagement scores were strongly related to earnings per share (EPS). Median earnings among those in the “top decile/exceptional growth” group who had high emotional engagement were more than four times those of their industry competitors. Imagine doing a presentation to the Board. Imagine asking them the question that how many of us want to earn four times more than our competitors? The answer will be a unanimous yes. Then show them these numbers on how investment in emotional wellbeing of employees can bring these numbers. Even if reluctantly, the Board will start getting interested.

2. Develop measurable departmental case studies— To make your case strong get some inside research done. Take departments or units of the company that have performed relatively well versus those departments or units that are struggling. Compare their emotional wellbeing and engagement scores. There is bound to be a difference. In my coaching experience, I have seen the same company, same situation, and same challenges having two different departments performing differently. The production department despite the challenges is meeting the targets and doing well. The logistics department is struggling. The difference will lie in how the employees feel about working in those departments. If their emotions are positive, they develop a fighting spirit and put in extra to get results. If their emotions are down, they get embroiled in the minor conflicts and are unable to meet targets. This was what I have witnessed time and again in the same company. These inter-departmental case comparisons can further lend substance to the argument of investing in the emotional capital.

3. Employee pulse through internal mystery shopping— Mystery shopping is generally an external customer exercise, where a research team goes posing as a customer in various branches of the company to gain first-hand customer emotional tendencies towards the company. Such an exercise also needs to be carried on internal customers, i.e., the employees. Many companies are now hiring chief cultural heads who go around departments gauging the sentiments of people. In China the introduction of unhappy leaves has created a stir. The retail chain in China, Pang Dong Lai, has assessed that the presence of an unhappy employee is more costly than his or her absence. “I want every staff member to have freedom. Everyone has times when they’re not happy, so if you’re not happy, do not come to work,” said Chairman Yu. He wants employees to freely determine their own rest time, and for them all to have sufficient relaxation outside work.

The American Anxiety Association says 72 percent of people who have daily stress and anxiety say it interferes with their lives both in the office and at home affecting their relationships and productivity. Organisations that try to fix the bottomline by reducing the costs are only fixing the symptoms not the disease. If you have a runny nose and you clear it through sprays, it may give temporary relief, but it will recur at regular intervals. Organizations that focus on financial investments without focusing on emotional investments are just spraying the numbers with artificial gloss — a gloss that will fade away as soon as the virus of emotional unwellness resurfaces.