Improving your emotional intelligence – or EQ – could be the key to building more trust and better rapport with clients of accounting firms.
It may come as no surprise that 1200 executives in 44 countries believe technology is having the greatest impact in the modern workplace, but according to PwC’s just-released 20th Global CEO Survey there is also an X factor.
“The rise of automation and robotics in the workplace is driving a greater need for people that possess qualities that can’t be replicated by machines,” notes the PwC report.
Foremost among these are creativity, adaptability, problem-solving – and emotional intelligence.
Rachel Green, director of Perth-based The Emotional Intelligence Institute says, “I always tell my accounting clients that according to the World Economic Forum’s 2016 The Future of Jobs report, emotional intelligence will be one of the top 10 job skills in 2020”.
She adds: “Sadly, very few of us were given emotional intelligence education when we went through school, so we’re all in catch-up mode.”
What is emotional intelligence?
Simply put, emotional intelligence is a measure of someone's ability to identify, use, understand and manage the emotions of themselves and others in a positive way. Commonly abbreviated as EQ (emotional quotient) or EI, the term was coined in 1990 and gained widespread attention with the 1995 book Emotional Intelligence by Daniel Goleman. In the same year, Time magazine ran a cover story on EQ.
EQ has since been the subject of numerous studies, many of which point to it being a better predictor of professional success than someone’s general cognitive ability (IQ).
Researchers believe it explains why some people with high self-confidence, optimism and many so-called “soft” skills – but with modest intelligence and talent – often excel where those with greater natural intelligence and talent fail. Research from Harvard Business School, for example, suggests that EQ counts for twice as much as IQ and technical skills.
More importantly, unlike IQ – generally viewed as fixed and the result of genetics and environment – EQ can be trained, practiced, developed and improved.
The rise of EQ in accounting
This should encourage accounting firms, where compared to even just a few years ago practitioners are offering clients far more than number-crunching.
To offset the loss of traditional bread-and-butter staples to outsourcing and automation, today’s accountants are increasingly reliant on skills that include management, business advisory and new business development.
Learning and applying intangible assets that help them to empathise, collaborate, influence and build trust with clients to create business relationships that are based on more than financial transactions can set a firm apart in a crowded and commoditised market – an important factor in an industry where 84 per cent of new business comes from referrals.
“The one thing that now and into the future will differentiate one accountant from another is not numeracy, but their ability to manage client relationships,” Green says.
“They have to perform a different role – to be more client-facing and to offer advice, which means being able to really understand the client and what they need, to explain it and then motivate them to do what’s required.”
This, Green says, necessitates an ability to influence outcomes, “which in turn involves managing emotions because emotions drive people’s behaviour”.
“If you can inspire someone to comply with or follow your advice, you’re going to achieve a better outcome than if the person is complacent,” she says.
“Watch the person you’re explaining to. Are they getting it or not? Don’t provide data without monitoring their emotional response and know how and when to change tack according to that response.”
All of which is well and good if you already have the appropriate EQ, but as Green notes, it can be challenging to relearn and look at decision-making in a different light.
“Many finance professionals have been brought up to believe that they have to factor out emotions from every decision they make,” she says.
This may explain why more organisations have started giving employees opportunities to improve their EQ.
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“Some of the banks are investing heavily in the area, and I’ve had one finance department in the public sector put its team through training for a whole year,” Green says.
“Also, the entire directorate of an accounting firm has embarked on group workshops and personalised one-on-one coaching and completed the MSCEIT [Mayer-Salovey-Caruso Emotional Intelligence Test].”
MSCEIT is one of a diverse range of tests used for measuring EQ in individuals, organisations and teams. The tests fall into four broad categories:
- abilities-based in the same way IQ tests measure cognitive ability
- personality or disposition (trait-based)
- tools that measure how frequently a person demonstrates emotionally intelligent behaviours and actions
- and competency tools that in a workplace context measure learned capabilities against those expected according to role.
Some tests may include questions such as: Do you let clients’ needs determine how you communicate with them? Do you stay optimistic when things go wrong? Are you motivated by the satisfaction of meeting your own standards of excellence? Do emotions take charge when you encounter stressful situations? Do you enjoy helping colleagues develop their skills? Can you read office politics accurately?
At the end of the day, they are all designed to give greater predictability in areas such as promotion, leadership, succession planning and, of course, recruitment.
New rules of engagement
Historically, most professional accounting firms have not placed a lot of emphasis on EQ. However, according to principal consultant at Melbourne-headquartered recruitment firm Marshall McAdam, Gavan McDonald, who has over 20 years’ experience in financial and accounting recruitment, this is changing in both public practice and corporate accounting.
“The salient issue is increased automation of finance processes, which means everyone has to value-add to the business,” McDonald says. “Even junior candidates are being asked how they business partner and engage with non-finance people.
“Businesses want to hire people that not only bring a high degree of technical skills, but an ability to communicate insights. Another example is at the analyst level, where producing shiny reports is no longer enough. You need to have answers to questions before they’re asked.
“Obviously, any good practising accountant wants to really know their clients because it means more business. But you can’t produce insights if you can’t read the tea leaves.”
According to McDonald, there are very few exceptions to these new rules of engagement.
“In some cases, where specialist knowledge of statutory reporting or certain accounting standards is required, technical expertise will still win the day, but those roles are relatively few and far between.”
Bottom line impact
Nonetheless, because of the sheer number of variables at play when it comes to maintaining and expanding a client base, quantitating the direct impact EQ has on any firm’s financial bottom line is difficult.
However, at the 2015 Emotional Intelligence Summit in London, Grant Thornton UK presented the results of a five-year organisational transformation in which EQ was built into its leadership training program.
The firm quoted a 35 per cent revenue increase and 16 per cent uplift in client satisfaction.
A book co-authored by Daniel Goleman titled Primal Leadership: Realizing the Power of Emotional Intelligence, cites a study of partners at a large US public accounting firm where those with significant strengths in self-management contributed 78 per cent more incremental profit than partners without them.
Partners with strong social skills added 110 per cent more profit than those with only self-management competencies. This resulted in a 390 per cent incremental profit annually.
Interestingly, those partners with significant analytical reasoning skills contributed only 50 per cent more incremental profit.
Nothing ‘soft’ about soft skills
McDonald says savvy job seekers are aware of the growing need for “soft” skills in finance.
“Those who are serious about building a career look for opportunities to take themselves out of the comfort zone and become involved in projects where they may be tested on skills they haven’t used before, such as influencing people in a team environment and achieving outcomes where non-finance people are involved,” he says.
“It’s a good box to tick, especially in public practice, where if you don’t have the EQ to understand your target market and build rapport with clients, I don’t see how you can be effective, let alone generate business.”
Regardless, he still encounters practitioners who, for whatever reason, do not have the mindset or interest to develop relationship management skills.
“It’s always a bit galling to see someone who after five years in a practice environment says they didn’t realise that they’d be expected to generate revenue,” he says.
“Their struggles in the wider world have probably just begun, because to stay in a firm with a tremendous bag of technical tricks but without gaining much expertise around interacting with people is not what the CFOs or CEOs of other businesses or industries will be looking for.”
3 ways to better understand your emotions at work