Emotional Intelligence in the Workplace
Technical skills get people hired. Emotional intelligence determines whether they—and their teams—thrive. The business case for EI development, what deficits cost, and how leading organisations are investing.
Technical skills get people hired. Emotional intelligence determines whether they—and their teams—thrive.
HR sees the pattern clearly. A high performer gets promoted into management. They know the work better than anyone. Six months later, their team is struggling. Feedback isn’t happening. Conflicts simmer. Good people start leaving.
The manager isn’t failing because they lack knowledge. They’re failing because the skills that made them excellent individual contributors—technical expertise, deep focus, independent problem-solving—aren’t the skills that make teams succeed.
What’s missing is emotional intelligence. And the cost to organisations is enormous.
The Business Case: What Low EI Actually Costs
The financial consequences of low emotional intelligence in leadership are staggering—and Australian organisations aren’t immune.
The Australian context
The Australian leadership development market was valued at $1.46 billion in 2025 and is projected to reach $3.22 billion by 2035—a clear signal that organisations recognise the problem and are investing to solve it.
Yet only 66% of Australian employees feel engaged at work (Qualtrics, 2024), and more than a third perceive their leaders as lacking emotional intelligence. APAC regions, including Australia, grapple with significantly higher rates of low work productivity, anxiety, and depression compared to global averages—with work productivity scores of just 47.2 compared to the global average of 58.2 (TELUS Health).
The global cost data
The scale of the problem is clearest in U.S. research, where data collection is most extensive. Low employee engagement—often driven by poor leadership—costs organisations approximately $450–500 billion annually. U.S. organisations lose $1 trillion yearly due to voluntary turnover, with low-EI managers serving as primary drivers of these departures.
The per-employee impact
For HR leaders building a business case, the per-employee data is more actionable:
| Cost Driver | Impact |
|---|---|
| Each disengaged employee | 18–34% of their annual salary |
| Lost productivity per disengaged employee | $3,400–10,000 annually |
| Replacing a disengaged employee | 33% of annual salary (direct costs) |
| True replacement cost (including knowledge loss, disruption) | 3–4x annual salary |
Mid-sized S&P 500 companies lose between $228–355 million yearly due to low engagement and turnover.
The toxic worker effect
Individual low-EI employees impose quantifiable costs:
- One toxic worker costs a company over $12,000 annually
- Teams with high disengagement see 18% lower productivity and 15% lower profitability
- Disengaged employees call in sick 37% more often
The communication cascade
Poor communication stemming from low emotional intelligence creates ripple effects:
- 51% of employees report productivity decline from poor communication
- 41% experience increased stress
- 35% report drops in job satisfaction
- 31% lose confidence in their roles
These issues trace directly to leaders who cannot communicate effectively, build trust, or create psychological safety.
The contagion effect
Disengagement spreads. Low-EI leaders don’t just damage their own effectiveness—they poison team dynamics, pulling down engaged employees and destabilising workplace harmony. Engaged employees are forced to compensate for dysfunctional leadership or, increasingly, leave for healthier environments.
Why EI Predicts Workplace Success Better Than IQ
The research is unambiguous. Emotional intelligence outperforms IQ and technical skills as a predictor of workplace success.
The core findings
Daniel Goleman’s research across nearly 200 global companies, published in Harvard Business Review, established that emotional intelligence proved twice as important as IQ and technical skills for jobs at all levels. At senior leadership positions, nearly 90% of the difference between star performers and average performers was attributable to emotional intelligence factors rather than cognitive abilities.
What employers actually value
Employer preferences reflect these realities:
- 71% of hiring managers value emotional intelligence over IQ
- 75% of employers would promote a high-EQ candidate over a high-IQ candidate
- 59% of hiring managers would not hire someone with high IQ and low EQ
IQ and technical skills function as entry-level requirements. Emotional intelligence determines who excels.
The Current State: Most Workplaces Have an EI Problem
Despite overwhelming evidence of emotional intelligence’s importance, most workplaces—including in Australia—face a significant EI deficit.
The leadership gap
- 60% of new managers either underperform or fail within their first two years (Gartner)
- Only 36% of people worldwide possess emotional intelligence
This creates a fundamental mismatch: organisations desperately need emotionally intelligent leaders, yet fewer than one in three possess these competencies.
The APAC picture
Research across Asia-Pacific provides regional context:
- 70% of APAC employees perceive their colleagues as demonstrating emotional intelligence
- Only 64% of employees report that their leaders practice EQ
- Only 63% believe their organisations as a whole practice EQ
More than a third of employees across the region—including Australia—perceive their leadership as lacking in emotional intelligence. HRD Australia emphasises that demonstrating EI, particularly empathy and self-regulation, proves essential for managing conflict and enhancing communication within teams.
The promotion paradox
Traditional promotion pathways select for technical expertise and IQ while inadvertently screening out emotional intelligence—precisely when EI becomes most critical for organisational impact.
Organisations continue promoting their best individual contributors into management roles, only to discover that technical excellence doesn’t automatically translate into leadership effectiveness.
The systems failure
This isn’t about individual leaders failing. It’s about organisational systems that neither identify, develop, nor reward emotional intelligence:
- 68% of organisations have no formal tools to identify, develop, or leverage emotional intelligence
- Only 42% of organisations offer specific training to cultivate EQ competencies
- Only 30% of companies assess emotional intelligence during hiring
A Leadership IQ poll of over 27,000 workers found that only 15% believed their employers were candid about challenges, and just 23% said their boss responded constructively when concerns were raised.
What EI Deficits Look Like in Practice
Research has identified four primary emotional intelligence deficiencies that cause career derailment and workplace dysfunction.
Lack of self-awareness
Leaders deficient in self-awareness struggle to recognise their emotional triggers, understand their strengths and weaknesses, or perceive their impact on others.
In practice: They avoid social interactions, fail to listen actively, struggle to convey ideas clearly. They become defensive when receiving feedback, viewing constructive criticism as personal attacks.
We see this constantly in leader reflections on our platform:
The results didn’t surprise me. But I feel they would surprise people who know me well.
Everyone thinks I have a lot of patience. Even though I get angry, I don’t show it to people.
Poor self-regulation
The inability to manage emotions under pressure represents a critical deficit.
In practice: Leaders display frustration or anger during meetings, interrupt others, derail discussions. Under pressure, they become erratic, unpredictable, and overly reactive—creating environments that feel psychologically unsafe.
A lot of the time I react before I process what’s happening—fight or flight mode—and I tend to go straight to fight mode.
I have a long fuse but then one little thing will send me over. I’m usually so pent up by this point that I snap.
— Leader on our platform
Inadequate relationship management
Managers with deficient relationship management struggle with communication, leading to misunderstandings and collaboration breakdowns.
In practice: They blame-shift rather than addressing issues directly, avoid difficult conversations, fail to build strong professional relationships. When conflicts arise, they deflect responsibility.
I was too forceful with the start of the conversation and it went downhill from there. I was only interested in a solution and not what had happened.
My colleague snapped and took it as a personal attack on her abilities.
Deficient empathy
Empathetically deficient leaders dismiss employees’ concerns, fail to provide support, or make decisions without considering others’ perspectives.
In practice: A manager dismisses a team member’s stress about a deadline as baseless instead of acknowledging concerns. This creates cultures of disengaged, resentful employees who feel undervalued.
I realized that my approach was more direct than I thought and I used examples to show empathy when this might not be empathetic at all.
I probably jump too quick offering solutions without listening to get the full picture.
These deficits compound each other, creating toxic leadership patterns where high stress affects performance and relationships, and workplaces feel overwhelming and unsupportive.
Signs Your Workplace Needs EI Development
HR leaders often recognise the symptoms before they can name the cause.
Communication and feedback problems
- Feedback isn’t happening—or happens badly
- Difficult conversations get avoided until they can’t be
- Small issues escalate into major conflicts
- “By the time it gets to me, it could have been handled so easily earlier”
People problems
- High turnover, especially under certain managers
- Engagement scores stuck or declining
- Exit interviews cite management as the reason for leaving
- Teams underperform despite having skilled individuals
Leadership transition struggles
- New managers struggling with the people side
- Technical experts promoted but not thriving as leaders
- High-potential employees derailing after promotion
- Leadership development programs that don’t stick
Culture issues
- “Culture problems” that persist despite initiatives
- Silos between teams
- Low psychological safety—people don’t speak up
- Reactive rather than proactive problem-solving
The pattern: organisations send struggling managers to a feedback workshop, a conflict course, a communication skills day.
It doesn’t stick. The same problems return.
Read: Emotional Intelligence for Leaders →
How Leading Companies Are Investing
Australian organisations are increasingly recognising emotional intelligence as a strategic priority, not a peripheral HR initiative.
The Australian market
- Market valued at $1.46 billion in 2025, projected to reach $3.22 billion by 2035 (CAGR 8.2%)
- Leadership programs account for 40% of total executive education revenue in Australia
- Soft skills workshops show 35% higher ROI than technical training
- Annual enrolments in leadership and soft skills courses have increased by 28%
- Over 50% of Australian providers now offer tailored EI solutions
Specific implementations and results
Google developed Search Inside Yourself, a mindfulness-based emotional intelligence training program. It produces a 30% reduction in stress levels and 20% increase in collaboration effectiveness.
PepsiCo embedded emotional intelligence into leadership and sales training programs, saw direct business impact, and subsequently expanded training to include stress management, mindfulness resources, and employee wellbeing support.
SAP transformed its HR and training procedures to incorporate EI training and saw a 28% rise in productivity across departments.
ROI data
| Program/Approach | Result |
|---|---|
| Fortune 500 EI training program | 25% increase in engagement, 15% reduction in turnover within 6 months |
| Fortune 500 company (Texas) | 67% improvement in retention, $32 million increase in annual profits |
| Financial institution EI workshops | 40% improvement in employee satisfaction, 15% increase in customer satisfaction |
| Structured EI workplace programs | Average ROI of 150%+ |
Research indicates that average ROI from emotional intelligence initiatives ranges from 1.5 to 3 times the initial investment.
What Australian employees expect
The pandemic accelerated expectations for emotionally intelligent leadership. Adecco’s APAC survey found that 82% of respondents consider a leadership style focused on empathy and support highly important.
Australian employees increasingly expect leaders who:
- Demonstrate trust (82% rate this as important)
- Provide job security confidence (78%)
- Show empathy and take supportive action
Organisations not developing EI capabilities risk losing talent to competitors who create more emotionally supportive environments.
Building EI Into Your Workplace
Developing emotional intelligence at scale requires more than sending individuals to training. It requires building EI into organisational systems.
Start with assessment
- Establish baselines using validated emotional intelligence assessment tools
- Use 360-degree feedback to reveal blind spots
- Measure so you can demonstrate ROI
Build the foundation first
The sequence matters. Most training fails because it skips the foundational work:
- Self-awareness — Leaders must understand their own patterns, triggers, and blind spots before they can work on anything else
- Self-management — Emotional regulation must come before communication skills
- Empathy — Perspective-taking enables effective relationship management
- Application — Feedback, conflict, difficult conversations—now the skills have somewhere to land
Read: How to Improve Emotional Intelligence →
Choose approaches that actually work
| Format | Best For | Limitation |
|---|---|---|
| One-day workshop | Awareness building | Doesn’t change behaviour |
| Self-paced online | Scalability, cost | 5–15% completion, no accountability |
| Cohort-based + mentoring | Sustained behaviour change | Requires commitment |
| Executive coaching | Senior leaders | Not scalable |
The format that changes behaviour combines daily practice, cohort accountability, and ongoing mentoring over months—not days.
Integrate EI into talent systems
- Assess emotional intelligence during hiring (only 30% of companies currently do this)
- Include EI competencies in promotion criteria
- Reward emotionally intelligent leadership behaviours
- Build EI into performance management
Measure outcomes that matter
Track behaviour change, not just satisfaction scores:
- Engagement trends under specific managers
- Retention rates by team
- Promotion rates of program participants
- 360-degree feedback improvements
- Conflict escalation frequency
The Impact of Getting It Right
When organisations invest in emotional intelligence systematically, the results compound.
On teams:
- 20% higher productivity and employee satisfaction
- 24% more effective problem-solving
- 30% better collaboration
On retention:
- 20% lower turnover rates
- 27% higher employee satisfaction
- Leaders with high EQ retain 70% of employees for 5+ years
On engagement:
- 76% increase in engagement under empathetic leaders
- 61% boost in creativity
- 70% increase in employee morale
On the bottom line:
- Divisions led by high-EI leaders outperform earnings goals by 20%
- 23% higher profitability
- 18% greater productivity
The Future: Why EI Becomes More Critical, Not Less
As AI transforms workplaces, emotional intelligence becomes more valuable—not less.
The Future of Work APAC 2025 conference positioned the need to “raise leadership fluency across AI, Emotional Intelligence, and Subconscious Intelligence” as a core theme. This framing—placing EI alongside AI literacy—signals recognition that human-centred capabilities become critical differentiators as technology advances.
The skills that AI cannot replicate—genuine empathy, nuanced relationship management, contextual self-awareness—are precisely the skills that emotionally intelligent leaders bring.
Organisations that develop both technical and emotional intelligence capabilities position themselves for sustainable competitive advantage in rapidly evolving markets.
Program at a Glance
Methodology developed with Monash Business School. Recognised by AACSB’s Innovations That Inspire.
The cost of low emotional intelligence in your workplace is measurable. So is the return on developing it.
Related Reading
Emotional Intelligence for Leaders — The complete guide →
How to Improve Emotional Intelligence — What the research says works →
Emotional Awareness: The Skill Most Leaders Think They Have →
Achieve Emotional Self-Control →
Sources
1. Fortune Business Insights. (2025). Australia Corporate Leadership Training Market Report. Link
2. Qualtrics. (2024). Employee Experience Trends: Asia-Pacific & Japan.
3. TELUS Health. APAC Workplace Well-being Report.
4. O.C. Tanner Institute. (2025). Global Culture Report—APAC findings.
5. Adecco. APAC Reset Normal: Future of Work Survey.
6. Goleman, D. (1998). What makes a leader? Harvard Business Review, 76(6), 93–102.
7. Gartner. Research on new manager performance.
8. Eurich, T. (2017). Insight. Crown Business.
9. McKinsey & Company. Research on employee engagement and emotionally intelligent leadership.
10. Leadership IQ. Workplace survey of 27,000+ workers.
11. HRD Australia. Emotional intelligence in APAC workplaces.
About the author
Ashley Leach is Founder of Leda. Leda’s leadership development methodology was co-developed with Professor Anne Lytle (Monash Business School, Kellogg PhD) and has been recognised by AACSB’s Innovations That Inspire. The platform has supported thousands of emerging leaders across Australia and New Zealand, with completion rates of 88–98% — compared to 3–15% for typical digital learning.
Frequently Asked Questions
Emotional intelligence determines whether leaders can build trust, give effective feedback, manage conflict, and retain talented employees. Goleman’s research found EI is twice as important as IQ for leadership roles, and nearly 90% of what distinguishes top senior leaders from average ones is emotional intelligence. Low-EI leadership drives disengagement, turnover, and productivity loss costing organisations hundreds of billions annually.
Each disengaged employee costs 18–34% of their annual salary in lost productivity. Replacing them costs 33% of salary in direct costs, or 3–4x salary when including knowledge loss and disruption. One toxic worker costs over $12,000 annually. Teams with high disengagement see 18% lower productivity and 15% lower profitability. At scale, mid-sized companies lose $228–355 million yearly from these effects.
Common signs include: feedback not happening or happening badly, difficult conversations being avoided, small issues escalating into major conflicts, high turnover under certain managers, engagement scores declining, new managers struggling with the people side, and “culture problems” that persist despite initiatives. These typically trace to leaders who lack self-awareness, emotional regulation, or empathy.
Effective development follows a sequence: self-awareness first, then self-management, then empathy, then application (feedback, conflict, difficult conversations). The format matters—cohort-based programs with daily practice and monthly mentoring over months change behaviour, while one-day workshops and self-paced modules don’t stick. Organisations should also integrate EI into hiring, promotion criteria, and performance management.
Research shows ROI of 1.5 to 3 times the initial investment. Specific results include 25% increase in engagement, 15–20% reduction in turnover, 20% higher productivity, and 23% higher profitability. One Fortune 500 company saw 67% improvement in retention and $32 million increase in annual profits. The key is choosing sustained, cohort-based approaches rather than one-off workshops.