Impact of Managers’ Emotional Competencies on Organizational Performance

Abstract

The research objective of the study is to identify if there is a statistically significant effect of EI competencies on organizational performance, like emotional self-awareness, achievement orientation, adaptability, optimism, and emotional self-control on one side and financial, employee, and operational performance on the other side. The authors used SmartPLS software in order to test the questionnaires and the proposed research hypotheses (PLS-SEM). The questionnaires included three main parts: scales related to the demographic profile of respondents, the most common 360-degree Emotional and Social Competency Inventory—ESCI 360—to assess managers’ emotional intelligence, and scales to measure the respective organizations’ performance. The data for the present study were collected from 80 managers from medium-sized and large organizations in the Republic of Serbia. Managers were required to rate their emotional intelligence and organizations’ performance using a five-point Likert scale. The findings indicate that two EI competencies, such as adaptability and optimism, have a positive impact on organizational performance, while achievement orientation has a negative impact on organizational performance. With this research, we tried to reduce the gap that exists due to the insufficient research on emotionally intelligent managers in developing countries, as well as the existence of contradictory results in this area so far. This study delivers practical implications to organizations, experts and leaders on how to define the learning material for training and coaching, with the aim of obtaining key emotional competencies, thus increasing organizational performance. The more adaptable and optimistic the managers are, the more they will be in a position to perform well in an organization and create an effect on financial, employee and operational performance.

1. Introduction

The emotional intelligence concept helps companies to effectively implement a chosen business strategy while establishing a business culture of openness and trust that promotes internal and external networking to share knowledge and ensure a constant supply of innovation [1]. For this reason, over a long period of time, a large number of studies have focused on an analysis of the correlation between emotional intelligence and organizational performance in different business environments, most often in Western countries [2,3,4,5,6]. The statement of the authors Gondal and Husain that developing countries also have research potential to analyze this topic in more detail [7] has motivated the authors to conduct this research for the first time in the business environment of the Republic of Serbia. Especially considering previous research indicating that emotional intelligence competencies can be improved through training and coaching [8,9,10], such research also offers significant practical implications for companies in such countries.

This study is designed to close two gaps. The first gap is oriented toward exploring managers’ emotional intelligence competencies in Serbia as a developing country, where this type of empirical analysis has not been performed. Management assumptions, as well as their current capacity in the field of emotional intelligence, are significantly lower in developing countries compared to developed countries. This is supported by the research of the author Ural, which confirms that managers have difficulty in expressing emotional intelligence skills, which worsens business performance in the hotel industry in Turkey [11]. Because “emotions are mental responses” that depend on an “individual’s environment appraisal” [12], managers’ traits should be taken into account. The mastery of competencies depends on the level of learning orientation, the difficulty of job assignment, and the complexity of the business situation in which managers find themselves [13]. The conclusions of different authors [13,14] are that higher learning orientation, more innovative tasks, and a more complex environment lead to a greater possibility for the better mastery of competencies. Thus, by combining organizational incentives and the growing desire of managers to master emotional intelligence competencies, managerial talents can be developed, thus encouraging greater performance. The second gap is oriented toward analyzing the effect of managers’ emotional intelligence on organizational performance, and contradictory results are presented because some authors have pointed out that the development of managerial competencies has a greater impact on individual performance than on unit-level performance [15]. Therefore, this paper raises research questions: What is the relationship between leaders’ emotional intelligence and organizational performance? as well as: What specific competencies of emotional intelligence contribute to different organizational performance?

The aim of this research is reflected in the analysis of the impact of emotional intelligence components on organizational performance such as financial, operational, and employee performance in the business environment of the Republic of Serbia. The research objective of this paper is to determine the existence and the level of statistical significance effect of emotional intelligence competencies, like emotional self-awareness, achievement orientation, adaptability, optimism, and emotional self-control on organizational performance such as financial, employee, and operational performance.

The author Baba [16] in his research confirmed a higher level of emotional intelligence during the COVID-19 pandemic. Furthermore, author Daryanani [17] mentioned that the COVID-19 pandemic was a period of change from which arose the need for managing emotions at work. Thus, the significance of this topic is evident today, in the post-COVID crisis period, when high inflation and the difficult financial functioning of most companies are expected, together with the difficulty of achieving a higher level of performance [18], especially in developing countries. This is confirmed by the empirical results of research conducted in Macedonia, a developing country where it was found that the level of emotional intelligence of managers and employees has a statistically significant correlation with the index of managing changes [19]. Furthermore, author Huy [18] stated that: “Emotional intelligence facilitates individual adaptation and change” (p. 325). Based on all of the above, it can be assumed that managers will, through emotional and intelligent development, establish a higher level of emotional intelligence competencies that can be more successful in encouraging change, enhancing their change-management skills [17], readiness for change [20], and implementing changes [21] that will result in better organizational performance. Therefore, this study adds to the body of research that has already considered emotional intelligence in a manner that explores the topic in a new business context, as developing countries are characterized by specificity, both from the perspective of management profiles and leadership styles and from the financial capacities of companies themselves and their market opportunities.

The paper consists of four parts. In the first part, the authors present the main theoretical assumptions on EI, EI competencies, and its relationship to organizational performance. Furthermore, the hypotheses are developed in this part. The methodology and the sample are presented and described in the second part. After that, the third part of the paper comprises the main results and investigations of the proposed model. In the end, the authors discuss the results in line with previous research and gave conclusions, as well as practical and theoretical implications and some limitations of the research.

2. Theoretical Background

2.1. The Concept of Emotional Intelligence

An imperative of effective leadership is the application of the concept of emotional intelligence [22], because 90% of successful leadership in a company is attributed to possession of emotional intelligence competencies [23] (p. 33). Such leaders identify with the organization, are more committed to it, and perform organizational tasks better, which can all contribute to a higher level of motivation in performance [6]. Through self-control of their own emotions and managing the emotions of others, they make the right business decisions [10]. In this way, they are a good example to employees, who will follow and recognize them as role models because they have developed a sense of trust and cooperation. Such a domino effect in the behavior of employees in a company would lead to success in both the professional and private development of most employees, which would have a positive impact on their satisfaction, motivation, work engagement, and productivity. A favorable impact of EI on employees’ performance would result in positive organizational performance.

Since the concept of emotional intelligence is relatively young, it was first mentioned by the author Payne and, to this day, it is gaining more and more attention from the professional public [24]. To date, the notion of emotional intelligence has been defined in different ways by different authors. The most commonly used definition is given by the authors Salovey and Mayer [25], who indicate that EI is “the ability to monitor one’s own and others’ feelings and emotions to discriminate among them and to use information to guide one’s thinking and action” (p. 189). In other words, emotional intelligence enables the recognition of intrapersonal and interpersonal emotions and their adequate management [26]. In order to acquire such an ability, the manager must possess certain competencies. By emotional competencies, the author Goleman [22] means non-cognitive competencies and skills that have been learned thanks to the person’s emotional intelligence, which leads to outstanding performance.

Different authors categorize and group emotional competencies in different ways. Salovey and Mayer [25] in their “Four-Branch” model point to four competencies: (1) the use of emotions to enrich thinking, (2) the perceptions of emotions, (3) emotional management as emotional self-control and the regulation of own emotions, and (4) the understanding of emotional meanings. Based on the Bar-On model [27], EI can be observed through five competencies and skills, such as: intra-personal skills, inter-personal skills, adaptability, stress management, and general mood. The authors Rahimn and Malik [28] emphasize the following emotional competencies: “self-reflection, the desire to know the feelings of others, develop emotional control, desire to learn more listening skills, etc.” (p. 192). Further, the author Boyatzis [2] points out that EI competencies can be viewed through three clusters, such as (p. 127): (1) the self-motivation cluster, which includes initiative, planning, achievement orientation, and self-confidence; (2) the self-regulation cluster, which includes taking a risky stand, self-control, adaptability, conscientiousness, values learning; (3) the people-management cluster consisting of oral presentations, networking, leadership, coaching, empathy, influence, facilitating learning, and distinguishing the firm’s reputation and resources.

Finally, we will explain in detail the observation of EI competencies by the author Goleman [29], whose division is present in the methodology used while conducting this empirical research. Goleman [29] looks at EI competencies across four clusters:

• The emotional self-awareness cluster, which implies recognizing one’s own or other people’s strengths and weaknesses through understanding what someone feels. People who have developed competencies from this cluster, such as emotional self-awareness, accurate self-assessment, and self-confidence, create advantages, such as assessing their own or others’ capabilities and limitations, learning based on their own or others’ mistakes, and striving for improvement. These competencies single out employees as “star performers”. Authors Vani, Sankaran and Kumar [30] stated that: “managers with this quality are receptive, work constructively on critical criticism and are focused on learning” (p. 470).
• The emotional self-management cluster is a person’s ability to control anxiety, anger, and emotional impulsivity on one hand, while, on the other hand, it means encouraging the creative and innovative potential of the individual along with developing their strong ambition. This cluster consists of the following competencies: self-control, trustworthiness, conscientiousness, adaptability, achievement drive, and initiative. Possessing these competencies allows leaders to be recognized by employees as someone who makes rational decisions and can be trusted [1] (p. 66).
• The social awareness cluster is a person’s ability to recognize nonverbal cues, such as voice tone, facial expressions, and gestures, that reveal hidden emotions, concerns, and needs. It includes the following competencies: empathy, service orientation, and organizational awareness. By possessing the mentioned competencies, the leader has feedback on how employees react to his business moves and decisions, which can help him in correcting his own behavior to produce a positive impact on employees [1] (p. 67). Individuals with competencies within this cluster can be characterized as effective team players, respecting the principle of trust [30].
• The relationship management cluster is a type of social skill that implies the ability to adapt to others and establish adequate relationships and influence. Therefore, it stands out as a significant competence for visionary leaders in high positions who should be ideal for employees and thus influence the joint implementation of the vision. It consists of the following competencies: developing others, influence, communication, conflict management, leadership, change catalyst, building bonds, and teamwork and collaboration.

For a person to realize the full potential of one’s emotional intelligence, one should first possess the skills from the emotional self-awareness cluster, which are the basis for the further improvement of emotional competencies from the following clusters. Within the emotional self-awareness cluster, the key competence that stands out as having the greatest impact on performance is self-confidence [31]. Competencies from the second cluster, emotional self-management, are extremely important in managing stressful situations, which are present more and more often, especially considering the uncertainty from the environment, innovations to be implemented in the company, and the possibility of negative effects of external market trends on the workplace, such as the loss of jobs during the COVID-19 pandemic. These competencies will enable the employee to avoid demotivation and to continue with their further business development. From the point of view of performance, the most important competencies in this cluster are conscientiousness [32], achievement orientation, and initiative because they describe individuals as proactive and persistent employees who continuously influence the achievement of better performance [29]. If we look at the third cluster, the one of social awareness, a significant competence to encourage higher performance is empathy, especially when performing work tasks in multidisciplinary teams and with a larger number of participants who differ from each other and for employees who are constantly interacting with end customers. Good leaders should have a commitment to developing “empathy capacity” [26] (p. 803) to avoid the possibility of leaving their employees angry and demoralized [26]. Furthermore, for leaders to establish as many long-term and successful external partnerships as possible, they should have developed the mentioned competence. Within the fourth cluster, relationship management, the change-catalyst competence stands out as important for encouraging employee performance [29], as well as the teamwork and collaboration competence, which motivates them to greater effort and work performance by establishing a positive atmosphere and employees’ sense of importance [33]. It is believed that the possession of competencies from only one cluster is not enough to establish a greater positive impact on organizational performance, but an adequate combination of competencies from all clusters will result in a synergistic effect [29,34].

It can be concluded that all of the mentioned competencies imply that one is aware of oneself and one’s emotions, that one knows how to control them and adequately manage them, and is aware of other persons and adequately manages one’s relationships with them. Emotionally intelligent leaders need to be emotionally stable on the one hand and emotionally expressive in dealing with employees on the other [35]. Then the superior can recognize how to treat subordinates in different business situations in order to achieve the optimal effect for mutual benefit. All of this supports the definition of the authors Martinez and Bar-On [36,37], who point out that emotionally intelligent managers and employees better respond to demands and pressures from the environment and better tolerate stressful situations that directly affect business results at the individual level, as well as at the organizational level. It is assumed that emotionally intelligent people make timely and optimal business decisions [38] and thus gain a competitive advantage [39]. Finally, it is necessary to point out that the competencies that form emotionally intelligent people “indicate 58% of performance in all types of jobs” [19] (p. 472).

2.2. Emotional Intelligence and Organizational Performance

Among the first research on the correlation between the EI of leaders and organizational performance was an empirical analysis by Kelley and Caplan [40], who observed that EI influences variations in performance levels. In addition, during the COVID-19 pandemic, the analysis of this topic was renewed in developing countries, where research highlighted the positive direct impact of managers’ emotional intelligence on organizational performance [6,41]. In previous research, various EI competencies have been singled out, which contribute to a higher level of organizational performance. However, there is still no standardized set of EI competencies that need to be encouraged and developed over the course of a business career in order to improve performance at the individual and enterprise levels.

On the one hand, research by Bipath [42] confirmed that EI competencies such as adaptability, emotional self-awareness, and achievement orientation have a statistically significant correlation with organizational performance. On the other hand, it was found that the competencies of emotional self-control and optimism in leaders do not have a statistically significant correlation with organizational performance [42] (p. 162). The emotional self-control of leaders, which has a negative connotation, stands out, which the author [33] explains: “leaders who are self-confident, who are honest about their feelings and who make their feelings known are likely to improve performance” (p. 188). Such leaders have great expertise and offer little instruction to their subordinates who may not properly understand the delegated work task and often fail in its implementation, which manifests itself in lower performance [42] (p. 188).

In order to analyze the relationship between EI and the level of organizational performance in more detail, different competencies of EI and different types of organizational performance, such as financial, employee, and operational performance, have been linked.

The focus of a large amount of research was the connection between the competencies of emotional intelligence and exclusively financial performance. The results in this area are contradictory. Based on research conducted in the United States, the author Boyatzis [2] points out that EI competencies, such as planning, adaptability, self-control, self-confidence, conscientiousness, taking a risky stand, values learning, leadership, empathy, and coaching largely predict the financial performance of leaders, such as higher account revenue and account gross margin (p. 127). On the other hand, the author Ayranci [11] conducted the same empirical research in Turkey and points out that “most factors of leaders’ emotional intelligence did not have any statistically significant effect on the organizations’ financial performance” (p. 9). Thus, EI competencies such as adaptability, stress management, interpersonal empathy, interpersonal relationships, and intrapersonal self-acceptance have no established correlation with financial performance, while self-awareness competence has a statistically significant but negative correlation, and the willingness to face challenges has the weakest correlation with financial performance [11]. In the end, the question remains whether contradictory empirical results find their cause in the diversity of business environments in Western and Eastern countries? In order to answer the dilemma, the following hypothesis was defined:

Hypothesis 1 (H1).

Dimensions of managers’ emotional competencies are related to financial performance.

It is necessary to analyze the impact of EI on employee performance. There are two reasons for this direction of research. One of them is the statement of the authors Ishak et al. [43] that the cognitive abilities of individuals cannot be completely equated with career success because they are a bad predictor of work performance (p. 2). Today, it is not enough for an employee to have technical and conceptual skills, but success itself depends on behavioral skills. It has been proven that the level of EI influences the development of employees‘ skills in the field of customer management, negotiation, and conflict and communication management [8], which affects the greater organizational success of employees [5,44]. Another reason is that emotionally intelligent leaders promote emotional stability and develop a long-term relationship with employees based on trust and transparency, which together can motivate employees to better business engagement, which is reflected in better performance. Furthermore, such managers can develop organizational emotional intelligence, which will affect employees to gain higher job satisfaction, develop higher compensation satisfaction, and better work–life stress management [45]. Such leaders can be expected to have a greater impact on employees compared to the impact stemming from formal authority.

General confirmation of the positive attitude and impact of EI competencies on employee performance in developed countries was given by Higgs [5], in developing countries, specifically in Pakistan by Gondal and Husain [8] and in Macedonia by Rexhepi and Berisha [19]. So far, the most-common EI competencies have been associated with job satisfaction as a measure of employee performance.

Job satisfaction, as an emotional state of liking or disliking one’s job [46] (p. 30), arises not only from the nature of work but also from the beliefs and expectations of employees and the quality of interpersonal relations between leader and employees when performing delegated tasks. It is important to highlight that the concept of job satisfaction can have positive and negative effects on individuals, as well as on the organization [47]. One of the positive effects is a better level of organizational commitment in individuals [48]. In a sample of 187 food service employees, a higher level of EI was found to lead to higher job satisfaction [49]. Furthermore, the authors Gunavathy and Ayswarya [50] in their study of a sample of 150 employees working in the software industry came to the same conclusions. Furthermore, a survey of 474 employees in South Africa indicates a statistically significant correlation between emotionally intelligent behavior in leaders, through competencies such as self-awareness, self-control, adaptability, and optimism on the one hand and employee job satisfaction on the other [26]. The results of a survey conducted on a sample of 90 respondents from two universities in Pakistan indicate that EI has an impact on employee performance and satisfaction, as well as productivity [51].

Based on previous empirical results, it can be concluded that emotionally intelligent leaders who can understand employees and establish empathy with them at the same time inspire and motivate them to be satisfied with the work they do and with their workplace. Such a situation can in turn affect leaders so that they obtain greater potential and greater desire to establish high-quality interpersonal relationships with such employees. A high level of emotional intelligence among the actors interacting in a company leads to the establishment of a friendly climate in the company.

We should not ignore the reverse situation that the lack of competencies in the field of emotional intelligence can lead to negative effects on employees, such as the level of absenteeism and level of fluctuations as unwanted employee performance. The author [43] pointed out: “The inability to manage and communicate emotions can effectively lead to unresolved and repetitive conflicts among employees and that in the long run can cause severe burnout and diminished productivity” (p. 12). Analyzing the impact of EI levels on employee job burnout in a sample of employees in China, it was found that there is a statistically significant negative correlation [52], which in turn can negatively affect employee performance. Furthermore, leaders who have a low level of emotional intelligence establish low-quality interpersonal relationships with employees, which affects their attitude towards turnover intention [4]. In addition, it has been proven that low EI levels can lead to higher turnover rates of managers in companies in developing countries [53,54]. A similar study was conducted in Greece, the results of which also indicate a negative correlation between EI levels and turnover intention [6]. Given the fact that, recently, the number of employees actively looking for a new job is increasing and makes up 51% of workers [55], this result is the crucial one that could reduce this enormous turnover of employees, which would be beneficial both for employees and the company itself, by reducing the cost of finding new labor.

Based on previously presented research assumptions and the previous results of empirical research, the following hypothesis was set:

Hypothesis 2 (H2).

Dimensions of managers’ emotional competencies are related to employee performance.

The need to analyze the correlation between EI and levels of operational performance, such as sales growth, level of customer satisfaction, and product/service quality to meet or exceed customer demands, arises from the statement of the authors O’Boyle et al. [56] that the possession of EI competence is very important in business when there is interaction with consumers in order to achieve greater customer satisfaction and customer loyalty. Employees who interact with end customers are expected to express positive emotions that could lead to several positive results from the consumer’s point of view, such as: customer satisfaction with service quality, easier to make a positive purchase decision, repeated purchases, and positive word of mouth [57] (p. 55). Emotionally intelligent leaders are more likely to produce positive feelings in employees and thus encourage the establishment of a positive relationship with end consumers [56]. Such a positive correlation between the leader and an employee from the sales operation encourages their greater motivation and better sales performance [3], which leads to sales growth at the organizational level. The author Rathi [57] in his research puts forward the proposition that the type of emotional labor strategy is a mediator between the influence of the emotional intelligence of employees on consumer satisfaction. The authors Groth et al. [58] in their study of 285 employee–customer dyads found that there is a statistically significant correlation and connection between employees who establish deep emotional relationships and empathy with consumers and consumer orientation (p. 965), which implies a positive impact on the consumer and consumers’ greater satisfaction, as well as greater loyalty. A survey conducted on a sample of 181 respondents indicated that EI predicts sales revenue and that there is a positive impact on it [59]. The same authors conducted a study on a sample of 107 insurance agents, wherein the existence of a statistically significant correlation between EI and customer orientation was confirmed, as was the finding that EI mediates the correlation between customer orientation and sales performance [59]. For the assumptions to become standard in a company’s functioning, it is necessary to formulate an emotional labor strategy with well-defined rules of conduct [60], such as verbal and nonverbal gestures, establishing empathy with end-users in order to enter their shoes and discover their hidden needs.

Based on all that has been stated previously, the last research hypothesis has been set, which claims:

Hypothesis 3 (H3).

Dimensions of managers’ emotional competencies are related to operational performance.

3. Methodology

3.1. The Sample

The research was conducted in 2021 on a sample of 80 managers from medium and large companies operating in the Republic of Serbia. Each respondent was the CEO, representing a single company. A total of 235 questionnaires for managers were distributed, which makes the response rate 34%. The reason for this response rate can be attributed to the fact that, during the survey period, the Republic of Serbia faced an unusual situation caused by the COVID-19 pandemic.

Table 1. Sample characteristics.

	Sample Characteristics	N	Percentage of Sample
	Gender
1.	Male	53	66.3
2.	Female	27	33.7
	Age
1.	Less than 25	1	1.3
2.	25–34	12	15.0
3.	35–44	19	23.8
4.	45–55	31	38.8
5.	More than 55	17	21.3
	Manager level
1.	Top-level	27	33.8
2.	Middle-level	32	40.0
3.	Low-level	21	26.2
	Company profile
1.	Private	58	72.5
2.	Public	22	27.5
	Company size
1.	Middle	39	48.8
2.	Large	41	51.2

Source: Authors.

presents sample characteristics.

Respondents were managers because they are the key actors “who give, create and evaluate organizational outcomes” [11] (p. 10). Data collected from managers were used for analysis through a self-assessment of their levels of emotional and social competencies. The respondents were predominantly highly educated male managers of a company. The profile of respondents shows that 66.3% were male, while 33.7% were female; 21.3% have completed high school and three years of study, and 47.5% have a university degree, while 31.2% acquired a master’s degree.

Furthermore, medium- and large-sized companies were chosen for the analysis because of two reasons: firstly, in such companies, a large number of interpersonal interactions have been established in manager–manager and manager–employee relationships, and, secondly, many large companies in the Republic of Serbia have difficulties in achieving the desired levels of performance, especially public enterprises. The profile of the companies was: 72.5% private companies and 27.5% public companies, while 51.2% are large companies and 48.8% middle companies. The businesses surveyed belonged to a variety of industries, mainly from the processing industry and retail trade.

3.2. The Questionnaire

The questionnaires included three main parts:

• Scales related to demographics (gender, age, level of education) and organizational characteristics (sector—public or private, activity, and job of the employee).
• Scales to measure emotional intelligence of top managers, the 360-degree Emotional and Social Competency Inventory—ESCI 360—developed by the consulting company Hay Group in collaboration with Goleman and Boyatzis [61]. This instrument is among the most represented in empirical research. It consists of 68 questions related to 12 competencies grouped into four clusters: emotional self-awareness, self-management (striving for success, adaptability, emotional self-control, optimism), social awareness, and relationship management. For the purpose of this research, the first two clusters describing emotional competencies were analyzed. The questionnaire is based on a five-point Likert scale.
• Scales to measure the respective organizations’ performance for a particular period. Organizational performance was measured by applying subjective criteria that imply the perception of the respondents, in this case the managers, for the last three years. Managers were required to rate their company’s financial, employee, and operational performance using a five-point Likert scale (1. Worse than all competitors, 2. Worse than most competitors, 3. Average performance, 4. Better than most competitors, 5. Better than all competitors).

All of the mentioned questionnaires are standardized and have been used in previous research [62,63].

Emotional competencies were presented as unidimensional reflective constructs, while organizational performance, OP, was conceptualized as a multidimensional, formative higher-order construct. Emotional competencies within EI consist of five reflective constructs: emotional self-awareness, striving for success, adaptability, emotional self-control, and optimism. OP consists of three reflective lower-order constructs: financial performance, employee performance, and operative performance. The repeated indicator approach [64] was applied for OP estimation using 12 manifest variables of their three underlying lower-order constructs. Because of this approach, the manifest variables were used twice, for lower-order constructs as well as for higher-order constructs. The model was analyzed using SmartPLS software (SmartPLS Version 3.3.9, Boenningstedt, Germany).

3.3. Data Processing

For the purpose of this research and the proposed hypotheses, the authors used the PLS-SEM method. The first part of the analysis was dedicated to the analysis of the measurement model and then the structural model. Furthermore, special attention was paid to the analysis of the higher-order construct (OP). For the validity of the measurement model, the authors used indicator loadings, internal consistency reliability, convergent validity, and discriminant validity (for reflective constructs) and, for formative higher-order constructs (OP), following Becker, Klein, and Wetzel [64], we paid attention to the path coefficients between these constructs and their lower-order constructs and their VIFs. After that, for the validity of the structural model, we used bootstrapping to investigate the proposed relationships.

4. Results

4.1. Testing the Questionnaire and the Measurement Model

In the first part of the analysis, we analyzed reflective constructs through indicator loadings, internal consistency reliability, convergent validity, and discriminant validity [65]. Individual reliability indicator was analyzed by indicator loadings, which should be higher than or equal to 0.70 [66]. Items whose loadings were below that value were excluded. From the construct emotional competence, the following indicators are excluded: ESA2, ESA3, ESA4, ESA5, AO2, AO4, AO5, AO6, Ad1, Ad2, Ad3, Ad4, Op1, Op2, ESC1, ESC2, ESC3, and ESC6. From the construct OP, the following indicators were excluded: FP2, FP3, EP3, EP4, OP3, OP4, OP5, and OP6. Based on the mentioned model reduction, the analysis of internal consistency reliability and convergent validity was performed by calculating the Cronbach’s alpha value that is greater than 0.7, composite reliability (CR), and average variance extracted (AVE), wherein CR should be higher than or equal to 0.70 and AVE higher than or equal to 0.50 [65,66]. Furthermore, multicollinearity issues were analyzed by variance inflator factors, which should not be higher than a value of 3.3. The reliability validation of the reflective first-order constructs was presented in

Table 2. Reliability Validation of the Reflective First-Order Constructs.

Attributes	Loadings	CR	AVE	VIF
Emotional Self Awareness (ESA)		0.783	0.644
ESA1 Able to describe how own feelings affect own actions.	0.851			1.903
ESA6 Acknowledges own strengths and weaknesses.	0.751			1.903
Achievement Orientation (AO)		0.721	0.564
AO1 Initiates actions to improve own performance.	0.763			1.017
AO3 Does not strive to improve own performance.	0.739			1.017
Adaptability (Ad)		0.786	0.659
Ad5 Adapts to shifting priorities and rapid change.	0.735			1.104
Ad6 Adapts overall strategy, goals, or projects to cope with unexpected events.	0.871			1.104
Optimism (Op)		0.863	0.612
Op3 Views the future with hope.	0.783			1.424
Op4 Sees possibilities more than problems.	0.794			1.836
Op5 Sees opportunities more than threats.	0.819			1.858
Op6 Sees the positive side of a difficult situation.	0.731			1.572
Emotional Self Control (ESC)		0.848	0.739
ESC4 Remains composed, even in trying moments.	0.763			1.355
ESC5 Controls impulses appropriately in situations.	0.946			1.355
Financial performance (FP)		0.908	0.831
FP1 Growth in profits.	0.905			2.116
FP4 Organizational performance is measured by return on equity (financial profitability or ROE).	0.918			2.146
Employee performance (EP)		0.885	0.795
EP1 Level of employee productivity.	0.914			1.876
EP2 Level of employee satisfaction.	0.868			1.745
Operational (OP) performance		0.931	0.870
OP1 Sales growth.	0.939			2.219
OP2 Market share growth.	0.926			2.537

Source: Authors.

.

In analyzing the appropriateness of formative higher-order constructs (OP), following Becker, Klein, and Wetzel [64], the path coefficients between the constructs and their lower-order constructs should be investigated. The data showed that all path coefficients in the case of OP (FP, EP, and OP) were positive and statistically significant (p < 0.05) and the inner VIF values were below 3.3.

For the purpose of analyzing discriminant validity, we performed the cross-loadings indicator, Fornell–Larcker criterion, and heterotrait–monotrait correlation ratios (HTMT), presented in

Table 3. Discriminant validity—cross loadings.

	ESA	AO	Ad	Op	ESC	FP	EP	OP
ESA1	0.851	0.086	0.567	0.285	0.424	0.186	0.115	0.104
ESA6	0.751	0.127	0.207	0.437	0.379	0.116	0.126	0.084
AO1	0.035	0.763	0.329	0.139	0.241	−0.014	−0.117	−0.146
AO3	0.162	0.739	0.123	0.126	0.013	−0.075	−0.067	−0.122
Ad5	0.519	0.180	0.735	0.271	0.377	0.123	0.086	0.153
Ad6	0.333	0.296	0.871	0.315	0.407	0.254	0.114	0.139
Op3	0.287	0.187	0.229	0.783	0.198	0.268	0.380	0.231
Op4	0.291	0.057	0.178	0.794	0.227	0.068	0.318	0.130
Op5	0.446	0.088	0.269	0.819	0.209	0.131	0.292	0.264
Op6	0.347	0.195	0.479	0.731	0.196	0.086	0.291	0.219
ESC4	0.259	0.227	0.347	0.261	0.763	0.024	−0.034	0.074
ESC5	0.536	0.115	0.470	0.218	0.946	0.013	−0.015	0.133
FP1	0.131	−0.006	0.738	0.111	0.038	0.905	0.364	0.527
FP4	0.217	−0.097	0.792	0.243	−0.002	0.918	0.441	0.563
EP1	0.151	−0.055	0.109	0.407	−0.019	0.444	0.914	0.477
EP2	0.111	−0.178	0.116	0.305	−0.025	0.336	0.868	0.305
OP1	0.188	−0.124	0.216	0.274	0.191	0.662	0.393	0.939
OP2	0.025	−0.215	0.111	0.244	0.041	0.445	0.444	0.926

Source: Authors.

,

Table 4. Discriminant Validity Assessment Fornell–Larcker Criterion.

	ESA	AO	Ad	Op	ESC	FP	EP	OP
ESA	0.802
AO	0.129	0.751
Ad	0.505	0.304	0.806
Op	0.437	0.177	0.365	0.783
ESC	0.501	0.172	0.484	0.263	0.859
FP	0.192	−0.058	0.244	0.197	0.019	0.912
EP	0.149	−0.123	0.126	0.416	−0.024	0.443	0.891
OP	0.118	−0.179	0.178	0.278	0.128	0.599	0.447	0.933

Source: Authors.

and

Table 5. Discriminant validity—HTMT.

	ESA	AO	Ad	Op	ESC	FP	EP	OP
ESA
AO	0.420
Ad	0.898	0.896
Op	0.748	0.394	0.599
ESC	0.833	0.563	0.857	0.377
FP	0.310	0.224	0.376	0.224	0.047
EP	0.255	0.366	0.212	0.526	0.040	0.566
OP	0.183	0.413	0.282	0.326	0.153	0.719	0.552

Source: Authors.

.

Table 3 shows the discriminant validity cross-loadings. If the indicator loading for a constructive structure is greater than other construction, we can say that the measurement model has a corresponding discriminant validity [67]. The cross-loading output confirms that the measurement model has a discriminant validity.

Since each construct’s square root of AVE was higher than its correlation with another construct, discriminant validity was reached.

Table 5 shows that all of the obtained values differ from each other to a satisfactory extent and describe the different phenomena [6]; since the value is below 0.9, we can conclude that the criterion of discriminant validity through HTMT is met.

4.2. Testing the Hypothesis and Structural Model

The second part of the analysis includes an analysis of the correlation between the components of emotional competence and organizational performance, such as financial, employee, and operational. The coefficients for PLS-SEM relations and their significance level are presented in

Table 6. Results of the bootstrapping analysis—H1.

	Original Sample (O)	Sample Mean (M)	Standard Deviation (STDEV)	T Statistics (|O/STDEV|)	p Value
Emotional Self Awareness→Financial Performance	0.006	0.006	0.062	0.090	0.928
Achievement Orientation→Financial Performance	−0.221	−0.221	0.060	3.654	0.000
Adaptability→Financial Performance	0.191	0.181	0.055	3.487	0.001
Optimism→Financial Performance	0.291	0.284	0.047	6.135	0.000
Emotional Self Control→Financial Performance	−0.088	−0.068	0.052	1.674	0.095

Source: Authors.

for Hypothesis 1,

Table 7. Results of the bootstrapping analysis—H2.

	Original Sample (O)	Sample Mean (M)	Standard Deviation (STDEV)	T Statistics (|O/STDEV|)	p Value
Emotional Self Awareness→Employee Performance	0.005	0.005	0.055	0.091	0.927
Achievement Orientation→Employee Performance	−0.197	−0.189	0.056	3.539	0.000
Adaptability→Employee Performance	0.170	0.162	0.049	3.465	0.001
Optimism→Employee Performance	0.260	0.253	0.047	5.512	0.000
Emotional Self Control→Employee Performance	−0.078	−0.061	0.047	1.677	0.094

Source: Authors.

for Hypothesis 2, and

Table 8. Results of the bootstrapping analysis—H3.

	Original Sample (O)	Sample Mean (M)	Standard Deviation (STDEV)	T Statistics (|O/STDEV|)	p Value
Emotional Self Awareness→Operational Performance	0.006	0.006	0.063	0.090	0.928
Achievement Orientation→Operational Performance	−0.224	−0.215	0.062	3.633	0.000
Adaptability→Operational Performance	0.194	0.184	0.056	3.476	0.001
Optimism→Operational Performance	0.295	0.288	0.049	6.076	0.000
Emotional Self Control→Operational Performance	−0.089	−0.069	0.053	1.689	0.092

Source: Authors.

for Hypothesis 3. The coefficients represent the correlations between the five components of emotional competencies and organizational performance, such as financial, employee, and operational performance. The R2 value for financial performance is 0.705, which indicates that EI competencies explain 70.05% of the variance in financial performance in the selected sample. The R2 value for employee performance is 0.562, which indicates that EI competencies explain 56.20% of the variance in the employee performance in the selected sample. The R2 value for operational performance is 0.728, which indicates that EI competencies explain 72.80% of the variance in operational performance in the selected sample.

Table 6 shows that positive statistically significant correlations were found in the case of adaptability (T = 3487) and optimism (T = 6135) on one side and financial performance on the other side. At the same time, a negative statistically significant correlation was found between achievement orientation (T = 3654) and financial performance. Based on this, Hypothesis 1 is partially proven.

Regarding the influence between the research variables in H2, it was found that there are positive statistically significant relations in the case of adaptability (T = 3.465) and optimism (T = 5.512) with employee performance. A negative statistically significant correlation was found between achievement orientation (T = 3.539) and employee performance. Hypothesis 2 is partially proven.

Table 8 shows that there are positive statistically significant correlations in the case of adaptability (T = 3.476) and optimism (T = 6.076) with operational performance. A negative statistically significant correlation was found between achievement orientation (T = 3633) and operational performance. Hypothesis 3 is therefore partially proven. The results of the bootstrapping analysis are given in Figure 1.

5. Discussion

We have tested the idea that EI plays some role in a company’s performance, which was also supported by various authors [2,5,8,19,42,51] predominately in Western countries. In the last three years, some authors have tested and supported the same researched idea in the developing countries from other continents [6,30,41]. According to the authors’ knowledge, most previous research in the field of emotional intelligence concept and emotional competencies has analyzed these components as one research variable, without taking into account the individual impact of different competencies on organizational performance, which we have done in our research.

Based on the obtained results from our research, it can be concluded that two emotional competencies, adaptability and optimism, have been singled out as having a positive impact on all types of researched organizational performance. Some authors have also proven that adaptability and optimism positively affect employees’ job satisfaction [26], leading to higher employee productivity and organizational performance [2,42]. The connection between the mentioned variables can be explained through the impact of this competence on the creative expression of employees, observing problems from different perspectives, and greater commitment to defining new concepts and ideas that affect their work performance. Such leaders are open to the influx of new information [40] and combine them in new ways, which leads to the offer of greater innovation, resulting in greater financial performance. Finally, such leaders are agents of change, with a willingness to take risks and implement organizational change, which has a positive impact on operational performance. Furthermore, optimism as an emotional competence is of great importance, especially in service industries wherein employees need to express positive emotions with clients [57] on the one hand, and there is a positive correlation between leader and employee on the other hand, which will lead to better performance [3]. Furthermore, achievement orientation as an EI competence stood out to have a statistically significant negative impact on all types of researched organizational performance. The results obtained in this study follow the results of research by Kelley and Caplan [40], who pointed out that EI competencies affect variations in the level of organizational performance in different ways. The negative impact of achievement orientation on all types of organizational performance can be explained by the business environment in the Republic of Serbia, where business in companies is still, in most cases, run in an autocratic style, especially in public companies where it is too rigid and bureaucratic, so employees do not have the opportunity to be particularly participatory or to express their creative proposals, which affects their dissatisfaction. This can lead to extremely different psychological reactions in employees, from loss of desire for success and demotivation to excessive desire for success, which, in some cases, can have counterproductive results. It should be noted that macroeconomic business context and business atmosphere and culture within the company, as well as previous knowledge, experience, age, and gender of managers, may prevent them from using their emotional potential sufficiently and affect organizational performance.

6. Conclusions

Especially today, in the post-COVID period and amid current international events, it is evident that there will be a crisis in which the growth of a company’s performance should be encouraged in all possible ways. Furthermore, from the managers’ perspective in the post-COVID crisis, they will be more exposed to complex, unstructured, and stressful business situations that lead to new responsibilities and new behaviors, which in turn will impose the need to improve emotional intelligence to better counteract negative effects and encourage a higher level of organizational performance [6,13,30]. Furthermore, managers who are involved in innovative tasks express positive emotions and greater motivation when solving new problems [13]. Authors Vani, Sankaran, and Kumarthe [30] point out that the leaders saw the necessity to incorporate “EI as a tool towards success” (p. 471). All of the above indicates that more and more emphasis should be placed on the training of employees at all levels in the field of emotional intelligence and that the policy of such training of employees should be on a “top-down” [30] principle. This opens the possibility for new research on the territory of the Republic of Serbia on how to formulate the mentioned policy, how to implement it, and what elements within organizations need to be changed, such as organizational design, which should be less hierarchical and should strive to form flat organizations. An organizational culture should be created that will lead to changed perceptions in employees or give them a sense of community and that will address the importance of emotions in employees. Finally, the concept of emotional intelligence can be linked to a socially responsible business, which would expand the social dimension of this research topic. The direction of future research may be to determine the indirect effects of the mentioned variables in developing countries. Some of the authors have so far put the mentioned connection in relation [6,41], but no one has done so in the business environment of the Republic of Serbia or in the neighboring countries in the Balkans that share with it the same cultural, historical, and political dimensions.

6.1. Implications

Theoretical implications lie in the increased understanding of the effects of emotional competencies on organizational performance in the business context of the Republic of Serbia as a developing country. According to the authors’ knowledge, many researchers did not analyze the separate effect of emotional competencies on different organizational performance. Therefore, this study adds to the body of knowledge that the cluster of self-management, as a set of emotional competencies, is of prime importance in relation to emotional self-awareness from the angle of influencing the level of organizational performance. The conducted research, in addition to theoretical implications, also offers practical implications. Based on our research, it has been determined that a group of emotionally intelligent competencies can influence organizational performance, which expands the scope of action on the success of the company itself, from individual to organizational. Based on this knowledge, the management of the organization can influence the entire business process, by initially creating an employment policy based on the principle of testing the level of emotional intelligence of new applicants and selecting those who meet the minimum acceptable criteria for possessing emotional competencies. Furthermore, extensive training and workshops can be created for already employed people, upgrading their emotional intelligence in that way.

6.2. Limitations

In addition to the previously highlighted theoretical and practical implications, the conducted research has certain limitations that are reflected in the limited sample of respondents, as well as in the specific business environment of the area where the research was conducted in. The second limitation refers to examining only managers, and not their subordinates, who can assess their EI competencies more objectively. The third limitation relates to the use of research questions when assessing financial performance, rather than specific parameters, which may lead to greater subjectivity in the assessment. However, as the questions were answered by the managers, it is believed that their level of professionalism and ethics does not allow them to give incorrect answers. It is expected that the level of professionalism and regulations in companies will not allow respondents to provide false answers [68].