How Does Emotionally Intelligent Leaders Impact Team Performance or Culture?

Emotional intelligence (EQ) is one of the biggest drivers of team performance and workplace culture, often more than technical skills or strategic know-how. Why? Because EQ directly influences how people communicate, handle stress, build trust, and collaborate.

In fact, Gallup reports that 70% of the variance in team engagement is directly attributed to the manager. That means how a leader shows up, how they connect with others, has a massive ripple effect on how the team feels and performs. And all of that is rooted in emotional intelligence.

But here’s the challenge: according to organizational psychologist Tasha Eurich, while 95% of people think they’re self-aware, only 10 to 15% actually are. That gap can cause serious issues in leadership. When leaders overestimate their self-awareness, they’re more likely to misread situations and damage trust often without realizing it. The result? Confused teams and a decline in psychological safety.

And that matters, because psychological safety is one of the clearest indicators of a team’s health and effectiveness. Research from McKinsey shows that psychological safety drives real results:

·       89% of employees say it’s essential at work, and when organizations invest in leadership development, employees are 64% more likely to see their leaders as inclusive.

·       Creating a safe environment leads to better team performance, higher engagement and retention, and more creativity and innovation. And all while improving mental health and decision-making. Even frontline sales performance gets a boost: a one-point increase in employee happiness led to a 13% jump in weekly sales.

Bottom line? People do their best work when they feel safe and supported. Leaders with strong emotional intelligence help create the conditions where psychological safety thrives. They manage stress in healthy ways, stay grounded during difficult moments, give clear and compassionate feedback, and build trust through consistency and empathy. In these environments, teams are more likely to take risks, learn faster, and perform at their best.