Emotional intelligence (EI) is critical for leadership success, particularly in SMEs, where leaders interact closely with employees. Leaders with high EI foster better communication, conflict resolution, and employee motivation. Research indicates that emotionally intelligent leaders often build stronger organizational culture and employee loyalty, contributing to overall business resilience and adaptability in dynamic markets.

Atef Muhammad Abd El Bari Mabrouk I’d like to add a perspective from my experience in supply chain and entrepreneurship within SMEs. Emotional intelligence (EI) isn’t just a soft skill, it’s often the difference between operational alignment and costly miscommunication. In dynamic environments like logistics or supply chain operations, emotionally intelligent leaders are better equipped to manage cross-functional teams under pressure, especially when disruptions occur or rapid decisions are needed.

One example I’ve seen is how EI helps leaders balance stakeholder expectations,from suppliers and partners to frontline staff,without compromising team morale. It enables more thoughtful conflict resolution, which is essential in high-stress situations like delayed shipments or resource shortages.

Also, in entrepreneurial contexts, leaders often wear multiple hats. When a founder or SME leader demonstrates empathy and self-regulation, they create a culture of psychological safety, employees feel more confident taking initiative, sharing ideas, and owning challenges. That kind of environment drives innovation and agility, both of which are essential for SMEs trying to scale or pivot in uncertain markets.

EI, in my view, is becoming a form of leadership capital,especially in SMEs where people and performance are tightly interwoven.

Emotional intelligence is one of the competences conditioning leadership effectiveness in SME, precisely due these enterprises size. So, entrepreneurs trainings should take that into account. In ResearchGate you could find some of my works (book, articles, conference papers) on micro, small and middle size enterprises, as well as competences oriented trainings, which could be useful for interested researchers.

Emotional intelligence (EI) plays a pivotal role in leadership effectiveness in small and medium-sized enterprises (SMEs), where interpersonal relationships and adaptability are key to organizational resilience. As a foundational element of authentic leadership, EI enables leaders to remain self-aware, empathic, and grounded in their core values—even in high-pressure environments. Authentic leaders use their emotional intelligence to build trust, foster transparent communication, and create inclusive and purpose-driven cultures. This is especially critical in SMEs, where leadership is often more visible and directly impacts employee engagement and innovation. As Kelly et al. (2022) note in our study on authentic leadership and social entrepreneurship, “authentic leaders promote social impact by combining compassion, grit, and transparency, ultimately fostering trust and motivation within entrepreneurial ecosystems.” In SMEs, these traits are not just admirable—they’re essential for navigating uncertainty, sustaining employee morale, and aligning team efforts with mission-driven goals.

Emotional intelligence plays a vital role in leadership effectiveness within SMEs by enabling leaders to better understand and manage their own emotions as well as those of their employees. In the dynamic and often resource-constrained environment of small and medium enterprises, leaders who possess high emotional intelligence can foster a positive work culture, build strong relationships, and enhance communication. This ability to empathetically connect with team members helps in motivating employees, resolving conflicts amicably, and creating a sense of trust and loyalty, which are essential for maintaining productivity and cohesion in smaller organizational settings.

Furthermore, emotional intelligence enhances a leader’s capacity to adapt to changing circumstances and make thoughtful decisions under pressure, which is critical for the agility required in SMEs. Leaders with high emotional intelligence are more attuned to the needs and concerns of their staff, allowing them to provide appropriate support and encouragement. This sensitivity improves employee engagement and satisfaction, leading to increased commitment and performance. Overall, emotional intelligence facilitates more effective leadership by fostering collaborative environments, encouraging innovation, and strengthening the resilience of the organization amid challenges.

Emotional Intelligence (EI) means the ability to recognize, understand, and manage your own emotions and those of others. In leadership, this helps build trust, handle conflicts, motivate employees, and make better decisions.

In Indian SMEs, leaders often work closely with employees. Since resources and manpower are limited, emotional intelligence plays a big role in:

• Team building,Handling pressure and uncertainty,Improving employee retention,Driving motivation and innovation.

Atef Muhammad Abd El Bari Mabrouk Emotional intelligence (EI) plays a pivotal role in enhancing leadership effectiveness within small and medium enterprises (SMEs), where leadership is often more personal, direct, and influential due to flatter organizational structures. Leaders in SMEs typically interact closely with employees, clients, and stakeholders, making their ability to understand, manage, and respond to emotions a key asset. High EI enables SME leaders to foster strong interpersonal relationships, resolve conflicts constructively, and maintain morale during challenging periods—factors that are critical in dynamic and resource-constrained environments.

One of the most significant contributions of emotional intelligence in SME leadership is the capacity to build trust and engagement within small teams. Leaders who exhibit self-awareness, empathy, and social skills are better positioned to motivate employees, provide meaningful feedback, and adapt their leadership style to individual and team needs. This creates a positive work climate that enhances employee retention and performance, which are crucial for SMEs that often rely on close-knit teams and cannot afford high turnover.

Moreover, emotionally intelligent leaders are typically more effective in navigating the stress and uncertainty inherent in running a smaller business. They are better equipped to regulate their own emotions, avoid reactive decision-making, and maintain composure under pressure—qualities that foster sound judgment and resilience. This stability is especially important during growth phases, economic downturns, or when facing operational disruptions, where emotionally reactive leadership could lead to strategic missteps.

EI also enhances a leader’s ability to manage external relationships, such as with clients, suppliers, and investors. Leaders who communicate clearly, handle feedback with grace, and demonstrate interpersonal sensitivity often build stronger partnerships and attract loyalty, even in competitive markets. In this sense, emotional intelligence becomes a form of soft capital that contributes directly to the strategic positioning and long-term viability of the enterprise.

Finally, EI can influence innovation and adaptability—two traits critical to SME survival. Emotionally intelligent leaders tend to create psychologically safe environments where employees feel comfortable voicing ideas, experimenting, and learning from failure. Such environments are fertile grounds for creativity and agile responses to changing market conditions. In sum, EI is not a peripheral leadership trait in SMEs; it is central to sustainable performance, team cohesion, and the ability to lead with both head and heart in an ever-changing business landscape.