Whether we’re conscious of it or not, our work and personal lives are made up of daily rituals including when we eat our meals, how we shower or groom, or how we approach our daily descent into the digital world of email communication. Our habits comfort us much like the Balinese feel reassured by their morning offerings. But, have you ever taken an inventory of your daily rituals and how they’re serving you? And, have you ever imagined what daily rituals could make you a better leader or a happier person?

About a decade ago, I experimented with a daily offering at the worst of times for my company. As CEO, I could see that the dot-com bust was taking a huge toll on the psycho-hygiene of our hotel company. Knowing that creating a culture of recognition was one means of developing a ripple of positivity in an organization, I made it a practice of giving a minimum of two heartfelt expressions of recognition to two different people in the company each weekday. My rule was that it had to be unexpected by the recipient, it had to be specific in terms of what I was thanking them for, it needed to have a level of detail that was more like a paragraph than a sentence, and – if possible – it needed to be done in person. I tried this for a month and found that like a stone falling into a pond, the reverberating effect of people feeling significant by being caught doing something right helped change the mood and morale around the offices. My daily offering was the American workplace equivalent of a Balinese gift to the gods.

The Balinese could teach us a few things about how to create the conditions for a happy culture. One of my favorite Emotional Equations is the one about Happiness which is defined by Wanting What We Have divided by Having What We Want. The numerator of this equation is all about Practicing Gratitude, finding the time to really want we have rather than take it for granted. A daily offering is one means of doing that. The denominator – having what we want – is the act of Pursuing Gratification. When we jump on that never-ending treadmill of aspiring to have what we want in life, it can create a momentary adrenaline high but it also can distract us from all that we already have in our lives. Some dictionaries define “pursuit” as “to chase with hostility.” At work, do we chase happiness with an edge of hostility? I saw some of that at the mall this holiday season.

We can either be conscious or unconscious about our personal daily rituals as well as our organizational rituals. I just finished reading a groundbreaking book by Teresa Amabile and Steven Kramer called “The Progress Principle.” Based upon giving a large sampling of employees in seven diverse companies a daily journal along with precise instructions about how to review their work experiences of the day, the authors were able to create one of the most authoritative studies of the inner emotional life of American workers. And, they were able to show that the most fruitful means of managing or leading a work group is to give them a meaningful sense that they were making progress and had the resources and encouragement to feel like they were living up to their potential. It’s a very instructive read that I highly recommend. But, one of the most interesting lessons of their study was just how much the employees got out of their daily ritual of reflecting on their work day. Here’s a quote from one manager who was disappointed that the daily journal study was ending: “I am sorry this is coming to an end. It forced me to sit back and reflect on the day’s happenings. This daily ritual was very helpful in making me more aware of how I should be motivating and interacting with the team.”

Starting tomorrow, what offering, ritual, or habit are you going to start practicing that is going to serve you in your personal or work life?

The fact is that almost all anxiety can be distilled down to two basic variables: what we don’t know and what we can’t control. So, the Emotional Equation for Anxiety? ANXIETY = UNCERTAINTY x POWERLESSNESS. You may have heard about the social science experiment in which people were given the choice between an electric shock now that’s twice as painful as one they would receive randomly in the next 24 hours. As you can imagine, the vast majority of people chose more pain now as opposed to less pain at some unpredictable time in the near future. Mystery creates anxiety, especially when we feel we have no influence on the situation.

Once you know the emotional building blocks of Anxiety, you can influence them. Take out a piece of paper and label it “The Anxiety Balance Sheet.” Create four columns with the first one being a list of what you DO know with respect to this issue that is giving you anxiety. Then, in the second column, write down what you DON’T know. In the third column, list what you CAN influence with respect to this issue and, finally, in the fourth column, write down what you CAN’T influence. Most people’s experience of this exercise is enlightening as they have more items in columns one and three (what they do know and what they can influence) than they expected. But, the magic comes from looking at what you don’t know  and what you can’t control. Often, you can move an item from column two to column one by just asking a few knowledgeable people on the subject whether it’s regarding your likelihood of a promotion or your job security. And, I’ve often seen people review column four and realize that they may have a little more influence over some of these items than they’d previously considered.

In sum, the lessons for leaders are simple. Even if you have bad news, it’s better than no news. Transparency is the leadership equivalent of giving people that electric shock early. It may be painful, but the uncertainty creates an even more distracting and debilitating environment. And, as a leader, one of the most effective steps you can take in harrowing times is to help your people steer away from what psychologist Martin Seligman calls “learned helplessness.” Great leaders help their people see how they can directly impact the company’s objectives and their own personal goals. The more externally chaotic the world becomes, the more we need sound internal logic, especially when it comes to our emotions.

A decade and a half later, Daniel Goleman’s Emotional Intelligence (EI) theory was introduced to business schools around the world. But, this idea — still radioactive to some — that the dominant trait in effective leadership comes from EI (also called EQ), not IQ or the level of one’s experience or depth of their resume, took a while to become commonplace language amongst mainstream business folks.

But, while there’s still no hard metric for EI , conventional wisdom now favors this fluid ability as compared to the fixed capacity of one’s brainpower. When I graduated from biz school, I thought I had to be superhuman if I were ever to be a successful CEO. But after two dozen years of being a CEO, I’ve come to learn that the best leaders aren’t comic strip heroes, they’re just super humans who have developed the four capacities that Goleman outlined for EI: self-awareness, self-management, social awareness and relationship management. As Goleman recently told me, “EI includes a broad spectrum of competencies, and no leader is A+ across the board — even the best have room to improve.”

I’m often asked which business leaders are the ultimate examples of Emotional Intelligence, so I decided to do a little research. Limiting my search to only Fortune 500 CEOs of American companies (so Oprah doesn’t qualify), I started asking everyone I knew who they most admired as a role model for EI and then I talked with employees in these CEOs companies and did a deep dive into speeches they’d given and articles that had been written about them. And, of course, I took a look at the performance of their companies while they’ve been the “emotional thermostat” for their organization. So, drum roll please, here’s the first annual Top 10 Chief Emotions Officers in the U.S. (in alphabetical order):

• Jeff Bezos (Amazon.com): With his quirky laugh and self-deprecating style, Bezos doesn’t sound like a Fortune 500 CEO and that’s probably to his benefit. His obsession with the hearts and minds of his customers and his long-term perspective on relationships (and business strategy) are legendary, as was his YouTube announcementof Amazon’s Zappos acquisition in 2009.

• Warren Buffett (Berkshire Hathaway): “Success in investing doesn’t correlate with IQ once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble investing.” Intensely loyal and relationship-driven, he asks his CEOs to run their companies as if they were to own them 100 years from now.

• Ursula Burns (Xerox): In tandem with Anne Mulcahy who moved up to Chair, Burns transitioned to CEO as the first woman-to-woman CEO leadership transition in a Fortune 500 company in what has become a pivotal case study in organizational development. Direct, yet respectful, her assertiveness is matched by a sense of mission that inspires her employees.

• Jamie Dimon (JPMorgan Chase): At Harvard Business School, Dimon said: “You all know about IQ and EQ. Your IQ’s are all high enough for you to be very successful, but where people often fall short is on the EQ. It’s something you develop over time. A lot of management skills are EQ, because management is all about how people function.” ReadLast Man Standing about him.

• John Donahoe (eBay): Donahoe inherited a difficult situation from Meg Whitman with the need to truly alter the company’s business strategy. As a role model for Jim Collins’ Level 5 (humility & ambition) and Bill George’s “True North” leaders, Donahoe’s disciplined self-awareness and his listening ability have created a deeply loyal team and a healthy, evolving culture.

• Larry Fink (BlackRock): Called “psychologically astute” in a Vanity Fair feature article, Fink created the largest money-management firm in the world based upon self-reflection, teamwork and direct communication. His senior leadership team embraces EI seminars to improve their skills.

• Alan Mulally (Ford): Walk around Ford’s corporate campus and you will see office cubes featuring handwritten notes that Mulally has sent to employees… praising their work. Great interpersonal skills and a “Clintonesque” ability to make you feel like you’re the only one in the room when you’re in a conversation with him.

• Indra Nooyi (Pepsi): Nooyi is a conscious capitalist whose “performance with purpose” agenda has helped move employees from having a job to living a calling. She is acutely aware that being a woman of color means she may receive more attention and scrutiny, but she still projects her personality without reservation — whether it’ssinging in the hallways or walking barefoot in the office. She wrote the parents of 29 senior Pepsi execs to tell them what great kids they’d raised.

• Howard Schultz (Starbucks): He says that the main reason he came back was “love“: for the company and its people. Very dedicated to generous health care benefits –inspired by his father losing his health insurance when Schultz was a kid.

• Kent Thiry (DaVita): Leaders with high EI/EQ create culture-driven organizations that perform at their peak due to the power of mission and teamwork. Thiry took over a demoralized kidney dialysis center company that was almost out of business and, with a passionate spirit, created nearly 44 percent annual growth in earnings per share in the past decade, 6th highest of any Fortune 500 company.

Harvard Business School Professor Rosabeth Moss Kanter wrote a book“Confidence” which could be distilled down to the following: Losing streaks are often created and then perpetuated when people lose confidence in their leaders and systems, while winning streaks are fueled by confident people who are secure in their own abilities and the ability of their leaders. Winning streaks are characterized by continuity and continued investment, while losing streaks are marked by disruption and a lack of investment that typically give way to a self-fulfilling prophecy of failure. Long-term winners often face the same problems as long-term losers, but they just respond differently. They know how to recover quickly and not let failure mess with their head.

We’ve all seen classic human behavior when our confidence is shaken. It could be the coach who throws out the game plan and tries the “Hail Mary” leading to further embarrassment of the team or the business group that starts blaming each other for petty issues. Or, at the high school dance, it could be the shy guy who feels smaller and smaller after two girls turn down his offer for a dance. And, of course, in the bedroom when performance anxiety strikes, one can feel like there are three Olympic judges propped on chairs above the bed ready to reveal their scores.

If “Disappointment equals Expectations minus Reality”, at some point after a few too many disappointments, we start expecting less. This is often the path to personal depression and it could be the same for an economy, which shares that same word – depression – to describe a similar valley. We end up with a “sulking economy.” And, that’s where we are today. For a leader, it’s not an easy thing to rebuild the expectations of one’s people after constant disappointment. The tried and true method of doing this is what I call the “momentum of victory,” creating a feasible goal in the short-term and achieving it. Once that’s accomplished, it means finding another small, concrete win on the horizon. Winning and losing are 90% mental.

In preparation for writing Emotional Equations, I dove into the deep end of the academic pool reading hundreds of psychological studies and books on everything from anxiety to the difference between happiness and joy to Charles Darwin’s theory on the origin of emotions. Here’s a list of my top twenty book recommendations for anyone who wants to go “swimming” with me (I have put an asterisk * next to my favorite in each category and I haven’t included Viktor Frankl’sMan’s Search for Meaning since it’s not primarily about emotions):

HAPPINESS/CONTENTMENT

· Born to be Good: The Science of a Meaningful Life (Dacher Keltner)

· Happiness: Unlocking the Mysteries of Psychological Wealth (Ed Diener and Robert Biswas-Diener)

· Positivity: Groundbreaking Research Reveals How to Embrace the Hidden Strengths of Positive Emotions, Overcome Negativity and Thrive (Barbara Fredrickson)

· Stumbling on Happiness (Daniel Gilbert)

· The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom (Jonathan Haidt)

· The How of Happiness: A New Approach to Getting the Life You Want (Sonja Lyubomirsky) *

NEUROSCIENCE/EMOTION THEORY

· Buddha’s Brain: The Practical Neuroscience of Happiness, Love & Wisdom (Rick Hanson with Richard Mendius)

· Descartes’ Error: Emotion, Reason, and the Human Brain (Antonio Damasio)

· Emotions and Life: Perspectives from Psychology, Biology, and Evolution (Robert Plutchik)

· The Emotional Brain: The Mysterious Underpinnings of Emotional Life (Joseph LeDoux) *

· What is Emotion? (Jerome Kagan)

UNCONVENTIONAL BRAIN/EMOTION SCIENCE

· Molecules of Emotion: The Science Behind Mind-Body Medicine (Candace Pert) *

· The Biology of Belief: Unleashing the Power of Consciousness, Matter & Miracles (Bruce Lipton)

· The Spiritual Anatomy of Emotion: How Feelings Link the Brain, the Body, and the Sixth Sense (Michael Jawer and Marc Micozzi)

· The Spontaneous Healing of Belief: Shattering the Paradigm of False Limits (Gregg Braden)

PRACTICAL APPLICATION OF EMOTION THEORY

· Predictably Irrational: The Hidden Forces That Shape Our Decisions (Dan Ariely)

· The Art of Choosing (Sheena Iyengar)

· The Emotional Hostage: Rescuing Your Emotional Life (Leslie Cameron-Bandler and Michael Lebeau)

· The Paradox of Choice: Why More is Less (Barry Schwartz)

Executives execute. We don’t execute people as in life and death matters (although, sadly, we do “terminate” people when they’re no longer needed), but we have traditionally thought of business leaders as being emotionless technicians who just keep the trains running on time. But, timely trains didn’t make Southern Pacific or Santa Fe railroads into 21stcentury mega-corporations. In fact, the train industry missed its chance to expand into automobiles and airplane travel by thinking of their business a little too myopically. Maybe these train executives were a little too focused on the simple execution of being on time.

While execution is still a fundamental skill of the best executives, we no longer are purely executing mechanistic, industrial organizations. In this knowledge era, execution is all about people: how to harness and inspire the potential of those we work with. And, at the heart of people are our emotions, the mysterious internal weather that either propels or penalizes us. After 24 years of being a CEO, I’ve come to realize that the best amongst us are truly Chief Emotions Officers as we are the “emotional thermostats” for our organizations with studies showing that a typical leader has 50-70% influence over the work climate of their team.

There are three great pieces of empirical evidence that amplify this reality about 21st century leadership. First, Daniel Goleman has shown for 15 years now that emotional intelligence (EQ) represents two-thirds of the success of business leaders as compared to only one-third coming from either IQ or the leader’s transferable experience. And, yet, in 2010, less than 10% of the training and development dollars spent by America’s corporations went toward emotional intelligence or literacy training (often called “soft skills”). We know it’s important and, yet, we seem to be reluctant in investing in the skills to help our executives become Chief Emotions Officers.

Secondly, Dr Matthew Lieberman at UCLA has proven that labeling our emotions reduces the intensity of these emotions in such a way that it maximizes our cognitive abilities just at the time when we most need to use the prefrontal cortex of our brain for better reasoning and judgment. By being emotionally literate about what we’re experiencing, executives can sidestep the 10-15 point drop in IQ that often occurs for those who are barraged by having to make decisions during times of emotional distress. So, maybe being a CEO is less about being able to predict the times of trains and more about being an internal weather forecaster.

Finally, Harvard’s Nicholas Christakis, as well as a few other academics, has shown that our emotions are contagious. When we have the flu, our colleagues feel comforted that we stay at home in order not to spread the misery. Yet, when so many of us have caught the “fear” at work – especially in economically turbulent times – there’s no sane corporate voice warning us of the risks of how our emotions can spread and threaten the well-being of those in our organizational petri dish. The ultimate inoculation for fear is a great corporate culture and companies with great cultures have healthy psycho-hygiene. In other words, their leaders are emotionally attuned to what’s going on around them and they cleanse the company through transparent communication or other tactical means to help employees feel recognized and engaged.

Any executive worth their weight understands the principle of accrued interest. If you have a loan and don’t pay the interest currently, it accrues and can compound and over period of time. The cost of the interest can become staggering. This is an apt metaphor for organizational emotions that are not properly addressed in the workplace. Most companies – led by CEO’s who aren’t nearly literate about their own emotions – are actively disengaged in addressing the individual and collective emotions that are invisible predators of passion and engagement. From my own experience, I have learned the hard way. When I most have bottled up my emotions for extended periods of time, they have leaked out in other subversive ways that didn’t serve my purposes as CEO. And, yet, when I was most vulnerable and authentic in my emotional communication with fellow co-workers, ironically, I was told by these colleagues that I was more admired and they felt most comfortable to be all they could be at work.

Henry Ford complained, “Why is it when I need a pair of hands, I have to get the whole man as well?”  Sorry, Henry, that’s how it works.  My father, when he was in the midst of strenuous management-labor negotiations would say to me as a kid, “I love business, but the people side of business can be really frustrating.”  As much as I love my dad, I see the fallacy in his thinking now that I’m no longer a young whipper-snapper.  There is no people “side” of business.  The most neglected fact in business is that we’re all human and virtually everything we do in the context of business can be distilled down to the emotions and whims of people, just like you and me.

Douglas McGregor, who wrote “The Human Side of Enterprise” fifty year ago, suggested, “Behind every managerial decision or action are assumptions about human nature and human behavior.”  McGregor was the management guru who popularized Theory Y management, or the idea that people long for a workplace that allows them to actualize their greatest potential.  Humans are trustworthy, motivated, and collaborative.  Unfortunately, most of us come from the Frederick Taylorscientific management school of thinking.  Taylor famously suggested 100 years ago that, “In the past, man has been first; in the future, the system must be first. The first object of any good system must be that of developing first class men.” I’m sure Henry Ford was a big Frederick Taylor fan.  Theory X management is based upon the premise that men, by nature, are moldable and need to be trained because, left to their own devices, men are lazy losers.  Have you ever worked at a company that had this kind of underlying assumptions about its people?  What was the effect on the work climate over time?

The intersection of psychology and business is typically seen as being as congested, stressful, and emotionally barren as a peak commute traffic day on the LA freeways.  But, thankfully, we live in an era in which neuroscientists are teaching us about the malleability of our brain and the emotionally contagious nature of our workplaces.  We are not robots and, yet, when we’re treated as such, we can lose our passion for our work and our compassion for our fellow employees and customers.  Yet, companies that create a healthy “psycho-hygiene” are able to tap into the full potential of their people.  These companies evaluate their leaders not purely on financial results but on scales for both results and relationships, they create cultures of recognition knowing that positivity has a ripple effect just like negativity does, and they create a sense of purpose and meaning that helps employees feel that they’re motivated by an internal calling or inspiration as opposed to being a trained seal who only performs when financial incentives or awards are offered.

In sum, we’re finally starting to realize that organizations are purely the sum total of the relationships that make up that organization.  The companies we admire are like the people we admire: resilient, authentic, personable, collaborative, ambitious, and humble.  Daniel Goleman has proven that two-thirds of the success in business is based upon our Emotional Intelligence as opposed to our IQ or our level of experience.  As we look for the next crop of future CEO’s, maybe it’s time for America’s corporations to start interviewing grads from the Psychology masters’ programs rather than the MBA programs.

First off, Drucker made it a practice of spending two weeks every year reviewing his work, a habit he picked up from his Editor-in-Chief when he was working for a newspaper in Europe. He would set aside this time to “review my work during the preceding year, beginning with the things I did well but could or should have done better, down to the things I did poorly and the things I should have done but did not do.” Simple idea, yet few of us practice this kind of self-reflection. I’m off to the beach for the next few days and, while I won’t spend two weeks on this, I will spend a few days doing an inventory of what I learned this year and how I can apply it in 2011.

Peter Drucker’s other practice – to adopt a new subject, completely unrelated to his work life, to study and master over the course of three years is an unadulterated form of curiosity. When I spent some time with Mihaly Csikszentmihalyi, the author of the landmark book Flow, this summer, he told me that the most important trait for 21st Century innovation isn’t creativity, but instead it’s curiosity. Curiosity – that blessed alchemy of wonder and awe – is a quality that we all had as a child and yet, with time, most of us found ourselves on a narrower and narrower path.

For more than 60 years, Peter Drucker studied one subject at a time from Japanese art to Civil War history with the intent of mastering the subject. Curiosity may have killed the cat, but it helped Mr. Drucker keep a facile mind and a youthful spirit into his mid-90’s. So, starting in 2011, I am going to take one subject per year and devour it – both mentally and experientially. This first year I’m going to tackle the sublime and geological magic of natural hot springs. Why and how were these created? Why do some smell so different than others? What are the health benefits or risks associated with using them? And, what’s the history of public bathing? And, as I will do in the future with subjects like Renaissance art or hang gliding, I plan to explore these subjects by literally diving in. So, in 2011, I will visit a different natural hot spring every month of the year. Iceland and Japan, here I come!!