(FORTUNE Magazine) – WHEN I GRADUATED from Harvard College as an ostensibly smart guy, I discovered that I did not know how to make change. This was brought to my attention when I got a job selling cigars and pipes in a tobacconist's shop. I understood subtraction and addition the abstract. But when confronted with a cash register (a nonintelligent one; this was 1977) and a testy, foot-tapping customer, sapience fled. My boss did not fire me; he pitied me. The Angel of Duh passed over, and I lived to make change another day.

A smartness deficit of this kind, while embarrassing, is seldom fatal, since it arises from a lack of skill. And skills can be learned. Innumerate? Scott Flansburg, the Human Calculator, has people making change and doing logarithms in a jiffy. Inarticulate? An hour with Verbal Advantage, and you may be mistaken for Dick Cavett. Memory bad? Haven't read the Fifty Greatest Books? Illiterate? All these deficits and more can be put right, for a price.

Failures of perception, however, are tougher, attacking otherwise smart, highly successful people. Seldom do they explode in a single, career-killing solar flare of foolishness (although sometimes they do; see box, "Great Moments in Career Suicide"). Instead they gnaw away, year by year, quietly undermining accomplishment, until one day someone finally says, "You know, I don't care if O'Reilly is making twice his quota. He's a jerk. I want him out of here."

This, allowing for poetic license, is what happened to Dick Snyder, former head of publishing giant Simon & Schuster. For years he seemed unable to stop himself from degrading and humiliating subordinates, even as he pushed S&S to ever higher earnings. Viacom eventually bought S&S, and Frank Biondi, Viacom's CEO, fired Snyder. Explaining why he had done so to writer Roger Rosenblatt in a New York Times Magazine article, Biondi said Snyder had "not been a team player." Yes, said Rosenblatt, but what if Snyder had been able to double S&S's business? Would Biondi still have fired him? "Probably," replied the axman coolly.

Snyder displayed a deficit of what author Daniel Goleman calls "emotional intelligence," or, as it is sometimes known, EQ. This he defines as the power not only to control emotions but also to perceive them. Failing to perceive can be costly.

George McCown, co-founder of McCown De Leeuw, a buyout partnership in Menlo Park, California, hired a "very data-driven individual" with such a deficit, though he didn't know it at first. She was smart--very smart--and from the finest schools. When Jane crunched numbers, they stayed crunched. So pleased was McCown with her ability that he entrusted her with the job of checking out a company he hoped to buy. She visited it and returned with her recommendation: Buy. Why? The numbers said so.

McCown then visited, and what he saw shocked him. "I could tell in the first two minutes of talking to the CEO that he was experiencing serious burnout. The guy was being overwhelmed by problems. On paper, things looked great. But he knew what was coming down the line. Jane had missed those cues completely." She no longer works for the firm.

Goleman's recent book, Emotional Intelligence, uses science to confirm what common sense has long observed: there's more to success than having a high IQ. Knowing when to laugh at the boss's jokes, when to trust a co-worker with a confidence, and when someone is on the verge of a nervous breakdown are, collectively, a form of smarts every bit as vital to workplace survival as understanding the electoral college or knowing how to do cube roots.

Goleman doesn't denigrate IQ. He merely notes that in a group of people with identical IQs, some will outperform the others. Something more than IQ is at work. The mental component of "something more" is EQ.

It has, he says, five dimensions: knowing one's own emotions and controlling them; recognizing emotions in others (empathy) and controlling them; and self-motivation. Empathy--the ability to see life as somebody else sees it--he considers the fundamental skill of management.

The book has been a runaway hit, perhaps because the public is responding positively to a more optimistic view of intelligence than the one propounded in the previous best-seller on the subject, The Bell Curve. Like most experts on intelligence, The Bell Curve's authors described IQ as immutable: What you've got now, you're stuck with. Goleman says that emotional intelligence, by contrast, is mutable. It can be increased, goosed, buffed.

MOREOVER, Goleman asserts, emotional intelligence is handmaiden to IQ. When the emotions are at peace, IQ functions static-free. When they are engaged positively, they can enhance intellectual performance. Proof? Dr. Robert Rosenthal, a professor of psychology at Harvard and an expert on empathy, has shown that when people giving IQ tests treat their subjects warmly, the subjects score higher.

Goleman's book has struck a nerve, I think, because it plays off a couple of deeply held folk beliefs:

Smart people can be "too smart for their own good," falling prey to their own special stupidities (a belief shared, incidentally, by Dr. Arno Penzias, the Nobel laureate who heads Bell Labs; see box, "Putting the Idiot in Idiot Savant"). The dim, by contrast, possess a mystic wisdom.

Smartness isn't, by itself, especially attractive (which may account for the poor newsstand sales of Playboy's November 1985 cover--"The Women of Mensa"). Dumbness, however, is forever amiable. If the long march of 20th-century film comedians (Ed Wynn, Stan Laurel, Shemp Howard, Lou Costello, Huntz Hall, Red Skelton, Jerry Lewis, Jim Carrey) proves anything at all, it is that three generations of imbeciles are not enough.

We digress.

Goleman's book holds valuable insights for navigating the reefs and shoals of a contemporary career. The skills he describes are exactly those required of people struggling to lead (or work within) a group. Thanks to the weakening of corporate hierarchies, ours is the age of the group.

Ellen Hart, a vice president of Gemini Consulting and a specialist in group dynamics, thinks the advent of group structure has wrought subtle changes to the Peter Principle: Men and women still may rise to the level of their incompetence; but incompetence now manifests itself, most often, as a want of EQ. A star--a technician with a specialty--rises to a height at which, if he is to advance any further, he must solicit help from others. To get it, he must learn how to persuade, listen, exercise patience and restraint, offer sympathy, feel empathy, and recover from the emotional assaults common to group give-and-take.

At Chemical Bank, Ernest Pelli's bosses suggested he polish these very skills. So, late on a Thursday night in Manhattan, Pelli, 32, attends a Dale Carnegie class, explaining to classmates that he is there "to practice showing interest in other people." Trained as an accountant, he rates his technical skills as very good. But Chemical wanted him to work on "the intangibles"--the people skills required of managers. "Especially in accounting," he explains, "you see a lot of people who are interested only in the technical aspect." When, for example, the bank values an asset one way and the client another, a lack of EQ skills can make discussions "more contentious than they need to be."

The emotionally illiterate can degrade what Yale psychologist Robert Sternberg calls "group IQ." The term doesn't refer to the numerical average of team members' individual IQs, but to how harmoniously players work together. Though the group may never work smarter than its members' strengths would suggest, it certainly can work dumber by allowing friction and infighting to frustrate its efforts.

At Bell Labs, researchers for the Harvard Business Review studied e-mail patterns to determine why certain scientists underperformed their equally distinguished colleagues. What they found was that scientists who were disliked had been frozen out of the informal e-chat circles that distributed advice, gossip, and other useful information. When these pariahs asked for help from net-mates in times of crisis, what they got was the cold e-shoulder.

Computers, so successful at modeling other aspects of human intelligence, haven't yet mastered EQ, which may explain why companies are starting to value it more highly.

At Forte Hotels, a computer does what a smart person might once have done, noting and recording each guest's preferences. No human need recall that Mrs. Dunbar likes white roses on her nightstand. That information is recalled automatically the next time she books a reservation. What form of human intelligence does Sir Rocco Forte, CEO, most prize?

"I know the most amazing waitress," he says. "She can look at a counterful of people eating breakfast and tell immediately who wants chatting up, who wants to be left alone. Uncanny. Just uncanny." Earl Hunt, author of Will We Be Smart Enough: A Cognitive Analysis of the Coming Workforce, agrees that such skills probably will always defy automation. "Jobs that depend primarily upon unconstrained interactions with other people," he says, are safe. "I defy anyone to design a computerized system to operate an acceptable day-care facility." EMPLOYERS have begun to screen for EQ attributes. Jonathan Grayer, CEO of Kaplan Educational Centers in New York City, sees a new type of test aborning. "We've had, in just the past three months, companies approach us asking us to create such a test," he says.

He thinks the Scholastic Assessment Test (formerly the Scholastic Aptitude Test), to a degree, already captures EQ. "People taking the SAT have to have mastered the content--the ability to reason, add, subtract. But if they have confidence in their ability, that plays into the score. Their ability to guess effectively under stress, the frequency with which they change their answers, their ability to go on when they've missed a question--all those things that we might call confidence or optimism are part of EQ."

The challenge for Kaplan and other testing companies is to come up with adult analogues to the "marshmallow test" made famous in Goleman's book: a child is given a marshmallow and told that if he can put off eating it until later, he can have two. Writes Goleman: "The diagnostic power of how this moment of impulse was handled became clear some 12 years to 14 years later, when the same children were tracked down as adolescents." The plucky holdouts for two marshmallows were socially more adept by any definition. At age 4, the test was twice as powerful a predictor of how the kids would do on the SAT as was IQ.

A few employers have already tried to measure aspects of EQ deemed important for certain jobs. Met Life, for example, tested salesmen for optimism. Martin Seligman, a professor of psychology at the University of Pennsylvania, had found that optimism was predictive of academic performance. Success, in Seligman's words, came down to a "combination of reasonable talent [with] the ability to keep going in the face of defeat." Might the same be true for insurance salesmen, who must constantly rebound from having doors slammed in their face? Met Life said: Go find out.

Seligman discovered that in the first two years on the job, salesmen who scored high for optimism sold 37% more insurance than their more pessimistic brethren. Seligman then tried another experiment: Applicants who were optimists, but who failed to meet Met Life's other standard test criteria, were hired anyway. This group outsold its pessimistic counterparts by 21% its first year and by 57% the next.

Seligman now believes optimism can be taught and has devoted a book to that subject (Learned Optimism). What about the other competencies subsumed in EQ? Can they be learned?

There's no question that the observational skills supporting empathy can be sharpened. Jim Brosnahan, a star litigator with the San Francisco law firm of Morrison & Foerster, has devoted a professional lifetime to reading the cues and clues that signal, often unconsciously, what people are thinking and feeling. "Most of us don't use our powers of observation," he says. "The way people gesture, the look in their eyes, their tone of voice--it all discloses how they feel."

The most accomplished observers, thinks Brosnahan, can further refine their powers. "I see it all the time in trial work and in poker." Poker? An entire school of poker playing holds that the best way to beat an opponent is to watch his "tells"--pokerese for body language. Does the player, for example, look away from his cards in a way that suggests lack of interest? It likely means he's got a killer hand. Whole books have been devoted to cataloguing and diagnosing tells, among them Play Poker, Quit Work and Sleep Till Noon! by John Fox and what is regarded as the classic of this genre, The Body Language of Poker: Mike Caro's Book of Tells.

ON A DEEPER LEVEL, EQ can be cultivated to assist problem solving and decision-making. Traditional, analytical approaches to decision-making, as taught in business school and the military, are described succinctly in The Thinker's Toolkit: Fourteen Skills for Making Smarter Decisions in Business and in Life, by Morgan Jones, a former teacher of analytic skills for the CIA. In most, the decision-maker assigns weight or rank to variables, based on his estimation of their significance. For example: For your big interview on Tuesday, should you wear your blue suit or your brown plaid plus fours? Easy: the blue suit. Experience tells you so. Says Jones: "We would be in serious trouble making decisions without this built-in software for ranking."

How serious trouble? Goleman gives an extreme (but real) example: A corporate lawyer underwent brain surgery for removal of a tumor. All his cognitive functions emerged intact, including logic and memory, but he somehow lost his emotional capacity to form preferences. He no longer knew whether he preferred to sleep with the window open or shut or if he preferred coffee to tea.

He found it virtually impossible to make even simple decisions quickly, since, faced with a choice of several equally logical choices, his gut feeling for each was neutral. Goleman's point: "While strong feelings can create havoc in reasoning, the lack of an awareness of them can be ruinous."

Since gut instinct, bidden or not, enters into rational decision-making, experts have begun to wonder if the gut might not be harnessed to the decision-maker's advantage. The most interesting research, so far, comes from the military, where battlefield exigencies discourage use of neat decision trees.

John Schmitt, a major in the U.S. Marine Corps Reserves, has studied the way officers actually make decisions on the battlefield. Most of the time they don't use analytical constructs. They size up a situation and do what gut instinct tells them. That process Schmitt calls intuitive decision-making. "It's a sensing activity," he says, "essentially artistic."

Gary Klein, Ph.D., owner and chief scientist of Klein Associates, which does R&D in applied cognitive psychology for the military, explains how intuitive decision-making works: "People call it 'intuitive,' and I guess that's accurate; but the word conjures up an image of Luke Skywalker summoning the Force." The approach, he says, is anything but mysterious.

People with years of experience to draw upon quickly recognize a pattern of information that might mean nothing to a novice. While the novice would have to attack the problem by considering, analytically, many possible solutions, the experienced person sees a possible solution immediately--not the best solution, maybe, but one that works.

Says Klein: "This is different from the kind of advice you get in management books, which say look at all the options and identify the evaluation criteria and weigh the options numerically, and see which option has the highest score. Everybody talks about that approach. The fact is, hardly anybody ever uses it."

Decisions reached via gut get attributed to "intuition," says Klein, because people lack a vocabulary to explain what they're really doing: using a sophisticated form of pattern recognition. "Because we don't have a vocabulary," he says, "a lot of organizations don't trust it."

THE MARINE CORPS wants to trust it more. To that end, it tried a novel experiment in December. For two days, 11 senior officers, including several generals, were remanded to the care of traders at the New York Mercantile Exchange. Why? Generals in time of war must analyze complex information quickly under high-stress conditions, making split-second decisions. Traders do that all the time, as they buy and sell and shout and scream at each other in the pits. Perhaps these most uncivil civilians could teach the generals a thing or two. So, after a little coaching (and after the exchange had closed for the evening), the generals began to trade.

It wasn't pretty. Real traders winced as their pretend counterparts yelled things to one another like, "Ten at $290, sir!" One general said to another condescendingly, "No, no. I'm the seller; you're the buyer." Slowly, however, they improved, and by session's end the guys with diamond studs in their ears were patting their charges on their olive-drab backs. Said Lieutenant General Paul K. Van Riper: "Analytical problem solving is fine, if you've got all the time in the world. With these guys, it's all ingrained. If they have to stop to think about it, they lose millions of dollars."

Shoshana Zuboff, a professor of business administration at Harvard, says organizations that don't trust intuition are making a mistake. "So many people go awry because they use sterile analytic tools," she says. She uses the example of a shoe company deciding what new style of women's shoe to make. The company could reach one sort of decision by studying market analysis. It could reach an entirely different--and perhaps superior--one by going to shoe stores, listening to customers' comments, and using a little empathy to put itself into the shopper's shoes.

If the gut is the practical site of decision-making, how can one make it smarter?

Says Klein: "We've not found a strategy we can teach people to make them better decision-makers, because what distinguishes the better ones is their body of experience." Smartness, then, lies in gaining more experience--as much relevant experience as you can get your hands on. That may not always be easy, says Klein. "Somebody can sit in a fire department that's not very busy and, ten years later, emerge not very skilled. In a busy one, they build up experience more quickly."

An employee who wants to sharpen her decision-making should ask, for example, to be rotated through a variety of jobs within her specialty and to serve on task forces, and should try to soak up as much secondhand experience as she can from old-timers in the office. Prospectively, she should try to anticipate the types of experience that will be needed tomorrow: Is the corporation expanding to Mexico? Taking a vacation south of the border to get a better feeling for Mexican culture might not be dumb.

Ellen Hart of Gemini Consulting thinks one of the smartest things an employee can do is to assume full management of his own career. Keeping a job--any job--is not, after all, the test of smartness. Smartness is making sure your intellectual and emotional abilities are matched to a job that promotes their growth. If EQ and IQ are telling you your job no longer fits, it may be time to ask yourself: Is your job smart enough to keep you?

Reporter Associate Tim Carvell