The last couple of weeks has seen some very important decisions being made by the U.S. Federal Reserve. Lehman Bros has been allowed to fail, filing for Chapter 11 bankruptcy while Fannie Mae, Freddie Mac and now insurance giant AIG have been bailed out. Some of our largest financial giants have sunk, some have been rescued and others continue to swim (or tread water). While these decisions will have widespread ramifications for consumers, businesses and financial markets globally, they have been made by the Fed to quickly restore confidence and certainty in what can be described as the most uncertain of times.

In fact, the market turmoil provides an interesting study in the unease that ensues when rules are unclear and inconsistent. We often think of this as either “sinking or swimming”. As leaders we have both incentive and responsibility to provide ongoing clarity and consistency for our teams, while simultaneously encouraging risk taking and innovation. To do so requires emotional intelligence — what Daniel Goleman calls the ability to “acquire and apply knowledge from your emotions and the emotions of others” to make effective decisions in any situation.

In challenging times, one way of achieving this balance is to understand the critical role that emotions play in both perception and performance:

1. Emotions affect how we respond to changing conditions as well as to one another
2. Emotions are highly contagious (as Annie McKee reminds us)

When we experience negative emotions — especially fear and distress –- we tend to spiral into avoidance, paralysis or hysteria. These mindsets feed off one another, clearly inhibit productivity, and can swell to epidemic proportions if collectively embraced. As leaders, we have to be vigilant about infusing passion and positivity into everything we do if we want our teams to be focused and optimistic in turn. After all, we have large and difficult challenges to face individually and collectively — and we will need every ounce of innovation, creativity and collaborative teamwork to move forward.

As a leader, think about how are you keeping the waters calm in your organization. How can you best reward risk taking while concurrently discouraging over–zealousness? Look for the leaders amongst your teams — those that demonstrate strong emotional intelligence. Look for those who are resilient, confident and highly communicative, infusing their teams with those same qualities and energy. Look also for those who need your help. Nurture those teams’ abilities to cope with stress and negativity, and you will be rewarded with people with enhanced confidence who can deliver stronger performance and success.