What is Psychological Capital (PsyCap)?

PsyCap (known in full as Psychological Capital) refers to positive states such as hope, resilience, optimism, and self-efficacy Opens in new window enhanced through leadership and organizational behavior that is oriented towards the positive psychological well being and health of its members.

Psychological capital is a relatively new concept from the literature on positive psychology and human strengths. A growing body of research has demonstrated that higher levels of psychological capital are associated with higher job satisfaction Opens in new window and better job performance Opens in new window (Luthans et al., 2007).

Fred Luthans of the Gallup Leadership Institute in the University of Lincoln-Nebraska, and his colleagues, have done most to develop and apply the concept of PsyCap.

According to Luthans et al., (2007: 2) PsyCap refers to an individual’s positive psychological state of development and is composed of four major components:

  1. Sel-efficacy, which implies the confidence to take on and put in the necessary effort to succeed at challenging tasks;
  2. Optimism, concerned with making a positive attribution about succeeding now and in the future;
  3. Hope, or perseverance towards goals and, when necessary, redirecting paths to goals in order to succeed; and
  4. Resilience, meaning the ability to bounce back and succeed in the face of problems and adversity.

A briefings report from the Gallup Leadership Institute points out that psychological capital is made up of both “who a person is” and “who the person is becoming.” This is contrasted with human capital (“what a person know”) and social capital (“who a person know”).

Following the emergence of promising new studies regarding the concept of PsyCap, some researchers have rearranged the four basic components of PsyCap in an acrosticOpens in new window order (e.g., hope, efficacy, resilience, and optimism) that formed the acronym HERO. They offered the following description:

  • Hope ⇒ Employees have the drive to succeed and are able to identify the path to success.
  • Efficacy ⇒ Employees believe in their own ability to achieve success.
  • Resilience ⇒ Employees are able to rebound from setbacks and carry on (progress, not perfection).
  • Optimism ⇒ Employees believe that positive outcomes are achievable and are motivated to perform because of those beliefs.
PsyCap Figure Figure showing the four components of PsyCap

PsyCap is especially oriented towards positive psychological well being and health of employees, which in turn improve on job satisfaction and employee productivity. Leadership can play an important role in building psychological capital by acknowledging that everyone brings their life experiences with them to the workplace and that current workplace events shape and enhance employee’s psychological strengths. According to Luthans and Youssef (2004), these strengths of self-efficacy, optimism, hope, and resiliency have been shown to be important in performanceOpens in new window and satisfactionOpens in new window at work.

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  • References
    • The Leadership Experience University of Michigan Studies (pg 48) By Richard Daft

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