A New Concept: Psychological Capital Learn how to embed the four drivers of PsyCap for great results

A New Concept: Psychological Capital

September 1, 2013

Most business people are familiar with intellectual and social capital. Far fewer have heard of psychological capital. This is must-learn.

Most business people know what intellectual capital is, and they are familiar with the concept of social capital. However, far fewer business people have heard of the newer concept of psychological capital. This is must-learn. Research has shown that that embedding the drivers of psychological capital in a work culture can not only foster happy, healthy employees, but it can also play a significant role in achieving excellent performance.

Psychological capital, or PsyCap, is form of capital that involves the personal resources people bring to their jobs. In much the same way that a cake is a combination of simpler ingredients such as flour, sugar, eggs and milk, PsyCap involves the combination of four basic ingredients – hope, optimism, confidence and resilience. Research has shown that individually each of these ingredients can lead to desirable organizational outcomes, such as good health, persistence on difficult tasks and job performance, but together they represent an even more powerful resource than any of the ingredients on their own. Embedding the drivers of psychological capital in an organization’s culture is a smart way to promote a thriving organization.

So, how do we do this? First we need to understand that, as described by the culture guru Ed Schein, the essence of culture is the basic assumptions that underlie the values and observable features of a workplace or workgroup. These unspoken assumptions serve as the foundation of thought and behaviour in an organization. It’s not hard to appreciate how tacit assumptions such as “this is a dangerous place to express oneself,” can interfere with the success of an enterprise; whereas unstated assumptions such as “I am cared for here,” can foster employee experimentation, proactivity, and both personal and organizational success. It is an often repeated refrain, but true nonetheless, that organizations that create a culture that support the behaviours it needs for success possess a strategic advantage. To the extent that organizations desire employees full of hope, optimism, confidence and resilience, it behooves them to engineer cultures that promote psychological capital.

The second thing we need to do is consider how to build such a culture. One useful model for achieving this comes from work in organizational health psychology. Dr. Catherine Heaney, Psychologist at Stanford University, suggests that the best targets of intervention to promote workplace health are organizational policies and practices, coworker behaviours, supervisory practices and job design. Given that PsyCap can be considered a form of employee psychological health, these same features can help to build thriving cultures.

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Features of Psychological Capital:


Optimism refers to having positive outcome expectancies and involves using an adaptive explanatory style for events. Optimists expect good things to happen to them. When they experience unfortunate events they tend to chalk them up to forces that have limited scope and won’t last. When they experience positive events, they explain them in terms of their own personal qualities, which will endure and generalize to other circumstances. Organizational policies and practices can go a long way toward creating a culture with optimistic employees. For example, a properly managed pay-for-performance compensation plan can lead employees to believe that their hard work will result in desirable rewards. An employee who works hard, makes her numbers, and earns an expected bonus will recognize that the bonus is her own doing, will believe that she’ll earn another if she continues to work hard, and may also expect that she will get a promotion down the road. Such policies and practices encourage optimistic assumptions.


Confidence reflects people’s level of conviction about their abilities to successfully accomplish particular tasks. The most powerful sources for developing confidence are personal mastery experiences, observing others succeed, and encouragement and support from other people. All of these sources for building confidence can be provided by an employee’s coworkers. For example, implementing buddy systems and communities of practice can help employees observe other employees successfully perform tasks, gain graduated success experience experimenting with new tasks, and receive assistance, feedback and praise from peers. Organizations that promote and support these sorts of peer-networking activities can help build a culture in which people feel confident.


Hope is the belief that people can find pathways to the important goals in their lives and muster the motivation to implement these pathways. Supervisors can play a major role in building a culture that nurtures hope. When supervisors coach and develop their people, provide input on career goals and help people find ways to achieve them, and assist their direct reports in defining key business objectives and performing well in achieving these objectives, they set the stage for the development of assumptions that nurture hope. They are also likely to be admired and respected.


Resilience, the final ingredient in PsyCap, is about maintaining effective adjustment, coping well, and bouncing back when facing difficulties, including when experiencing a desirable change, such as receiving a promotion (promotions can be stressful). Job design elements can be strategically engineered to promote resilience. For example, one way to enhance resilience is to minimize unnecessary difficulties in a job. Carefully considering the way jobs are designed may present ways to minimize or eliminate tasks that may be better performed by others. Also, resilience is fostered by ensuring that employees have all of the job-related resources they need to perform their work. Along these lines, it is no surprise that the Gallup organization finds that employees are most engaged when they report having the resources they need to get their work done.

When these four ingredients exist at the same time in a particular organization it produces a culture that builds PsyCap. The culture of an organization can be a hard-to-imitate source of competitive advantage, and produce both top line and bottom line success. Organizations that embed the drivers of PsyCap into their policies, team-building and leadership training initiatives and job design will enjoy work cultures that bring out the best in their employees, produce organizational success, and build thriving work environments.

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Jamie Gruman
Dr. Jamie Gruman is an Associate Professor of Organizational Behaviour. He has taught in the undergraduate program, MA Leadership Program, MBA program, and PhD program in Management at the University of Guelph. Dr. Gruman is the Founding Chair of the Canadian Positive Psychology Association. Dr. Gruman has consulted and delivered seminars for Fortune 500 corporations, public and not-for-profit agencies.

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