Learning & Development

Why developing psychological capital is a top priority for leaders

By James Brook, Co-founder and Joint MD, Strengths Partnership Ltd
Learning & Development
Published: 10 October 2017

Against a backdrop of sweeping and accelerating changes facing organisations today, human capital (what people know) and even social capital (who they know and how well they collaborate) is no longer sufficient to achieve high performance and consistent value creation year on year.

Leaders and HR professionals need to better understand and help organisations build emotional and psychological capital. Management professor and organisation behaviour specialist, Professor Fred Luthans advanced a simple framework for psychological capital, which is even more relevant today than when it was first formulated. His HERO model defines four key elements of psychological capital:

H – Hope: Belief in our goals and persevering to find pathways to achieve them.
E – Efficacy: Confidence in our ability to achieve a specific goal in a specific situation.
R – Resilience: Successfully coping with adversity or stress; the ability to “bounce back”.
O – Optimism: Having a positive expectation about succeeding now and in the future.

Organisations need ever-greater levels of these capacities to build adaptive, innovative and resilient organizations that can innovate and cope with the mounting pressures presented by technological disruption and socio-political shifts that are changing customer expectations and the way we do business.

By building psychological capital, companies can also ensure they are better equipped to deal with three major challenges facing workplaces today:

  1. Engagement
  2. Productivity
  3. Wellbeing

Developing psychological capital requires a significant shift in mindset by leaders and HR/talent professionals from a weakness-based model of managing people to a more positive, strengths-based one. It requires them to retool those responsible for implementing all stages of the talent life cycle, from hiring, through development, performance conversations and succession planning. It is ultimately mid-level managers and their employees that must implement this shift, with leaders and HR providing the vision, guidance, coaching and tools to ensure this transformation in mindset, practices and behaviours is effectively executed.

As a global leader in strengths-based leadership, assessment and culture change, we recommend the following five steps leaders and managers should take to build psychological capital into the DNA of their work culture:

Build a strong sense of purpose
Organisations with an unambiguous and compelling purpose will find it easier to recruit and retain people. The purpose should describe the company’s reason for being, the value the business will deliver to customers /end users and how it will conduct itself.

Focus on the positives
When leaders and managers make a conscious choice to focus on strengths, successes, opportunities and solutions, they set off a powerful chain reaction of positive emotions and behaviours. This leads to a sense of hope, powerfulness, efficacy and optimism at work, which fuels higher performance.

Help people shine in areas of standout strength
Employees are not expected to be well-rounded, but rather, to stretch themselves and excel in areas of greatest strength. They are also encouraged to call on co-workers for help in areas where they are weaker, giving rise to strong collaboration and complementary partnering.

At companies like Facebook, Deloitte and PhotoBox, employees are highly trained in company processes and technical skills in these companies, but are not constrained to narrow job descriptions. They are encouraged through positive stretch and challenge to move beyond their comfort zones and make meaningful contributions in areas that most energize them.

Empower people
Employees value freedom in the way they go about delivering results and don’t want an over-eager boss micro-managing and controlling them. Great leaders and managers recognise the need to free up employees’ strengths, ideas, and energy to do their best work. They allow front-line employees to make important decisions and back them up with support, coaching and guidance.

Regulate stress and pressure
Too many leaders and managers today are pushing their people to breaking point. This is exacerbated by organisational cost-cutting and a “do more with less” mindset which are increasingly commonplace. Stress-related physical and psychological illnesses, including ‘burnout’, are on the rise and the cost to both organizations and society are growing significantly.

Effective leaders understand the need to regulate stress and pressure and provide people with opportunities to rest, recover and reflect. They encourage people to take time off during holidays and to disconnect insofar as possible while away. They organise work to ensure people are not working at full pace continuously and encourage on and offline support networks and ‘buddy’ coaching and mentoring to ensure people have the emotional and practical support they need.

Through implementing these steps, leaders and managers can build a positive, inclusive cultural DNA that supports the growth of psychological as well as human and social capital. This will provide ignition for a virtuous success cycle where top talent is attracted to the organisation and once hired, is motivated to go above and beyond to help the organisation prosper.