Why building psychological capital is a top priority for leaders

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) are 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 4 key elements of psychological capital:

HHope: Belief in our goals and persevering to find pathways to achieve them.
EEfficacy: Confidence in our ability to achieve a specific goal in a specific situation.
RResilience: Successfully coping with adversity or stress; the ability to “bounce back”.
OOptimism: Having a positive expectation about succeeding now and in the future.

Organizations need ever-greater levels of these capacities to build adaptive, innovative and resilient organisations 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. The engagement challenge
  2. The productivity challenge
  3. The wellbeing challenge

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, though 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 5 steps leaders and managers should take to build psychological capital into the DNA of their work culture:

Build a strong sense of purpose

Organizations with an unambiguous and compelling purpose will find it easier to recruit and retain people who are wanting to make a difference by contributing to that vision. 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. Clarifying a straightforward and valuable purpose will inspire hope and optimism among employees that they can make a real difference, provided they feel valued and empowered to contribute their strengths, ideas and views in working towards this purpose.

Focus on the positives

Everyday managers and leaders face tough challenges and changes impacting their organisations. Choosing how to respond in any given situation provides a “moment of truth” which determines how they are perceived and their impact on the organisation’s results.

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.
Maintaining a positive mindset doesn’t mean leaders and managers should be happy and upbeat all the time. This is not only unrealistic, it is also unhealthy as no person should repeatedly suppress negative emotions.

A positive mindset doesn’t imply negative emotions should be dismissed or ignored. It highlights the need to surface them and explore the impact on behaviours and results. So, if a leader is upset or angry, we encourage them to talk about these feelings in an open and constructive way and focus on finding solutions with the help of co-workers, a mentor, coach, etc. This enables them to overcome their negative emotions more quickly and constructively so they can refocus on the positives.

 Help people shine in areas of standout strength

At companies like Facebook, Deloitte and PhotoBox, managers and leaders regard themselves as “strengths coaches” and encourage employees to discover and optimise their natural strengths (underlying qualities that energise them and they are great at or have potential to be great at) in pursuit of their goals. 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.

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 energise them. This builds optimism, as well as self-efficacy, or the belief an individual has that they possess the capabilities to succeed and accomplish their goals.

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. They want discretion in how the job is performed so they can deal with the task in a way that suits them best. 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 to deal with tougher decisions and overcome blockers. This builds greater levels of hope, self-efficacy and optimism.

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 organisations 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. These steps help regulate energy, facilitate shared learning from different experiences and enable employees to become more psychologically resilient.

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, are motivated to go above and beyond to help the organisation prosper. As Tony Hsieh, CEO of online shoe and clothing success story, Zappos, observed: “…the leader’s role is to free people, not control them – to free their strengths, ideas, energy and value, rather than straightjacketing them with fear, rules and bureaucracy”.

James Brook