Psychological Capital, Leadership and Organizational Performance

This essay explores the vital role of psychological capital (PsyCap) in leadership, examining its influence on leadership styles and organizational success. It defines PsyCap, comprising self-efficacy, hope, resilience, and optimism, and its significance in leadership development. The essay highlights key leadership styles like authentic leadership and Leadership-Member Exchange (LMX), showing how they interact with PsyCap to enhance employee performance and job satisfaction. It emphasizes that positive leaders build a positive work environment and encourages employees to achieve organizational goals. The essay further discusses the link between employee attitudes and PsyCap, noting that individuals with high PsyCap tend to be more productive and confident. It concludes by emphasizing the importance of positive leadership in fostering PsyCap, which in turn drives ethical behavior, respect for values, and overall organizational success. The essay stresses the importance of emotional attachment and positive emotions in the workplace, emphasizing their impact on employee commitment and performance.

Running Head: Positive Leader
Psychological Capital (PsyCap)
Essay
System04104
8/13/2019

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Leadership and Psychological Capital
Leadership plays a vital role in the performance of employees and it also determines
the success or failure of organisation. However, psychological capital, which is also known as
‘PsyCap’ plays an important role in both leadership development and influence (Avey, 2014).
The aim of this essay to shows the relationship between psychological capital and different
leadership styles. The essay also demonstrate that how psychological capital determines the
leadership effectiveness and leadership development.
Psychological Capital has gained lots of emphasis of researchers and human resource
experts as an important factor in leadership development and leadership effectiveness. The
psychological capital comprising four factors named self-efficacy, hope, resiliency, and
optimism. However, there are many researchers and pioneer in the field of management
stated that PsyCap is an important factor in leadership influence and development in the
modern organisations. Leadership is an important thing in every organisation. In the words of
John C Maxwell, “everything rises and falls in leadership” (Leroy, Anseel, Gardner, and Sels,
2015). It is the leadership that determines the organisational performance and success by
influencing and motivating the employees to perform their best to achieve the organisational
goals and objectives (Avey, 2014). A leader not only help the employees in their performance
rather it also helps to determine the job satisfaction of employees, their motivation level,
providing a positive work environment to employees, and solve the issue of employees after
considering their grievances.
A positive leader is not always found at the top level of the organisation rather a
leader can be found at any level of the organisation. The role of a good leader to determine
the organisational goals and objectives and motivates the employees to achieve the
organisational goals with available resources and within the timeframe (Walumbwa, et. al.,
2008). However, there are various types of leadership in the organisations. Some of the
important leadership styles, which are more popular and related to psychological capital are
as follow:
Authentic Leadership: The authentic leadership style revolves around the ethical
behaviour of a leader. The authentic leadership style generally focuses on establishing a good
relationship with employees and encourages them to meet the target or achieve the goals of

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the organisation in significant manner (Walumbwa, et. al., 2008). An authentic leader always
focuses on an open relationship with its followers or subordinates. It can be said that the core
quality of an authentic leader is being authentic and transparent to the followers or employees
whom he/she leads. An authentic leadership always maintain integrity in the organisation,
motivate others, and self-aware about their own strength and weakness (Leroy, Anseel,
Gardner, and Sels, 2015).
Leadership-Member Exchange (LMX): LMX approach of leadership is based on
two-way (dyadic) relationship between leaders and followers. According to this theory, the
leader has strong relationship and faith in some of the people of the organisation, but not with
all the members. The LMX theory can be divided in two type of relationship with two
different type of group. The first group called in-group members who are closed to the leader
and second group called out-group members who are not close like the in-group members to
the leader. However, the in-group members receive more trust and favour from the leader
while the out-group member receives only standard job benefits to perform the standard job
description.
Psychological Capital is the part of positive organisational behaviour. PsyCap enables
the people to accept the challenging task and having confidence to put necessary efforts to
complete any type of task or work. Psychological capital can be defined as “an individual’s
positive psychological state of development” which is characterised by the having high levels
of HERO (Hope, Self-efficacy, Resilience, and Optimism). Psychological capital plays an
important role in developing the personal capabilities and competencies of people to achieve
the stable organisational growth (Hoch, Bommer, Dulebohn, and Wu, 2018). In other words,
it is the scientific study of individual approach and their optimal functioning that enables the
people to succeed. The features of psychological capital also enable the person to do those
things that give more job satisfaction or life satisfaction to the people.

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(Source: Leroy, Anseel, Gardner, and Sels, 2015)
Authentic leadership generally focuses to develop positive attributes in people such as
like self-confidence, encouragement, hope, and believe etc. that are required for positive
psychological capital in employees (Walumbwa, et. al., 2008). The authentic leader generally
focuses on develop the positive organisational skills in the employees such as coordination,
positive thinking, self-confidence, and hope that are the key requirement of positive
psychological capital. The authentic leadership also develop the ability in people to accept the
challenging task in the organisation and make the tough decision to become a HERO.
Authentic leaders are so crucial for those organisations that are facing multifaceted issues in
the modern day of business operations (Walumbwa, et. al., 2008). The authentic leadership
style develops the four key factors of positive PsyCap that called HERO in the employees, so
the employee can face any challenge or situation in the future. Authentic leadership develops
the positive features in the people such as self-awareness and self-regulated behaviour which
is required to develop positive psychological capital in the employees. Another thing that is
noticeable that the authentic leaders carry out all those features that are required in positive
psychological capital (Story, et. al., 2013). A leader should be more positive and confident to
perform any challenging task and should have potential to influence others from their actions
and decisions. These all the basic features of psychological capital. In other words, it can be
said that an authentic leader should have all the traits of psychological capital to become a
successful leader in the organisation.

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There is link between the employee’s attitudes and psychological capital. Various
researchers found that it is the psychological capital that determines the behaviour and
attitudes of employees in the organisation or in their life as well (Walumbwa, et. al., 2008).
Generally, it has been seen that a person that have high positive psychological capital is more
productive and self-confident in compare to other people. It has been found that people who
have more desirable attitude having high positive psychological capital and people having no
desirable attitude having low or negative psychological capital. People having positive
psychological capital are always looking to achieve something and try to create their own
success while people having negative psychological capital are always avoid their
responsibility and are very dull in nature. The negative psychological capital raises the
negativity in people and there are generally hopeless in their life. However, people having
positive psychological capital are invulnerable to obstructions (resilience). It has been
globally observed by many researchers that people having high level of positive
psychological capital are more successful and satisfied in their life. These types of people are
more loyal and committed to their work and focuses on hard work and responsibility to
achieve the success in life (Leroy, Anseel, Gardner, and Sels, 2015).
An authentic leader always provides a positive and effective organisational
environment and workplace culture to the employees to develop positive psychological
capital. Even the other positive leaders also contribute and make positive decision to enhance
the positive PsyCap in the employees by motivation, encouragement, and inspiration that
further excel the self-confidence and self-interest of people to achieve any goals or
accomplish any challenging task of the organisation. However, it has been seen that in the
LMX approach of leadership, a leader always establishes a relationship based on trust and
mutual understanding (Leroy, Anseel, Gardner, and Sels, 2015). Based on this trust, the
leader supports the employee for developing confidence, hope, and self-efficacy through
motivation and positive feedback. The demerit of this type of leadership is that another group
of employees are generally avoided by the LMX leader and it shows the big drawback of this
leadership approach. LMX approach of leadership shows that LMX favours only some of the
employees in the organisation who are closed to the leader. The LMX leader can develop the
features of positive psychological capital in the employee by inviting them to participate in
decision making, goal setting, reward and performance management, and by providing them
adequate resources to achieve the organisational goals. This will definitely increase the hope
and confidence in the employees and develop positive psychological capital. If the LMX

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leader provides job security to the employees and give them freedom to take decisions
regarding their performance, it will definitely help the LMX leader to develop positive
morale values in people and develop their self-confidence. It also leads to the better resilience
and optimism behaviour in employees at the workplace (Walumbwa, et. al., 2008). Moreover,
it can be said that a positive leader-member exchange leadership generally associated with
higher feelings of PsyCap empowerment that helps the employees to develop positive
psychological capital, which further leads to the better performance of employees and better
performance of organisation as well.
Building psychological capital in employee is generally a primary role of a leader. A
leader should focus on the needs and various motivational factors that are essential to develop
positive psychological capital in the organisation. The four factors (HERO) of psychological
capital are crucial in building positive psychological capital in the employees. Although these
factors depend on the needs of employees but it cannot be avoided that a leader has role to
influence and motivate people for their organisational role as well as their life role. PsyCap
plays an important role in improving the performance of employees. However, every people
have different needs and motivation factor so does employees. For example, the blue-collar
employees are generally inspired and motivate by the monetary benefits. These types of
people need continuous growth in their salary packages and safety and security at the
workplace, so they can giver their best to the organisation (Avey, 2014). The white-collar
employees are generally motivated by the appreciation and promotion. However, monetary
benefits are also important here, but it is more desirable than promotion and higher
designation. These people always expect appreciation from the leader of the organisation and
a prestigious designation and power to do the assigned work. However, the administrative
employees generally need social recognition and power to perform their jobs. The social
recognition, power, and authority to take decision can help the administrative leader to
develop positive psychological capital. Building psychological capital in professional
employees required encouragement and appreciation of people (Avey, 2014). These types of
people need facilities, support from the people, and are more dedicated to their works. This
type of people also requires more social and personal support from the leader, but they are
already more dedicated to their works. Therefore, a small encouragement and motivation
force create a high level of positive psychological capital in the professional employees.
Emotions and employee’s performance are directly linked with each other. Although
most of the modern organisations ignore the importance of emotions at the workplace. The

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emotional attachment of employees helps the organisation to retain the organisational people
for the long term in the organisation (Walumbwa, et. al., 2008). Apart from this, people who
are emotion are more committed towards their work and more loyal to the organisation. This
commitment and loyalty of employees helps the organisation to improve its performance in
long term. Positive emotions also encourage the employees to perform their best at the
workplace, so the organisational goals can be achieved in significant manner. Emotions
directly affect the performance of employees and organisation as well.
In conclusion, it is the positive leadership that encourages and motivates the
organisation people to perform their best. A leader encourages and motivates the employees
and it further builds the HERO factors of Psychological capital in the people that force them
to perform beyond the expected level. The positive psychological capital influences the
employees to act in ethical ways and respect the moral and cultural values of other people in
the organisation. However, it can be said that it is the leader who set a standard for the people
and drive them to perform their best to achieve the set target or goals of the organisation.
Nonetheless, a if a leader boosts the self confidence of the employees and motivates them
towards the ethical values or towards the HERO factors, it definitely builds the positive
psychological capital in the employees. Moreover, it is really a challenging job for a leader to
understand the needs, requirements, and emotions of the people and develop positive
psychological capital in the employees, but a strong personal and interpersonal relationship of
an effective leader can turn this challenging job in an easy stuff.

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References
Avey, J.B. (2014) The left side of psychological capital: New evidence on the antecedents of
PsyCap. Journal of Leadership & Organizational Studies, 21(2), pp.141-149. DOI:
10.1177/1548051813515516
Hoch, J.E., Bommer, W.H., Dulebohn, J.H. and Wu, D. (2018) Do ethical, authentic, and
servant leadership explain variance above and beyond transformational leadership? A meta-
analysis. Journal of Management, 44(2), pp.501-529. DOI: 10.1177/0149206316665461
Leroy, H., Anseel, F., Gardner, W.L. and Sels, L. (2015) Authentic leadership, authentic
followership, basic need satisfaction, and work role performance: A cross-level
study. Journal of management, 41(6), pp.1677-1697. DOI: 10.1177/0149206312457822
Story, J.S., Youssef, C.M., Luthans, F., Barbuto, J.E. and Bovaird, J. (2013) Contagion effect
of global leaders' positive psychological capital on followers: does distance and quality of
relationship matter?. The International Journal of Human Resource Management, 24(13),
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