Leadership, Employee Performance, Psychological Capital: A Review

This essay provides a comprehensive literature review focusing on the relationship between leadership, employee performance, and psychological capital within an organizational context. It examines the impact of positive leadership on employee outcomes such as engagement, turnover, well-being, and commitment. The review analyzes the interplay of leadership styles, including authentic and transformational leadership, and their influence on employee motivation and performance. The study also explores the concept of psychological capital, encompassing optimism, self-efficacy, resilience, and hope, and its correlation with employee attitudes and productivity. The essay incorporates a case study of a business consultancy firm to illustrate the practical application of leadership theories and provides recommendations for fostering an effective workplace environment. The findings highlight the significance of leadership development and the cultivation of psychological capital in achieving organizational success.

Running head: LEADERSHIP LITERATURE REVIEW
LEADERSHIP LITERATURE REVIEW
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction......................................................................................................................................2
Literature Review and Discussion...................................................................................................2
Leadership and employee performance at the workplace............................................................2
Comparative understanding of positive leadership......................................................................4
Comparative understanding of psychological capital..................................................................5
Recommendations for effective workplace.................................................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

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Introduction
The study is focused towards the effective evaluation of positive leadership. The specific
topic in focus is the analysis of leadership and employee performance in the workplace and its
comparison with the available literatures on positive leadership and psychological capital
literature. Positive leadership is concerned with bringing people together towards the
achievement of shared goals and empowering them to provide better performances. Positive
leaders are authentic leaders that have passion for work and strong value based foundations of
leadership. Psychological capital is the positive developmental state of individuals that are
mostly based on the values of optimism, self-efficacy, resiliency and hope. The focus of the
study is to bring forward essential implications through review of the available literatures on the
topic. The interplay of positive leadership and psychological capital towards the determination of
motivated performances of employees in organizational environment is analyzed through the
work. It is important to consider that both leadership development and the development of
motivated strongly performing
Literature Review and Discussion
Leadership and employee performance at the workplace
Employee performances and leadership have for long been considered to be very much
interrelated with each other. They also interact with each other more to create stronger growth
values for organizations. Both can either be positively or negatively affected by each other.
Positive leadership has a positive effect on the performances of the employees. Effective
engagement of leadership with the employees help to positively impact the vital aspects such as
engagement, turnover, wellbeing and commitment of the employees. According to Gardner,
W.L., Cogliser, Davis and Dickens (2011) all people have certain belief and value systems.

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These are important in determining their motivations and performances. The theoretical aspects
however are different from the actual practices that are implemented across various
organizations. According to Avey et al. (2011) has focused on relationship based leadership as a
medium to bring about positive motivated performances from the workforce. The relational
cultural theory is concerning the development of relationships that can help leaderships to grow
and develop across organization.
In order to compliment the study the example of a specific business consultancy firm can
be provided. In the organization relationship development between managers and employees are
considered to be essential. Because, the company follows an organic model of management.
Teams are given the opportunity to decide on various important factors that are related to
productivity and performances. The team leaders are hence closer to their subordinates in terms
of hierarchy. The middle level management is also given significant independence for important
decision making practices. The workplace is divided into larger teams. There are more than one
assistant leaders present in some of the teams. However, each team is provided only one team
leaders. The team leaders freely interact with the member. The members in most situations are
given the opportunity to provide their opinions in regards to the various changes that are about to
take place. The leadership of the organization is highly transformational. This means that the
essential focus is always towards changing the operational aspects as per the requirement of the
business environment. In essence, this type of a setup works to effectively motivate the
employees. As well as there is the implementation of a strong team based feedback mechanism.
In this the team members are provided essential feedback by the team leaders and assistant
leaders. The performance benefits that the various teams get due to these actions are various. The

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employees are more motivated to work in different projects. Moreover, there is optimal amount
of enthusiasm, energy and positive outlooks that could be harnessed among the employees.
Comparative understanding of positive leadership
The various aspects of positive leadership can be essentially considered in view of the
organizational aspects that were discussed above. According to Eisenberger, Fasolo and Davis-
LaMastro (1990) trait mindfulness and transformation oriented leadership is currently emerging
as a major trend across various organizations. The focus is more on the psychological well-being
of individuals in any given leadership scenario. In the opinion of Day et al. (2014) the social
change model of leadership development is slowly gaining popularity among the larger
organizations. In accordance with this theory, leadership is to be carried forward by groups rather
than individuals. Hence, this view is much different from the views of the previous authors as per
leaderships are concerned. In view of the same it can be said that in the given workplace more
emphasis was being given towards the group aspects of leadership. Providing more opportunities
to the subordinates to speak up helps to form effective leadership oriented behaviors. According
to Hoch et al. (2018) ethical, authentic and servant leadership are the forms of leadership that can
be considered to be over and above the usual transformational forms of leadership. Leadership is
being viewed by organizations as having more dimensions than one.
It is these multidimensional factors that influence leadership across the large corporates
that create the scope for better leadership implementation. It is important to consider leaders as
motivators and ethical guides that can help employees within any organization to grow. In the
opinion of Leroy et al. (2015) positive psychology is also an important aspect that is connected
with leadership development. In this case positivity can be instilled among the workers through
better feedback mechanisms and motivational factor. According to Hoch et al. (2018) followers

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were found to be more engaged in their work when transformational leadership was being
implemented. Followers seemed to engage more actively in terms of performance when the
leadership was transformational. It is important to consider that the leadership aspects were
important in generating value among the employees. Hence, employees can be said to react more
positively where they are given more opportunity to interact with the leadership. In accordance
with the same Eisenberger, Fasolo and Davis-LaMastro (1990) opine that ethical leadership has
the capability of instilling positive values among the employees. It is important to note that
ethical leadership is focused towards the development of the employees. In essence
transformational leadership has been greatly effective toward determing the value of motivated
performances.
Comparative understanding of psychological capital
Psychological capital refers to the developmental state of individuals that are mostly
based on the values of optimism, self-efficacy, resiliency and hope. It is important to note that
psychological capital is important in determining the motivated attitudes of the employees.
According to Gardner et al. (2011) there is a positive relationship between positive psychology
and effective organizational development. It is opined that employees are the biggest assets of
the organization. The leadership should always focus on improving the positive functional
attributes of the employees. It is important to note that psychological capital is the important link
between leadership and employee motivation. According to Leroy et al. (2015) however,
employees feel lower levels of stress in organizational environments. In organizations across the
globe stress levels are increasing due to the increasing work pressures that the employees are
subject to. This affects their well-being altogether and employees naturally become much
stressed while performing for the organization. According to Carter et al. (2013) provide some

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essential factors that can determine psychological capital among the employees. These factors
are mainly hope, self-efficacy, resilience and optimism. In accordance of the same an employee
often develops certain important performance measures. It is important to consider in view of the
given organization that employees are able to increase their performance levels if they get
positive backing form their organizations. It helps them to greatly improve their performance
levels towards enhancing their performance levels.
The organization was seen to provide more importance to the views of the employees.
The essential opinions of the employees mattered greatly for the organizations. The organization
focused on harnessing the decision making abilities of the employees. At the same time the
employees were given essential opportunities to voice their concerns. This is much in line with
the development of strong psychological capital among the employees. According to
Eisenberger, Fasolo and Davis-LaMastro (1990) the psychological capital of employees become
more important in certain specific professions. The Hospitality profession requires all time
motivated employees as direct customer interactions become very much important in this case.
Hence, varying levels of customer satisfaction might be required in many cases depending upon
the various organizational environment. In case of the organization being considered,
psychological capital was given importance as the organic management setup helped to form a
decentralized leadership system. This system was like many organizations transformational and
employee focused in its essential core value. As opined by Leroy et al. (2015) innovative
performances and their link with effective psychological capital of the employees were
measured. It was found that higher levels of customer satisfaction were related positively to
innovative performance levels and positive employee outlooks. Additionally, it was found that

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psychological capital was negatively related to job stress. Hence, moderate amount of job stress
can actually help to improve the innovative aspects that are related to the employees.
Recommendations for effective workplace
The workplace environment that was considered was effective in terms of the
opportunities that were created for effective employee interactions. It was found that the
organization was decentralized in accordance of the leadership aspects that were greatly present
within the given organization. Hence, it becomes important to note that the organization had a
positive leadership approach. The situations that were present were found to be important in
terms of effective employee growth and development. However, certain important
recommendations can be made to further improve the situation for the employees. It is important
that the organization very essentially looks into the matter of employee engagement. More
significant areas of employee engagement abilities should be addressed. Hence, there should be
more general understanding developed between the organization and their people in terms of
value development. More team meetings should be held along with the feedback sessions.
According to Avey, Luthans and Jensen (2009) psychological breach of contract is a
significant reason for job attrition. Hence, in this case it can be recommended that not forms of
psychological contract breach should be made between the employees and the employers. The
company should focus on creating more effective contracts with the employees. Moving forward
this can determine the value of the relationship that is developed between the organization and its
people. In accordance with empirical literatures, leadership is to be carried forward by groups
rather than individuals. Hence, this view is much different from the views of the previous authors
as per leaderships are concerned. In view of the same it can be said that in the given workplace
more emphasis was being given towards the group aspects of leadership. There should be an

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effective alignment within the organization between leadership and psychological capital. It is
important in this sense that the people take effective stance against any form of prejudice that
might occur in the workplace. Ethical practices should be valued, promoted, enhanced and
cultivated among the employees. This would create a culture of better cooperation and
engagement between the employees and the organization. The transformational leadership of the
organization should be optimized in accordance of the changing needs of the people.
Conclusion
The study brought to notice the importance of both positive leadership and psychological
capital in determining the development of organizations. Leadership roles were found to be
important in the context of employee and organizational development. Moreover, it became clear
that employee’s psychological capital also has significant roles to play in the effective
productivity of the organization. In essence, the organization is a developmental area that needs
to be addressed through both effective leadership and employee performance. It is important to
note that only though the positive interplay between leadership and employee psychological
capital can an organization reach positive outcomes in all areas of its functional factors. The
organization considered for the research was found to be effective in terms of its management
and leadership. However, the important factor is to keep improving its employee interaction
functions in accordance with the requirements for change. This would improve the performances
in all respects and enhance leadership-employee role optimization processes.

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References
Avey, J.B., Luthans, F. and Jensen, S.M., 2009. Psychological capital: A positive resource for
combating employee stress and turnover. Human resource management, 48(5), pp.677-693.
Avey, J.B., Reichard, R.J., Luthans, F. and Mhatre, K.H., 2011. Meta‐analysis of the impact of
positive psychological capital on employee attitudes, behaviors, and performance. Human
resource development quarterly, 22(2), pp.127-152.
Carter, M.Z., Armenakis, A.A., Feild, H.S. and Mossholder, K.W., 2013. Transformational
leadership, relationship quality, and employee performance during continuous incremental
organizational change. Journal of Organizational Behavior, 34(7), pp.942-958.
Day, D.V., Fleenor, J.W., Atwater, L.E., Sturm, R.E. and McKee, R.A., 2014. Advances in
leader and leadership development: A review of 25 years of research and theory. The leadership
quarterly, 25(1), pp.63-82.
Eisenberger, R., Fasolo, P. and Davis-LaMastro, V., 1990. Perceived organizational support and
employee diligence, commitment, and innovation. Journal of applied psychology, 75(1), p.51.
Gardner, W.L., Cogliser, C.C., Davis, K.M. and Dickens, M.P., 2011. Authentic leadership: A
review of the literature and research agenda. The leadership quarterly, 22(6), pp.1120-1145.
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.

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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.