What is Psychological Capital?

You’ve probably never heard of psychological capital even though it has been shown to be important for employee performance and well-being!

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We’re sure you’ve heard the term ‘human capital’. It refers to the people resources within an organization – meaning the skills, knowledge, and abilities of the employees. But, you’ve probably never heard of psychological capital. It has been shown to be important for employee performance and well-being. Today, we describe this concept and why it’s important!

Psychological capital refers to a set of resources a person can use to help improve their performance on the job and their success. It includes four different resources – self-efficacy, optimism, hope, and resilience. We will define all of these resources and why they matter together! Importantly, psychological capital can be developed, trained, and coached. You can build more of these resources!


Self-efficacy is an important part of psychological capital. It refers to a person’s confidence in their ability to control outcomes and overcome difficult challenges. In other words, someone with high self-efficacy believes they have control of what happens to them. These people know they can beat whatever challenges come their way. People like this don’t shy away from big goals and are motivated to accomplish them. They aren’t discouraged by failures and believe they have the control to fix it. Put simply, those high in self-efficacy believe in themselves.

Psychological Capital is made up of four very important parts! All are equally important to be someone that is high in it.


Optimism is probably a word you are familiar with. In research, optimism means a person’s expectation of positive outcomes. Simply, those high in optimism believe things are going to end well. Optimistic people are motivated to work towards their goals and deal with issues right away. Similar to self-efficacy, optimistic people believe things will go well even when things get hard. Optimistic people think things will be ok in the end.


Hope is another word you probably know. But it’s meaning in research is different. It is made up of two parts – agency and pathways. Agency is the motivation to succeed in a specific goal or task. Pathways is the way to accomplish that task. People with high hope put more effort toward their goals than those with low hope. They come up with alternative ways to meet their goals when the first try doesn’t work. In other words, high hope-ers work hard to reach their goals and will adjust if what they are doing doesn’t work. We discuss hope in more detail in a recent podcast episode.


The final part of psychological capital is resilience. It’s the ability to bounce back from challenges, risks, and failures. Resilient people can adapt to changing and stressful situations effectively. They are good at working through negative experiences and changes happening around them. Most people call these types of people ‘strong’ after seeing them come back from a hard situation.

As you can see, the four resources included in psychological capital work well together. People with high psychological capital believe they can control their future and that things will work out in the end. They work hard to reach their goals and adapt to challenges and change. When facing failure, they bounce back quickly and change their approach to make sure they don’t fail again. As you can imagine, being high in this can have a lot of benefits!

High psychological capital leads to better employee performance and well-being. Win-Win!

Benefits of Psychological Capital

Employers and employees both benefit from psychological capital. Employees that have high psychological capital outperform other employees. We all know companies care about employee performance! This finding shows that organizations should help develop employees’ psychological capital. While there’s still research to be done, we know that supervisor support and company culture can increase it. If companies make sure they have a positive culture and supervisors are supportive, employees will have higher psychological capital and, thus, perform better.

Employee Well-Being

In addition to high performance, employees with high psychological capital also have better well-being. One study found that when these employees have work-life balance issues, they are less likely to burnout. Researchers also found that psychological capital influences well-being over time. If you can have high psychological capital, you will be better off in the long run. One study even found that having high psychological capital while unemployed can improve a person’s well-being. Makes sense, right? If you have high psychological capital, you will work hard to find a job and won’t feel discouraged.

There’s a lot of other research that shows psychological capital reduces stress and negative emotions. Luckily, it is something you can develop, train, or coach. You can get there! We’ll explore some ways to do this in future posts. Or sign up to take our online course to help you develop your psychological capital! In the meantime, we’d love to hear from you! Do you believe you have high psychological capital? Do you have any tips that have worked for you?

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