We’re sure you’ve heard the term ‘human capital’.

It is a collection of all the knowledge, talents, skills, abilities and experience of an individual or the total workforce. From the human capital theory, initially formulated by Becker (1962) and Rosen (1976), it refers to “what you know”  and this set of skills or abilities can be improved or accumulate through training and education.
New hires are often recruited firstly for their human capital or “what they know”. Next to the knowledge and skills they bring, their relationships, their personal and professional networks and the potential connections they will bring are considered another important trait. This is known as a employees’ social capital or “who they know”.
Historically, organizations have been looking for these two resources and offered a labor contract and salary in exchange.

In today’s rapidly changing environment though, solemnly looking for human and social capital provides no guarantee that these forms of capital will yield a positive return on investment, nor that the human and social capital an employee possesses today will be valuable tomorrow. With the current speed of knowledge development, what one knows is obsolete 5 years later. So human and social capital is becoming a moving target!
The need for upskilling and reskilling we hear everywhere around us targets the human capital obsoleteness, this is one of the big challenges organizations face in today’s workforce management.
In order to adjust, many companies already refocused their hiring and development strategies to include future-focussed behavioral components called “attributes” or “attitudes” (e.g. agility, curiosity…) that will predict a more adaptive and future-ready workforce.

But let’s assume your workforce has the knowledge, network, and skills to perform and adapt. What will make some of them more ready for turbulence and change, more strong when facing adversity? Below the surface are psychological resources that impact immensely the visible part of the iceberg…
In order to keep a sustainable competitive advantage through resource management, HR should expand their current capital equation to include the psychological capital (PsyCap). PsyCap is a very well studied conceptual framework out of positive psychology that goes beyond “what and who you know” and is concerned with “who you are capable of becoming” in the future (Avolio & Luthans, 2006, Luthans et al, 2004, Luthans & Youssef, 2017).

It includes four different resources of which the total output is greater than the sum of the individual parts (Luthans et al, 2004):

  • hope, (self-) efficacy, resilience and optimism (the HERO within)

High psychological capital is demonstrated to lead to better employee performance, job satisfaction, problem solving and well-being, amongst a lot of other benefits (Luthans et al, 2017).
PsyCap provides recruiters and HR a look under the surface of observed behaviors. A look at psychological states that have impact on desired employee attitudes, behaviors, and performance.

(Self) Efficacy

Employees with high psychological capital

  • feel they have control over their future and believe things will work out in the end (Hope & Efficacy).
  • work hard to reach their goals and adapt to challenges and change (Resilience & Hope).
  • when facing failure, bounce back quickly and change their approach to make sure they don’t fail again (Resilience & Optimism).

As you can imagine, having high PsyCap can have a lot of benefits for both the individual and the organization, especially in a VUCA world…

We feel that if you are looking for a good evidence-based capital that fits the future of work and allows mutual benefits in this dynamic environment, PsyCap is worth investing in. Recruiting people with natural high PsyCap and fostering this in your organization is a critical denominator to sustaining our human and social capital, keeping your workforce up to date, energized and employable.
For individuals, developing PsyCap provides the resources to deal with the dynamic environment we today work and live in, allowing them to thrive and adjust with confidence so they can keep being successful in whatever situation they are faced with.
Not bad in the current global Covid19 pandemic… A capital that creates win-wins!

Want to know more on the different element of the HERO within that drives the PsyCap equation? Read our article on Psycap here.

  1. Psychological capital and beyond. Luthans, Youssef and Avolio, Oxford University Press, 2015
  2. Psychological Capital: An Evidence-Based Positive Approach. Annual Review of Organizational Psychology and Organizational Behavior Volume 4, 2017 Luthans, pp 339-366

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