The Human Asset

What is good about life is as genuine as what is bad and therefore deserves equal attention
Christopher Peterson

         Since the birth of our nation, society has been in a state of constant change.  America has been moving toward equal treatment of all of her citizens.  Sometimes this journey of social change has been slow, but generally it has made progress.  However, the way America does business has not changed since our beginnings.  There have been laws enacted to change behaviors that were socially unpalatable, but the basic hierarchical methods of business management have remained the same.  Business has been characterized by a "we verses them" attitude between management and employees which has yielded a paternalistic attitude from management, a class system in our organizations, and a mutual mistrust by all concerned.  There have been attempts to improve our ways, such as Total Quality Management efforts, the move toward enhancing quality and eliminating defects, or efforts to improve the Quality of Work Life for employees.  These efforts and others have met with mixed success because businesses have been reluctant to change the way they conduct business and have instead used these programs as quick fixes to improve profitability.
 
         When America was founded, one overarching principle made her different than the other nations of the earth.  All of her citizens are equal, and no one person or class has the right to rule over another.  American businesses, however, still use the monarchical system for corporate governance.  Instead of a king, the business ruler is a CEO.  Instead of princes and princesses, the CEO appoints executives.

         This system of business has been working well for America throughout most of our history, which is probably why, as antiquated as it is, it has not changed.  However, in the past five to ten years, other nations have begun to seriously challenge American business in its role as the economic powerhouse of the world.  If we are to remain the world' premier economy, business must change fundamentally.
 
         In recent years, research has been done to unlock one of American businesses most valuable assets, its human asset.  This paper will examine evidence that demonstrates that providing the proper environment in the workplace will not only unlock the potential of millions of American employees, but increase the productivity of our workforce and create a competitive advantage for American business that cannot be easily copied, if it can be at all.

Psychological Capital

Bill Gates has been quoted as saying "our most important asset walks out the door every night." (Luthans & Youssef, 2004, 143)  But what makes an organization's people its most important asset?  One property is the person's psychological capital.  Psychological Capital can be defined as "'Who you are' and 'what you can become in terms of positive development.'" (Luthans, Norman, Avilio, and Avey, 2008, 223)  It is the unique psychological ability that every employee, no matter what position, brings to an organization.  While we all possess many psychological abilities, only a few of these can be improved and honed through training.  Some of these abilities are optimism, self-efficacy, resilience, and hope.

Optimism

         Optimism "is defined by Seligman(1998) as an attributional style that explains positive events in terms of personal, permanent, and pervasive causes and negative events in terms of external, temporary, and situation-specific ones" (Youssef & Luthans,  2007, 778).  Optimism allows people to accept that they are responsible for the good things that happen in their lives and that good things will continue, but they attribute bad things partially, if not completely, to external circumstances and they believe they are temporary.  Optimism allows people to learn from successes and failures in life.  The optimist views them as achievements and therefore under their control.  This enables them to dissect the events leading to the success and learn from the event. The pessimist believes that their successes are just luck or gained by another's help.  Pessimists view themselves as personally responsible for a failure and that failing is a part of their lives.  An optimist believes that failures are attributable to outside forces, and can analyze these so they can be avoided in the future. 

         Optimism can be taught by managers by putting an employee's mistakes in the past and not dwelling excessively on them, by showing the employee that they are valued by the organization and by emphasizing what can be accomplished in the future. 

Self Efficacy

         Luthans (2002, 679) defines self efficacy as "an individual's conviction (or confidence) about his or her abilities to mobilize the motivation, cognitive resources, and courses of action needed to successfully execute a specific task within a given context ".  Self efficacy (also called self confidence) allows a person to set and achieve goals at a higher rate than someone who does not possess self efficacy.  Self efficacy can be developed through  1. mastery experiences, accomplishing many small, doable tasks, 2. through hands on learning or modeling of desired tasks, 3. positive feedback on successes, and 4. consistently demonstrating the value of the task.
 
Resilience

         Resilience is defined as the "developable capacity to rebound or bounce back from adversity, conflict, and failure or even positive events, progress, and increased responsibility" (Youssef and Luthans, 2007, p778).  Resilience may be observed in both positive and negative settings.  It helps a person recover after a negative setback or events that may be positive but overwhelming.

         In today's highly competitive global economy resilience is a necessary trait for surviving organizations.  The resiliency of an organizations workforce is one factor in determining the rate at which the organization can react to the constantly changing business climate.  The primary tool for building resilience is a supportive workplace.  Organizations that focus on results and emphasize what an employee can accomplish in the future instead of dwelling on processes and the mistake an employee has made today foster an environment where their workforce's resilience is constantly growing. 

Hope

         Hope is "a positive motivational state that is based on an interactively derived sense of successful (1) agency (goal-directed energy) and (2) pathways (planning to meet goals)" (Youssef & Luthans, 2007, 778).  Hope's agency component is the individual's initiative to formulate and to set goals for the future.  The pathway component is taking the goal that has been set, and setting into motion the plan that will accomplish those goals. 

         Hope can be taught and modeled by an organization through the goal setting process as part of performance development.  During periodic performance reviews, managers can set goals for the upcoming period with their employees.  Dividing these goals into smaller sub-goals allows the employee to see greater achievement as they work toward their goals, giving them hope that future goals will also be met.  In addition, giving the employee control over how they reach their goals demonstrates to the employee that the manager and the organization has confidence in them and increases the pathways aspect of hope, giving the employee confidence that future hopes can be realized. 

Resource Reservoirs

         If it seems to the reader that many of these states are related, the reader would be correct.  Youssef and Luthans (2007, 780) call these psychological assets a persons "resource reservoir" which makes up their psychological capital.  If an employee is given a new and unfamiliar task to accomplish, optimism will give them a positive attitude that they can accomplish the task.  Past successes can give the employee the self efficacy to believe that they can take on the new challenge.  Their hope enables them to set goals for accomplishment and to take steps toward completion of the task.  Their resilience will carry them past any hardships that they experience or any unforeseen obstacles that occur along the way.  It becomes apparent that "these positive psychological capacities...may be important for performance beyond what may be accounted for by any one of them" (Youssef and Luthans, 2007, 780).  These psychological capacities can be used by the employee as a "resource arsenal" to draw from to enable the employee to accomplish new tasks and therefore add to their knowledge and skills and become more productive.

         Take for example an educator, who has been assigned the responsibility of opening a new school.  Their self efficacy would give them confidence that they have the skills necessary to perform this daunting task.  The person's hope would give them the impetus to set goals and begin to formulate a plan to carry out those goals.  Their resilience would help to overcome obstacles that they encounter as their plan unfolds and not abandon the project.  Their optimism would keep them believing that they can succeed in this project and not to give up along the way.

Reasons to Act

         In today's short term thinking business climate, business leaders are reluctant to make changes unless those changes will have a positive affect on shareholder value.  Until recently having a positive, supportive workplace made for a more enjoyable environment in which to spend one third of our lives, but the only financial relationships that could be proven were the costs associated with these programs.  It was not until recently that psychological capital has been shown to increase productivity and create an advantage for companies that adopt these practices. 

Increases in Productivity

         Self efficacy in employees will help them overcome obstacles and accomplish things that those with low self efficacy may not be able to accomplish.  In a meta-analysis of research on self efficacy, the authors "found that self-efficacy has a correlation of .38 with work related performance" (Luthans and Youssef, 2004, 153).  Self efficacy has also been related to job satisfaction, turnover intentions, and organizational effectiveness both in the United States and worldwide. 

         Leaders that are hopeful have been shown to have more productive employees.  The employees that are led by a hopeful manager or leader have greater financial performance, better retention, and increased job satisfaction. 

         The increases in productivity associated with the optimistic employee can best be shown by examining the case of life insurance sales trainees.  Along with the standard test to demonstrate industry competence, agents were given a test to determine their level of optimism (Seligman, 2006, 97).  The agents that failed the industry test but scored highly on the optimism test were grouped into a sales task force.  These agents out sold agents that passed the industry test but scored low on the optimism test by twenty one percent their first year on the job and fifty seven percent their second year (Luthans and Youssef, 2004, 154).  This demonstrates the direct link that can be made between optimism and its sister psychological capabilities on an organization's Financial Statement. 

         In an article covering three different research studies, Youssef and Luthans (2007, 792) found support for the relationship between job satisfaction and organizational commitment and resilience.  While the relationship between resilience and productivity is an indirect one, the authors point out that resilience "may be more relevant in organizations in extreme conditions or undergoing crises or dramatic changes (Youssef and Luthans, 2007, 792).

Competitive Advantage

         In the highly competitive global economy in which we find ourselves, companies are struggling to find any reason they can to give themselves an advantage over their competitors.  Only a few years ago, a company who had a unique process or a specialized computer program could use this advantage to out perform their competitors for years.  Even "information technology, which until recently has been the primary source of competitive advantage is now readily available at exponentially decreasing costs" (Youssef and Luthans, 2004, 145).  The one resource that an organization's competitors cannot and will not be able to reproduce are its human resources. 

         The way that an employee is transformed into a valued member of an organization is through the teaching of tacit knowledge.  Tacit knowledge is the learning of the way things are done at an organization.  It is the adoption of a company's culture, the learning of individual process in an organization, it is buying in to the organization's mission, and it is becoming immersed in the organization so as to become a small part of the organization itself.  This combination of the details of organizational life with the psychological capabilities of its people create an asset for the organization that cannot be copied. 

Psychological Capital in Your Organization

         In the new world of extreme competition, we are all going down the wrong path unless we discover a new way to manage.
         Jim Clifton-CEO Gallup Organization

         We have seen how Psychological Capital is important to employers and employees in organizations.  Psychological Capital competencies can be instilled and strengthened by training.  They can also be strengthened by reinforcing the importance of these competencies. These reinforcers can take many forms.

Reinforcers

There are different methods of reinforcing desired activities in an organization.  Ironically, the reinforcers that have little cost associated with them are the ones that are the most effective.  Luthans and Stajkovic (1999, 55) found that the praise of a manager or supervisor, either in private or in public, had as much effect on productivity as pay for performance systems.  Based on their findings "it does not appear cost effective for human resource mangers to spend extra time and financial resources to simultaneously apply monetary, performance feedback and social reinforcers, when non-financial reinforcers alone produce the same results (Luthans and Stajkovic, 1999, 55).  Using performance feedback and social reinforcers are sufficient. 

Many of these social reinforcers can be used to increase productivity while also increasing employee job satisfaction.  In the information technology department of a major retailer in India, employees were given their choice of reinforcers.  The employees could either choose flexible work hours or casual dress as a reward for increased production.  Not only did this reinforcer reward the employees with improved work conditions, but the employees got a sense of increased control over their work lives by being able to make the choice.  Performance immediately increased fourteen percent, and even after the reinforcements were taken away, performance remained at a level eight percent above the original performance (Raj, Nelson, and Rao, 2006, 859).  This intervention was beneficial for both parties, because the employees "attitude was better than before, their willingness to do the job assigned to them was higher, and overall, their spirits were high" (Raj, et al.,2006, 864).  These reinforcers were so successful that when the study was completed, the company "thought [it] unwise to withdraw the reinforcers for these employees" because they feared the possible decrease in productivity.
Feedback can also be used as a reinforcer in the workplace.  In the above referenced study, a separate group was further divided into two groups.  One was given money as a reinforcer, and the other group was given feedback about their performance as a reinforcer.  Both groups experienced an increase in production of approximately twenty five percent.  After twenty one days of receiving these reinforcers, the reinforcement was removed.  Immediately, the performance of the group with monetary reinforcers fell to slightly above pre-study levels.  However, the group that had been receiving feedback maintained their level of production after the feedback was removed through the end of the study (Raj, et al., 2006, 858).  Since most companies keep metrics involving their organizations productivity, there was no cost to providing employees with feedback on their progress.

Conclusion

Despite the advantages of acquiring and increasing the Psychological Capital of an organization, many are slow to take advantage of this asset.  In fact, only one eighth of organizations are truly trying to take advantage of their Psychological Capital (Luthans and Youssef, 2004, 145).  As organizations begin to select employees with these assets, improve Psychological Capital through training, and learn to take advantage of what is already present, they will create for themselves a competitive advantage that cannot be duplicated. 



References

Luthans, F. (2002). The need for and meaning of positive organizational behavior. Journal of Organizational Behavior, 23, 695-706.
Luthans, F & Stajkovic, A. D. (1999).  Reinforce for performance: The need to go beyond pay and even rewards, Academy of Management Executive, 13, 49-57.
Luthans, F, Norman, S. M., Avolio, B. J., and Avey, J. B.(2008). The mediating role of psychological capital in the supportive organizational climate-Employee performance relationship. Journal of Organizational Behavior, 29, 219-238.
Luthans, F., & Youssef, C. M. (2004). Investing in people for competitive advantage. Organizational Dynamics, 43, 143-160
Peterson, C. (2006).  A primer in positive psychology. Oxford, UK:Oxford University Press
Raj, J. D., Nelson, J. A., & Rao, K. S. P. (2006). A study on the effects of some reinforcers t improve performance of employees in a retail industry.  Behavior Modification, 30, 848-866.
Seligman, M. E. P. (2006). Learned optimism: How to change your mind and your life. New York: Random House.
Youssef, C. M., Luthans, F. (2007).  Positive organizational behavior in the workplace: The impact of hope, optimism, and resilience.  Journal of Management, 33, 774-800.