Potential Added Value of Psychological Capital in Predicting Work Attitudes

Meeting the challenge of effectively managing human resources requires new thinking and approaches. To extend the traditional perspective of economic capital, increasing recognition is being given to human capital and more recently social capital, this article proposes and empirically tests the potential added value that psychological capital may have for employee attitudes of satisfaction and commitment. After first providing the background and theory of PsyCap, this article reports a study of manufacturing employees (N = 74) that found a significant relationship between PsyCap and job satisfaction (r=.373) and organization commitment (r=.313). Importantly, the employees’ PsyCap had a significant added impact over human and social capital on these work attitudes. Future research and practical implications conclude the article. Although work environments have always experienced change, most outsiders and insiders would agree that today’s workplace is changing at a much faster and more dramatic pace than ever before. Work in today’s organizations is becoming more fluid and less bound by space and time thanks to information technology and globalization (i.e., see Friedman, 2005). Also, changing demographics, growing two-income families, and an educated workforce that is insisting on more control over their careers is creating an unprecedented environment (Pearce & Randel, 2004). digitalcommons.unl.edu Lars on & Luthans in J. Leadership and Org. Stud ies 1 3 (2006) 2 In this new environment, the rules and boundaries of the playing field for organizations and employees alike are undergoing paradigmic change. For example, mega-mergers, acquisitions, reorganizations, and ethical scandals have altered the identity of “who we are.” What used to be distinctive attributes such as organizational culture or core values are being questioned and the consequence is that we have gone from the 1980’s “Me Decade” to what Feldman (2000) has called the “Flee Decade” of the new century. What he means by this is that there is now a perceived need to always be ready to move in order to stay employed—ultimately leading to a drastic change in the way people manage their careers and how they identify with their organizations. Organizational identification requires members to adopt strategies that allow them to preserve their psychological well-being and organizational success (Johnson, Smith, & Gambill, 2000). Although these complex workplace changes are very difficult to unravel, many managers still subscribe to a mechanistic perspective of organizations as simply being predictable entities – one in which members can be easily programmed as if they were machines. However, academics and an increasing number of practitioners, recognizing the complexity of today’s environment, now subscribe to the reality that work, and how it is carried out in organizations, is fundamentally about relationships – most notably the relationships between organizations and employees. This relationship perspective changes many assumptions. For example, flexibility and fluidity becomes a new regulator for organizations to instill in their managers and employees, which in turn results in a heightened sense of insecurity. Even employees who are able to hold on to their jobs, still view their employment as unstable and fear the future (Mack, Nelson, & Quick, 1998). Although the classical change model of unfreezing-moving-refreezing remains a way to deal with today’s constantly changing environment, as one employee recently observed, the constancy of change has resulted in a state of “slush: never refrozen, always in an uncertain state” (Mack, et al., 1998: 220). In this “slush” environment, numerous solutions to cope and effectively manage and change are possible. However, we would argue the only constant, beside the old cliché of change itself, is the important role human resources play in competitive advantage. Although obvious and recognized to a degree through the ages, only very recently have human resources been proposed as a form of capital to be developed and leveraged for a return on human investment. The purpose of this article is two-fold. First, give a brief overview of both human and social capital, and then provide the meaning and Lars on & Luthans in J. Leadership and Org. Stud ies 1 3 (2006) 3 theoretical foundation for the newly emerging psychological capital. Second, report the results of an exploratory study that analyzed the relationships between a sample of manufacturing workers’ psychological capital and their attitudes of job satisfaction and organizational commitment. Besides examining the relationship between psychological capital and worker attitudes, particular attention is given to whether psychological capital can go beyond more traditional measured human and social capital in predicting worker attitudes. An Overview of Human Capital The recognized value of organizations is slowly undergoing a change in perspective. For example, twenty years ago the largest recorded value of the firm was tied to inventory levels, including raw materials, workin-process, and finished goods. During the 1980’s and 1990’s, lean, justin-time manufacturing practices eliminated the luxury of having stock piles of inventory laying around and, therefore, reduced the “value of the firm” considerably (Leana & Rousseau, 2000). While inventory levels were shrinking, organizations became fixated on lowering variable and fixed costs (e.g., cutting pay and numbers of employees and plant closings) as much as realistically possible. In light of this “assetless” organization, accountants then turned to other factors to represent the value of an organization. Almost by default, some of the debate and public policy initiatives turned to a focus on human assets as the value of an organization (Cascio, Young, & Morris, 1997). For example, formal education was a fairly quantifiable value, but this caused some problems because there are many occupational groups where qualified training programs occur on-the-job and thus were not recorded in the value of human assets. Another controversy arose in valuing organizations as human assets with accounting principles and assumptions. In particular, accountants traditionally have viewed the world as assets or liabilities (expenses). As such, accounting practices could influence the “dispensability” of human assets and result in a short-term, rather than long-term, view. For example, there is considerable supporting empirical evidence that the downsizing rage of recent times supports such a shortterm rather than a long-term view of the value of an organization (Morris, Cascio, & Young, 1999). A response to this seeming difficulty in valuing human assets is the reality that most of today’s organizations still do not understand the capital Lars on & Luthans in J. Leadership and Org. Stud ies 1 3 (2006) 4 investment approach to human resources—called by Pfeffer and Sutton (2000) as the knowing-doing gap. Unfortunately, human capital management remains quite rare as proactive strategy for developing a competitive advantage for today’s organizations (Pfeffer, 1998). However, a working definition of human capital management could be a blend of the traditional aspects of human resource management (e.g., selecting and developing employee skills, knowledge, abilities, and experience) with the traditional economic principles of capital accumulation, investment, deployment, and value creation (Wright & Snell, 1999). Core human capital seems vital to the competitive advantage of the organization because the profile of the workforce is unique to that organization and, therefore, cannot be imitated or easily duplicated/purchased. According to Lepak and Snell (1999), these core human capital assets should not be outsourced because outsourcing these skills might jeopardize the competitive advantage of the organization. Also, practical guidelines to human capital management have been offered that includes: a) careful selection in hiring the right people with strong potential to help the organization, b) reaching the delicate balance between internal, customized training, and external, off-the-shelf training programs, and c) building tacit knowledge within the organization (Luthans & Youssef, 2004). Importantly, there should be a distinction in both perspective and actual practice between traditional human resource management and the newly emerging human capital management. Human capital management involves more of a dialogue, an interactive communication between the employee and organization (Van Marrewijk & Timmers, 2003). Rather than merely explaining or just telling what employees are supposed to do, today’s organizational leaders need to value and leverage the knowledge and skills of their people. They are partners with whom a professional dialogue about costs and output needs to take place. In the end, “human capital management is values-driven, striving to bring about dedication, motivation, and commitment of employees” (Van Marrewijk & Timmers , 2003: 178). Clearly, human capital management seems to have arrived. There is not only acceptance from academics and at least enlightened human resource management practitioners, but also a growing research agenda leading to the better understanding of the relationship between employees and organizations. With the emphasis on the employee’s knowledge, skills, and abilities (KSA’s) and experience/tacit knowledge, impact on performance and attitudinal outcomes are being demonstrated and acknowledged. However, this seems to be only the beginning, not the Lars on & Luthans in J. Leadership and Org. Stud ies 1 3 (2006) 5 end, in which to view employee-employer relationships. Although human capital has become an accepted lens to use in the “first generation” of the new environment of valuing and managing human resources, an emerging second generation of research, social capital, is now contributing even grea