The dimensions of psychological capital and their relationship with employee engagement

Master's Thesis, 2012
74 Pages




Literature Review


Analysis and Results



Appendix I

Appendix II

Chapter No: 1


1.1 Background

Positive psychology

New York Senator Robert F. Kennedy delivered a speech to the students, faculty members and community members of the University of Kanas in Lawrence on March 18, 1968. It was an emotional debate over the foreign policy issues, civil rights issues and unemployment issues. The motive of Kennedy’s speech was enthusiasm to the students and other people for personal excellence.

After thirty years of Kennedy’s speech, Positive Psychology is defined by Martin Seligman. Seligman (1999) said that the field of psychology had moved to make the people’s lives more productive and fulfilling. He said to psychologists to learn the actions that lead to flourishing the individuals, to communities and to societies as well. Positive psychology helps individuals, communities and societies (Sheldon & King, 2001). The conclusions of positive psychology based on science rather than philosophy, oratory, conventional or personal opinion.

Positive Organizational Behaviour and Positive Organizational Scholarship

Luthans focused on micro level approaches with the development of performance of an individual through positive involvement, to be known as Positive Organizational Behaviour (Luthans 2002, 2002; Luthans & Avolio, 2009). The aim behind the concept of positive organizational behaviour was to enhance the awareness of organizational behaviour field to emerge the positive psychology movements (Seligman & Csikszentmihalyi, 2000).Positive Organizational Behaviour come forward to apply the human resource’s strengths and psychological competences at the workplace. Luthan (2002) argued that for performance improvement, these strengths and capacities need to be developed and measured.

Positive Organizational Scholarship focused on the macro level of positive organizational behaviour (Cameron & Caza, 2004). Positive Organizational Scholarship has relationship with the results and characteristics of the organizations and their employees. POS also focused on employee strengths and psychological capabilities. Development of a central construct and a point going away from the basic initial roots of Organizational behaviour, termed as Psychological Capital is one of the most significant pace in the evolution of POB.

Psychological Capital

The term Psychological Capital (PsyCap) is defined as the development of an individual’s positive psychological state. There are four psychological resources that characterized the PsyCap: Self-Efficacy, Hope, Optimism, Resilience (Luthans, Youssef, & Avolio, 2007). Psychological Capital encourages the results of work (Avey, Luthans, & Youssef, 2009). Hackman (2009) expect for further empirical study on active and prolong positive positions at work.

Psychological Capital is different from trait-like construct such as self-evaluation. Luthans has given the support that Psychological Capital is different from the Big Five personality traits. Psychological Capital, Big Five personality traits and self-evaluation have been associated with positive employee behaviour and performance (Bono & Colbert, 2005). The consequence of combined four Psychological Capital resources is synergistic capacity. Luthans et al. (2005) said that only optimism helps with motivation and performance but it is not dominant with hope, resilience and efficacy. Thus, Psychological Capital included four positive resources i.e. hope, optimism, efficacy and resilience (Luthans et al., 2007).

Self Efficacy

First psychological capital resource is self-efficacy. According to the theory and research, “efficacy is an individual or employee’s confidence in his abilities to achieve a specific goal within given context” (Stajkovic, 1998).

Bandura (1997) stated that self-efficacy is related to hope and presumed as the belief of an employee about his ability to produce pathways, to take actions toward the goal and in the end goal accomplishment. The relationship between efficacy and performance is very strong (Stajkovic & Luthans, 1998) and produced by four sources of self-efficacy that are applicable to positive organizational change.

Task accomplishment is the main source of self-efficacy (Bandura, 1997). If employees achieve their goals or targets and accomplish a task, they believe that they can do it again. Other sources are watching vicarious learning or modelling guaranteed by a mentor that one will be successful in social persuasion or in a new task and motivate to complete the task or arousal.

Effectual employees are considered by persistent detection and efforts toward attainment and determined by beliefs in their own success. Employees can move toward higher level of efficacy after focusing on task mastery experiences, greater social support and role modelling in the changing work environment.


The term hope is used in daily life. Snyder et al. (1991) defined it as “an emotional and motivational state where successful feeling of agency and pathways interact” (Avey et al., 2009 & Norman et al., 2010).

Willpower and waypower thinking are included in Hope (Avey et al., 2009). Individuals should have willpower for achieving a goal because willpower is an anticipation and motivation. Individuals have the creepy ability to spawn the pathways for their goals. With the help of this psychological resource, the goal will be accomplished. When people run into obstructions the agency thinking takes on special significance in hope (Snyder, 2002).

Hope has important and corresponding components i.e. Agency and Pathways. An essential and necessary element of positive organizational change for the well-being of employees during time of crises is sustaining hope.


Third psychological capital resource optimism is defined by Seligman in attribution theory (Fritz Heider, 1958). Simarasl et al. (2010) argued that the closest structure is optimism in the positive psychology.

Optimist’s people are stable attributed about positive actions and they expect some good things to happen while people who attributed as external and unstable are known as pessimists (Seligman, 1998; Carver & Scheier, 2002).

Optimists take bad events “I am exhausted” as temporary and pessimists take bad events “I am washed up” as permanent. On the other hand, optimists interpret good events as permanent attribute “I am talented” while pessimists interpret good events “I tried very hard on this one”, as temporary attribute (Luthans et al., 2004). Simarasl et al. (2010) stated that optimism is a broad or common belief that good events occur more than bad events in the future.

The significant function of optimism in one’s achievement understands with the help of anticipated structure. Optimistic employee can move toward success with positive anticipation despite the consequences of past problems.


Fourth positive resource of psychological capital is resilience. Luthans (2002) defines “resilience as a positive psychological capacity to bounce back from uncertainty and conflict to progress and increased responsibility”. It is a positive way of handling with danger (Luthans & Norman et al., 2008). Masten and Reed (2002) stated that resilience is the set of experiences in the context of significant risk. The resilient people have creepy ability to cope the significant change (Coutu, 2002; Luthans et al., 2004).

Thus, resilient employees have ability to positively adapt the challenging conditions.

Employee Engagement

Engagement of employees is the need of today’s organizations. The quality of human resource is used to determine the growth of an organization.

Employee engagement is defined as “the involvement with and interest for work” (Harter, 2009). Nearly twenty years ago, employee engagement’s theory is introduced to the literature of management since the attachment of employees to their works (Kahn, 1990).

Engagement includes attachment with work that is considered as commitment, vigour and amalgamation (Schaufeli et al., 2006). Higher level of attention is given to employee engagement in the literature of Gallup’s Book (Buckingham & Coffman, 1999). Harter (2009) stated that practitioners used this term to represent anything from organizational commitment.

Management literature has given a high level of attention on how an individual feels about his job (Judge et al., 2001). Employee engagement is related to job satisfaction (Harter et al., 2002). Engagement is related to the struggling daily life of employees (Wagner, 2006).

The development of several measures of employee engagement is take place past few years ago. One measure is developed by Gallup (Buckingham & Coffman, 1999) and second measure is developed by Schavfeli and his fellows (Schavfeli et al., 2006). Employee engagement is helpful in management literature to explain business outcomes.

One of the Psychological capital resource self efficacy is linked with employee engagement (Luthans & Peterson, 2002). Employee engagement helps to decrease the turnover of employees (Harter, 2010).

1.2 Problem Formulation

Profit Organizations can easily maximize their return to shareholders after managing the resources. Over the years, organizations have given a high level of concentration to human capital and social capital. But now organizations focus or emphasize on the psychological capital’s growth because it is competitive advantage (Luthans, 2004).

The data from more than ten million employees suggests that the managers should have to fulfil the set of employee’s requirements (Fleming & Asplund, 2007).

People, who control their surroundings, will not want to leave their organizations. When an employee believes that he can has a positive impact in his organization, he can apply that believe toward success.

In this research effort is made to highlight independent variables like self-efficacy, hope, optimism and resilience who directly or indirectly affect the dependent variable employee engagement.

1.3 Purpose Statement

The primary aim of this research study is to explore the link between the dimensions of Psychological Capital and Employee Engagement through survey of employees form Commercial Banks of Lahore, Pakistan. This research is conducted to find out not only relationship between independent and dependent variable but also how does Psychological Capital impact on employee engagement.

The study is imperative to identify what variables are more significant and having impact on dependent variable i.e. employee engagement.

1.4 Significance of the study

There are very few published papers about the relationship of psychological Capital with employee engagement. Little study is conducted about the Commercial Banks of Lahore, Pakistan with respect to these variables. Total five variables are studied in this research.

Sample size is enough to get better results which can be generalized. The data was collected from participants of related field. Various data analysis quantitative techniques are used including descriptive statistics, bar charts, histograms, scatter plots and linear regression line.

1.5 Theoretical framework

Relationship between the dimensions of Psychological Capital and Employee Engagement

illustration not visible in this excerpt

illustration not visible in this excerpt

1.6 Research Objectives

The main objective is to identify the relationship of the dimensions of psychological capital with employee engagement in Commercial banks of Lahore Pakistan. The results generated from this endeavour can be helpful to decision making authorities at institutional as well as national level to draft workable policies for management.

1.7 Research Questions and Hypothesis

1.7.1 Main Research Questions

The questions are made to find out the relationship between independent variables i.e. Self-efficacy, Hope, Optimism, Resilience and dependent variable employee engagement from the employees of Allied Bank, Askari Bank and Bank Al Habib of Lahore.

The main research question of the study is:

Does any relationship exist between independent variables i.e. Self-efficacy, Hope, Optimism, Resilience and dependent variable employee engagement?

The sub-questions are:

1. What is the function of self-efficacy in the engagement of employees?
2. How hope plays a vital role in the process of engagement of employees?
3. Is optimism an imperative factor affecting employee engagement?
4. Why resilience is significant for the employee engagement?

1.7.2 Hypothesis

H1: Self-efficacy has positive significant effect on employee engagement.

H2: Hope has positive significant effect on employee engagement.

H3: Optimism has positive significant effect on employee engagement.

H4: Resilience has positive significant effect on employee engagement.

1.8 Structure of the thesis

Background of the study, problem formulation, and purpose statement, significance of study and objective of the study are discussed in the first chapter of study. Further, theoretical framework and model represent the overall picture of the study.

An overview of the literature review is included in the second chapter. The definitions of the variables and relationship between independent and dependent variables with references of previous studies are discussed in this chapter.

The third chapter includes the methodology of the research. Reason for choosing research design and methodology is discussed in this chapter. Research design with the help of different steps such as sampling plan, methodology sample that is selected from population is also included in this chapter. Measuring instruments, methods and data analysis techniques are elaborated.

Data analysis is included in the fourth chapter. The results of data were presented in the form of tables and diagrams. To determine the relationship between independent and dependent variables, Regression analysis and Pearson correlation were performed. One sample test was applied to check the extent of responses from the target population to our questions.

The interpretation of the results, study restrictions and conclusion of the research were included in chapter number five.

Chapter No: 2


2.1 Introduction

Literature review starts with Positive Organizational Scholarship and Positive Organizational Behaviour that provide the summary of positive psychology and its application to the workplace. Self-efficacy, Hope, Optimism and Resilience have been described in Positive Organizational Behaviour. Not only had these four resources discussed but Psychological Capital and its application also described in Positive Organizational Behaviour. Employee engagement is deeply discussed in Literature Review. At the end, summary of literature review is given.

2.1.1 Application of Positive Psychology to workplace

In the early 20th century, psychology helped to both mentally ill individuals and talented individuals. But after World War II, clinical psychologists were encouraged to give more attention on the treatment of mentally ill. After that some issues regarding the treatment of mentally ill individuals were arisen.

Many Psychologists divert their concentration on the better life of people (Seligman, 1999).

The field of psychology has established leaders like Ed Diener, Chric (2000), Snyder (2000) and Mchalyi Csikszentmihalyi (2000) but Seligman introduced a new term of psychology i.e. Positive Psychology. Positive Psychologists attempted to focus on the betterment of worst things in life (Csikszentmihalyi, 2000). Scholars were agreed with the observations of Seligman.

Peterson (2006) had given equal attention to what is good about life and what is bad. Positive Organizational Scholarship focuses on the ways in which people flourishing themselves and their organizations (Cameron et al., 2003). Positive Organizational Scholarship is stated as “the study of positive characteristics of the organization that facilitates its ability to perform during the crises”. Positive refers the evaluation process in organization. Organizational means the structural activities in an Organization. Scholarship refers to the scientific investigation of what is affirmative in Organizational structure (Cameron, 2004).

Positive Psychology to the workplace is applied by the scholars with the help of Positive Organizational Behaviour (POB).

POB focuses on individual level analysis and open to development that related to performance outcomes. Positive Organizational Behaviour is stated as “the study in which positive human resource’s strengths and psychological capacities are applied that is measurable and manageable for performance improvement in the workplace” (Luthans, 2002).

More attention has been given to the positive workplace topics in the literature. Positive Organizational Behaviour Researchers established the standards for inclusion that based on theory and research, have reliable measures, existed at micro level, exhibited state-like and developmental characteristics and have impact on work-related performance (Luthans, 2002; Luthans & Youssef, 2007). Positive Organizational Behaviour Researchers give more attention on four capacities that are Self-efficacy, Hope, Optimism and Resilience.


2.2.1 Self-efficacy

Psychology has prolonged history of self-efficacy. Self-efficacy was first defined by Bandura in an article (Bandura, 1977).

Latest concepts include the suggestions to judge one’s ability to execute the ways of deed to pact with certain circumstances (Bandura, 1982) and confidence in an individual’s ability to manage the ways of deed that is obligatory to generate specified accomplishments (Bandura, 1997).

“Self-efficacy is a belief about individual’s level of what they can attain by consuming the skills that they do have” (Bandura, 1986). Self-efficacy beliefs are beliefs about a person’s ability (Maddux, 2009).

According to the POB researcher, Self-efficacy is the confidence of people about their abilities to motivate themselves and to organize the ways of action to accomplish the particular job within known circumstances (Stajkovic, 1998). Self-efficacy as the best fit POB capacity (Luthans, 2002) with a solid theory, meets the POB criteria for inclusion.

Self-efficacy is a valid and reliable measurement according to the research base theory. Magnitude, strength and generality are the dimensions of self-efficacy. Any one of the dimension of self-efficacy can include in the measurement of self-efficacy (Bandura, 1977, 1986). The measurement of Self-efficacy less emphasize on generality (Maddux, 2009).

The dimensions of self-efficacy magnitude and strength have typical measurement format (Locke, 1987). Magnitude is assessed by yes or no answers and strength dimension is assessed by the percentage of confidence that the participant has in his answer. Lee and Bobko (1994) found the best score from the combination of percentage estimates of strength where magnitude response was yes.

Self-efficacy is affected by two factors (Bandura, 1997). First, the development of cause-and-effect relationship and self-reflection affected the self-efficacy. Second, the reaction of social environments influenced the self-efficacy.

The following five primary sources are helpful to develop the information throughout the life span (Bandura, 1997).

1. Performance experiences

The main source of self-efficacy information is control on environment and attainment of performance (Bandura, 1977, 1982).

2. Vicarious experiences

The observations of others behaviour and the outcome of those behaviours affected the self-efficacy. This information is helpful for behaviour expectancy and its consequences. It depends on the belief that an individual’s behaviour is similar to another individual’s behaviour. Self-efficacy in vicarious experience is weaker than performance experience (Bandura, 1997).

3. Imaginable experiences

Effective or ineffective behaviour imagined by one can influence the self-efficacy in hypothetical situations (Snyder & Lopez, 2002). Actual or vicarious experiences derive such images.

4. Verbal persuasion

Others perception and feedback regarding an individual’s capability to perform a particular task influenced the self-efficacy. Expertness, trustworthiness and attractiveness are those factors that affected the potency of verbal persuasion, as suggestions given by the researchers on verbal persuasion and attitude change (Snyder & Lopez, 2002). Performance experiences and vicarious experiences are more powerful sources of change in self-efficacy expectancy.

5. Psychological and emotional states

Self-efficacy expectancy is influenced when one associates the poor performance in pleasant feeling states with success or aversive physiological arousal (Bandura, 1986, 1997).


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The dimensions of psychological capital and their relationship with employee engagement
Master of Commerce
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Tehmina Batool (Author), 2012, The dimensions of psychological capital and their relationship with employee engagement, Munich, GRIN Verlag,


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