Psychological Capital: HERO in Leadership and Coaching

Originally developed in an organizational context, the concept of Psychological Capital with its four pillars of Hope, Efficacy, Resilience and Optimism (HERO) has been linked to job as well as life satisfaction. While every component has its own characteristics and interventions, the concept of PsyCap is greater than the sum of its parts.

Based on appreciation and positive emotions, PsyCap is a core construct for well-being and thriving. This article outlines the four elements of PsyCap, looks at the value of the concept as a whole and aims to inspire its use in leadership and coaching.

Investing in People – A Source of Competitive Advantage

The concept of Psychological Capital (PsyCap) was originally designed for organizations. Pioneer Fred Luthans suggested that growth in organizations needs to focus on psychological rather than educational development. He argued that human resources can serve as competitive advantage as they are more inimitable by competitors than physical, structural and financial resources.

Luthans argued that employees possess two types of knowledge: explicit and tacit knowledge. Explicit knowledge includes skills, abilities and competencies derived from education and experience. Tacit knowledge, on the other hand, is built over time through socialization into the organization. He claimed that tacit knowledge offers a long-term competitive advantage as it is unique, cumulative, interconnected and non-transferable to competitors.

Based on this idea, Luthans urged companies to invest in human capital management including building tacit knowledge rather than hiring a skilled temporary workforce (Fred Luthans & Youssef, 2004). Back then, the idea of investing in people for competitive advantage was considered ground-breaking.

A Concept for All Life Domains

Under the umbrella of positive organizational behavior (POB), the “study and application of positively oriented human resource strengths and psychological capacities”, Luthans developed the concept of Psychological Capital (PsyCap) as a source of competitive advantage.

In line with this idea, many studies have since confirmed that high levels of PsyCap are positively related to employee performance and job satisfaction, especially in the services industry (Abbas, Raja, Darr, & Bouckenooghe, 2012; Fred Luthans, Avolio, Avey, & Norman, 2007; Fred Luthans & Youssef, 2007; Youssef & Luthans, 2007).

What is more, employees who strive at work can be assumed to generally have a more fulfilling life due to the strong relationship between job and life satisfaction (Judge & Watanabe, 1993). Accordingly, PsyCap has been linked to outcomes of general importance for individuals. High levels of PsyCap have been found to positively influence well-being, health outcomes such as lower BMI and cholesterol levels and satisfaction with one’s relationships (Lorenz, Beer, Pütz, & Heinitz, 2016). Using the concept of PsyCap, leaders and coaches can:

“leverage to tap into still largely uncharted territories of human strengths, thriving, and excellence” (Fred Luthans & Youssef-Morgan, 2017).

Definition and Measurement of Psychological Capital (PsyCap)

PsyCap is defined as “an individual’s positive psychological state of development” (Fred Luthans, et al., 2007) which is characterized by having high levels of HERO; the four elements of Hope, (Self-)Efficacy, Resilience and Optimism. The concept of PsyCap has become even more relevant with recent findings in the area of neuroplasticity. Since our brain is malleable, PsyCap can be developed and strengthened. Further, PsyCap can be managed and assessed.

Several scales have been developed to measure PsyCap. The original scale developed by Luthans, Youssef and Avolio (2007) in the context of organizatios is the Psychological Capital Questionnaire 24 (PCQ-24). For a more general application in all domains of life, Lorenz et al. (2016) developed the Compound PsyCap Scale (CPC-12), a twelve-item self-report scale.

Here is an overview of the concept of PsyCap:

Application of PsyCap in Leadership and Coaching

As Shawn Achor (2011) claims, we are successful when we are happy, not the other way around. So if we are more hopeful, efficacious, resilient and optimistic, we are more likely to “weather the storm” in a dynamic organizational or a challenging personal environment. Hence, the concept of PsyCap is equally important for coaches and leaders.

Here is an overview of the four components of PsyCap and the interventions which can be used to further build on this capital. It is important to keep in mind that the level of PsyCap as a whole has a stronger relationship than each of the four components individually, as will be discussed later.


Hope and optimism are both personality traits which have been linked to physiological and psychological well-being (Du, Bernardo, & Yeung, 2015). According to Rick Snyer et al. (1991 p. 257),

“hopeful thought reflects the belief that one can find pathways to desired goals and become motivated to use those pathways”.

Hence, hope is a cognitive process which motivates to find willpower (goal-directed determination) and waypower (planning of ways to meet goals) which leads to positive emotions (the expectation of meeting desired goals). Here is a two-minute video on Snyder’s hope theory:

“We must accept finite disappointment but never lose infinite hope” Martin Luther King

How to develop Hope

Enriching the following three components has found to be successful in developing hope:

1. Goal setting and perceived ability (pathway thoughts)

The concept of hope is strongly based upon the belief that individuals want to achieve goals. Generally, approach-oriented goals (moving towards something) are emphasized over avoidance-oriented (moving away from something) goals.

In a work context, ideally goals are specific, measurable, attainable, relevant and time-based as well as clearly communicated. Leaders can support employees by breaking down complex, difficult goals into bite-size portions. What is more, appreciating or even celebrating small milestones can be a key motivation for employees. They become more confident they can reach the goals (Fred Luthans & Youssef, 2004).

In coaching sessions, the goals themselves may not necessarily need be defined as specific tasks. Rather, goals may lie in a desired change in behavior or emotional state (Lippmann, 2013).

Importantly however, the current state as well as the desired state can be pinned on a scale of

0 – 10. To enhance goal setting, coachees can be guided to develop a mental movie of how they will reach the desired goal (Fischer-Epe, 2016). This intervention strengthens the understanding of the goal and enhances the client’s belief that they can reach it.

2. Motivation (agency thoughts)

Autonomy and meaning have found to be key factors to create intrinsic motivation with employees. You can find more information on motivation in the article “Motivation and Wellbeing”.

Although clients generally decide for themselves what they would like to achieve through coaching, their goal needs to be validated as their own. Often, coachees confuse their goals with what they believe others would want them to achieve. As a result, coachees may lack a sense of motivation towards a goal they do not “own”.


Bandura (1997) defined self-efficacy as “people’s beliefs about their capabilities to produce effects”. Whether we have the confidence to take on and put in the necessary effort to succeed at challenging tasks determines how we feel, think and motivate ourselves. The belief that we can produce a desired effect is a major incentive to act in the first place. The higher our efficacy expectancy, the harder we will work to achieve our goals, leading to higher probability of success.

There are two key ingredients to self-efficacy:

1. Outcome expectancy (examination of what needs to be done)

2. Efficacy expectancy (examination of our own capability to do what needs to be done)

Here is a great video which explains Bandura’s concept of self-efficacy in only 6 minutes:

“Believe you can and you’re halfway there” T. Roosevelt

How to develop Self-efficacy

Bandura (1994) found that our level of self-efficacy is affected by the following processes:

  • Cognitive (thoughts shape reality)

  • Motivational (expected outcomes based on our beliefs shape our motivation)

  • Affective (perceived coping self-efficacy regulates avoidance behavior)

  • Selection (we only expose ourselves to situations we believe we can master)

Here are four ways to strengthen efficacy: