Research

Leaders, cheer up! Positive thinking can boost organizational performance

Research indicates that psychological characteristics such as optimism, resilience and hopefulness can impact performance among top management teams. What’s more, these performance-boosting characteristics can grow when nurtured, and their impact increases under transformational leadership, according to a study conducted by Suzanne Peterson and Zhen Zhang, two assistant professors of management at the W. P. Carey School of Business.

2012-03-14

Athletes do it. Salespeople do it. Even the Mayo Clinic endorses it for stress management. It’s positive thinking and, when combined with the positive action it inspires, research indicates that psychological characteristics such as optimism, resilience and hopefulness can impact performance among top management teams.

What’s more, these performance-boosting characteristics can grow when nurtured, and their impact increases under transformational leadership, according to a study conducted by Suzanne Peterson and Zhen Zhang, two assistant professors of management at the W. P. Carey School of Business. Since other research shows that the combined efforts of top managers are largely responsible for organizational success, maybe it’s time to add psychological characteristics to executive hiring criteria and development efforts.

Pumped up or psyched out?

Peterson and Zhang built their investigation on past studies that found the higher-order psychological constructs of core self-evaluation (CSE) and psychological capital (PsyCap) are related to organizational performance among individuals and lower-level teams. The scholars wondered if these characteristics would also have team-level impact on the higher-level analysis and activity that top executives undertake.

A psychological construct is a complex psychological concept determined by a number of component parts. PsyCap and CSE, the two high-level constructs examined in this study, are each made up of four other constructs.

In core self-evaluation, self-esteem is one component. It represents an individual’s sense of self-worth. Generalized self-efficacy also is in the mix. That’s how well people expect to perform in various situations. Locus of control, another component of CSE, reflects how much control people think they have over their own lives. That is, do they believe they can impact their own circumstances, or are life’s ups and downs due to some factor outside the self, such as the will of God, rapacious politicians or unsupportive managers at work? Finally, CSE includes emotional stability, which refers to a person’s tendency not to fret, worry, fear or feel helpless.

“Each of the constructs involved in CSE is independent and distinct,” explains Peterson. “They’re related and will be correlated, but they are, indeed, different.” So, how do they combine to make up core self-evaluation? “Imagine that each of the four constructs is a circle placed in a way that they overlap. That overlapping is the synergistic component that makes the combination of these constructs CSE or PsyCap,” she continues. “They’re called core concepts because there’s a core where the many dimensions come together.”

Psychological capital is the core concept made up of task-specific self-efficacy, hope, optimism and resilience. “It’s not as soft as it sounds,” notes Peterson. She says hopefulness is a state of mind that transcends mood because it involves setting goals, being motivated to reach them and figuring out the pathway to do it. Likewise, the other aspects of PsyCap also have behaviors associated with them. “If you have problems but you believe you can get around them and take action to do so, that’s what optimism operationalizes. If bad things happen but you bounce back, that’s resilience,” she explains. Task-specific self-efficacy is an individual’s confidence that he or she has the ability to successfully tackle the task at hand. “PsyCap is not just the power of positive thinking. There are behaviors beyond it that predict performance.”

The two core constructs sound quite similar, but Peterson notes that there are important differences. “Core self-evaluation is more a true evaluation of self-concept,” she says. Also, “CSE is more fixed. People’s locus of control and self-esteem are things a manager probably can’t change significantly within a few weeks. Psychological capital is more malleable. We’re not born hopeful, resilient, optimistic, efficacious people. We learn these things.”

Follow the leader

“We also can help people have higher PsyCap,” Peterson says. “If someone is not optimistic, you can train that person to be more so.”

This was the thinking behind the researchers’ look at the leadership styles of top people that the executives they surveyed are working under. Specifically, the team examined whether transformational leadership — another construct — would make high CSE and PsyCap even better predictors of good business unit performance.

“There’s a major literature base around transformational leadership, and most data indicate that it tends to predict positive outcomes for organizations in terms of things like performance and organizational citizenship behavior,” says Peterson. That is, it motivates followers to be loyal, dedicated workers.

What is transformational leadership? “It’s a leadership style that encompasses four major dimensions,” Peterson explains. These include individualized consideration, or what she calls one-on-one consideration, which includes empathy, support and coaching. The construct also encompasses intellectual stimulation, or the degree to which leaders solicit follower ideas, nurture and develop people who think independently and value learning. Plus, transformational leaders have what some researchers call “inspirational motivation,” or the degree to which the leader creates a compelling or inspirational vision. Many simply call it “charisma.” And, finally, they project “idealized influence,” or role modeling through exemplary behavior that instills pride and trust among followers.

According to the researchers, today’s top leaders — the C-suite — face increasing expectations to build confidence, instill motivation and raise commitment to organizational goals among their direct reports, which happen to be the kind of top management teams the researchers studied. The researches therefore expected transformation leadership to have a powerful and positive result in uplifting psychological characteristics among the top managers and improving business unit outcomes.

States outperformed traits

In psychology, pure “states” of mind are momentary. Things like pleasure or irritation are considered pure states, and psychological capital is considered to be state-like because it is something open to development and change. Traits, on the other hand, are more inflexible. Intelligence and talents would be considered pure traits, and they’re not really something managers can significantly alter among their employees. Core self-evaluation is a trait-like construct.

Among individual workers, studies show that when core self-evaluation is high, so is job performance. In looking at the combined CSE of top management teams, the W. P. Carey team found the same thing was not true.

Likewise, high psychological capital is correlated with strong job performance for individuals. It is for top-management teams, as well. What’s more, transformational leadership appeared to make the high PsyCap more significant, as business unit performance was enhanced. And, when transformational leadership was low, high collective PsyCap had less positive impact.

Peterson says their results suggest that C-level executives and the boards of directors who hire top organizational leaders might want to consider psychological capital in position candidates. That might be easier said than done. According to Peterson, “It’s really hard to get inside the heads of top managers,” and that’s particularly true for researchers like her. “We tend to know their demographics and backgrounds, which are valuable, but we know very little about the psychology of senior people.” It’s difficult for researchers to acquire psychological insights because top managers tend to ignore survey requests, or they’ll have a junior person fill the survey out on their behalf.

And, what about the top-level managers who are already in place? What are CEOs and boards of directors to do about them?

“If you already have people in place and you have to work with what you’ve got, you should make PsyCap the thing you focus on when compared to other psychological characteristics,” Peterson says. It will deliver the biggest benefit because it’s a way of thinking that can be altered and enhanced.

To this end, she recommends that leaders be willing to listen closely to those below them and examine whether problems are rooted in the people or the organization itself. “When I hear people say they’re motivated but frustrated, I suspect they are struggling with a sense of hope to some degree. They may have the sense of motivation to go forward (one part of hope), but they lack the second half of hope — the path to move forward. That’s a leadership or organizational issue,” Peterson maintains.

However, if people have a plan — or path — and they have been given the resources to move forward but still don’t, that’s a motivational issue, she continues. “It could be related to the reward system,” she adds. Additionally, “A hallmark of great leaders is to constantly be working on development of their people. It’s easy to say that your people are your most important asset, and that’s said all the time. But, nothing says it louder than offering development opportunities.”

Finally, she notes that CEOs and other top-level managers should remember they’re “always on stage.” Transformational leaders embrace that spotlight, exuding confidence, optimism and charisma in every step. That’s important, says Peterson, because “getting more PsyCap from people is often a role-modeling thing.”

Bottom line

• Core self-evaluation (CSE) is a measure of a person’s sense of self-worth. Psychological capital (PsyCap) looks at a person’s motivational capacity to accomplish goals.
• When CSE and PsyCap are high, individuals and lower-level organizational teams tend to have more positive work performance.
• Two W. P. Carey School researchers examined if high CSE and PsyCap predicted stronger performance for top management teams working on big-picture initiatives.
• High CSE isn’t a significant predictor of performance for top management teams, but high PsyCap is. Transformational leadership also appears to strengthen to impact of PsyCap on top management.

Leadership Management Organizational Behavior