An Investigation into what impacts an individual’s performance within an organisation

The purpose of this research was to identify some of the social variables that lead to individual performance within an organisation.  Job performance is considered to be one of the most important factors in People Management. Its assessment and analysis are used for a variety of organisational procedures, such as personnel selection, compensation and rewards, and training. Despite the importance of people in contributing to organisational performance, the underlying causes of this are poorly understood.

The roles of Psychological Capital, Leader-Member Exchange and Psychological Safety

The research, therefore, set out to identify what has the biggest impact on performance, the individual, the manager, or the organisation. More specifically it used three social constructs which have been extensively researched and identified as having a strong relationship with performance. These constructs were Psychological Capital (PsyCap, Leader-Member Exchange (LMX), and Psychological Safety (PS). PsyCap captures an individual’s psychological capacities that can be measured, developed, and harnessed for performance improvement and relates to four main areas: self-efficacy, hope, optimism, and resilience. LMX theory suggests that leaders have different types of relationships with different followers and this in turn impacts the performance of the follower. Psychological safety is strongly related to high levels of communication, trust, and decision making which leads to increased performance. Conversely, a lack of psychological safety results in employees staying silent despite having something important to add to the conversation.

What did the results show?

The results confirmed that all three constructs are positively related to performance with PsyCap showing the strongest relationship, (43.6%) followed by LMX (14.4%) and PS (11.6%)

It must be recognised that these constructs are not mutually exclusive, so while the initial research may suggest that 14.4% of an individual’s performance is based on the relationship with their manager, this may include some element of PsyCap. In fact, further to this, the research suggests that the relationship between LMX and performance is fully mediated by PsyCap, suggesting that there is no direct relationship between LMX and performance, but that a good relationship with your manager leads to increased PsyCap, which in turn leads to greater performance. Similarly, the relationship between PS and performance is fully mediated by PsyCap, meaning greater PS leads to increased PsyCap, which in turn creates greater performance.

So what?

The main implication of this research is the importance of PsyCap in understanding what contributes to individuals’ performance. Not only does it have the strongest relationship of the three constructs with performance but at 43.6% it represents a practically significant contribution which organisations cannot afford to ignore.

Does that mean the relationship with the manager is not important?

No. A good relationship with the leader is very important and at 14.4% is still worth investing in. In addition, the research suggests that LMX is one area that can help build PsyCap which will in turn improve performance. In particular, receiving recognition from others is likely to improve PsyCap.

What about Psychological safety?

Again, this is a very important element to improve individual performance (11.6%) and so in turn contributes to an organisation’s performance, however, as above it can improve PsyCap. In particular, having a supportive environment that allows individuals to overcome challenges at work can lead to increased PsyCap.

What can I do about it?

The good news is that PsyCap can be improved. This can be done through environmental factors such as LMX and PS as identified above, but also directly. Approaches such as coaching and mentoring, and well as learning new skills, and taking a strength-based approach have all been shown to have a positive impact on PsyCap. In addition, practical on-the-job approaches such as being involved in budget setting also contribute positively.

Want to know more?

https://positivepsychology.com/psychological-capital-psycap/

Loghman, S., Quinn, M., Dawkins, S., Woods, M., Om Sharma, S., & Scott, J. (2022). The Comprehensive Meta-Analyses of the Nomological Network of Psychological Capital (PsyCap). Journal of Leadership & Organizational Studies, 0(0). https://doi.org/10.1177/15480518221107998

Luthans, F., Youssef, C. M., & Avolio, B. J. (2015). Psychological capital and beyond. Oxford University Press, USA.

This article was written by Angus Robinson, Learning and Development Manager, Renault Group and RCI Bank and Services.