PSYCHOLOGICAL CAPITAL AND EMPLOYEE PERFORMANCE: A LATENT GROWTH MODELING APPROACH

Abstract

The positive core construct of psychological capital (consisting of efficacy, hope, optimism, and resilience) has been conceptually and empirically demonstrated to be related to employee performance. However, much of this work has relied on cross‐sectional designs to examine these relationships. This study utilizes longitudinal data from a large financial service organization (N= 179 financial advisory‐type employees) to examine within‐individual change in psychological capital over time and if this change relates to their change in performance. Latent growth modeling analyses revealed statistically significant within‐individual change in psychological capital over time, and that this change in psychological capital was related to change in 2 types of performance outcomes (supervisor‐rated performance and financial performance, i.e., individual sales revenue). Moreover, results of an exploratory cross‐lagged panel analysis suggested a causal relationship such that prior psychological capital leads to subsequent performance rather than vice versa. Taken together, these results highlight the impact employees’ psychological capital may have on their subjectively and objectively measured performance over time and offer evidence‐based practical guidelines for human resource selection, development, and performance management.