Psychological capital, part 2: building these resources in your team

In the first post in this series, I introduced the concept of psychological capital (PsyCap). PsyCap is a psychological state of development that shapes how people perform at work. It comprises four states: hope, efficacy, resilience and optimism that together work to drive confidence and performance.

It is an especially useful concept for leaders to understand because it is something that we can develop in ourselves and in our teams.

In fact, if you think about it, your team is inevitably exposed to how hopeful, how self-efficacious, how resilient and how optimistic you are, and the team will absorb this, whether for better or worse.

And the evidence shows that a leader's psychological capital does raise the team's (Story, Youssef, Luthans, Barbuto, & Bovaird, 2013). But it doesn't happen without the right building blocks being present, and good example on its own has its limits. Two things carry it: the relationship you have with your people, and the structures you deliberately put in place.

When researchers looked at how a leader's PsyCap reaches followers, the main route was the quality of the relationship between leader and team member (Chen, Kong, Niu, Gao, Li, & Li, 2019). The effect reaches even distant and virtual teams, and the strength of a leader's own psychological capital helps it carry across that distance (Story et al., 2013). More recent experimental work found the transmission holds up whether people are together in person or working over video (Kuhlmann & Klingenberg, 2025).

The practical point is that the resource is transmitted through the relationship. Regular one-to-ones and genuine interest in how your people are doing are what open the channel. This is the relatedness at the heart of Self-Determination Theory, doing its work.

Hope in a team works the way it does in a person: it needs a clear goal, more than one pathway to achieving that goal, and a shared belief that the team can actually move along those pathways to their objective (Snyder, 2002). The mistake most new leaders make is to hand the team both the goal and the single method for hitting it, which leaves people following instructions rather than owning the result.

So, it is critical to bring the team into both halves of the planning equation. Set the destination together, then run a short session where you map the possible routes as a group, including the awkward ones, and agree which to try first and what the fallback is. A team that has worked out more than one way to reach a target does not fall apart when the first way stalls, because the next route was planned by them to begin with.

Say, for example, the goal is to clear a reporting backlog. Rather than announcing 'everyone works an extra hour a day', ask the team how they would tackle it. You might come away with various viable alternatives. Now, if one route stalls, the goal still feels reachable. And as you go, calling out the small wins feeds the team's belief that it can achieve the objective.

Two kinds of belief matter here. There is each person's confidence that they can do their own job well, and there is the team's shared confidence that, together, they can pull off something demanding. Bandura called that second one collective efficacy, and it shapes how much a group takes on and how well it holds together under pressure (Bandura, 1997). Both are built the same way: through mastery experiences, the direct evidence of having done the thing and seen it work.

This means handing over work that genuinely stretches people, then putting enough support around it that they succeed rather than sink. Stretch on its own is just being thrown in at the deep end, and it teaches people they cannot cope. Stretch with support (e.g. a clear brief and a check-in halfway through) teaches them they can. When it works, say so specifically: name what the person or the team did and what it produced, so the win registers instead of passing unnoticed.

For example, if a capable team member has never presented to the senior team, you could hand them the next update instead of doing it yourself, then spend twenty minutes helping them prepare and sitting beside them on the day. The presentation becomes a mastery experience they own, not a favour you did them. Do that across the team and you are not simply clearing work off your own desk, you are building a group of people who have each proved to themselves that they can handle more. This is the idea behind good delegation, and it is also how you lead people who are better than you at the task: you give them the room to prove it.

A team takes its cue from how its leader reads a setback. When something goes wrong, what you say about it, out loud and in front of everyone, becomes the story the team carries into the next one. Treat a failure as a specific and temporary problem that can be worked, and the team learns to do the same. Treat it as proof that the whole thing is doomed, and that is the lens they will reach for next time. The way people habitually explain good and bad events, their explanatory style, is learnable, and a leader's style is one of the strongest influences on the team's (Seligman, 2006).

So handle mistakes in the open, and handle them as problems to be understood rather than culprits to be found. When a project slips or a client complains, get the team together and ask what actually happened and which parts were inside your control to change. Keep the attention on what can be acted on. That is the difference between a team that spirals after a bad week and one that treats it as information.

The key point to remember is that PsyCap doesn't just happen; it needs to be deliberately built. In a study of 94 teams, both leader psychological capital and team psychological capital predicted team performance, innovation and helpful behaviour, but the leader's PsyCap on its own did not reliably create it at team level (Waters, Strauss, Somech, Haslam, & Dussert, 2020). Modelling helps, but it isn't enough by itself. You have to build the conditions deliberately.

It also runs both ways: a team high in these resources lifts its leader, too (Haar, Roche, & Luthans, 2014). And what makes any of this stick is consistency, being the same steady, genuine leader over time, which is what lets people trust the resource enough to take it on (Rego, Sousa, Marques, & Cunha, 2012).

Remember this: your psychological resources are contagious, but contagion is not a plan. You build hope, efficacy, resilience and optimism into a team through the relationship you have with people and the experiences you deliberately give them.

Do this well, and you stop being the single point of confidence in your team. You build a group that generates confidence of its own.

I've been away from the newsletter for a couple of weeks, so this is a good moment to hear from you. Hit reply and tell me: how does your own psychological capital show up in your team, and what other leadership areas would you like me to write about when I'm back? Your replies genuinely shape what comes next.

All of my posts for new leaders are here.