Friday, August 4, 2017

Psychological Capital




The term 'Psychological Capital' also means 'Positive Psychology'. Its is commonly known as 'PsyCap'.

First of all this concept was introduced in 1990's through the research conducted by Prof. Martin Seligman in the field of organizational behavior. However, this concept was explored by Luthans and his colleagues in 2004 in the USA.


Every business need human and non-human resources in order to establish the business. Human resources can be skilled, semi-skilled as well as unskilled. Similarly, non-human resources consists of land, capital, finance, machines, furniture and so on. Even to operate the non-human resources, we require human resource. Therefore human resource is the key resource of any organization.

An organization’s success depends upon the psychological and physical participation of humans resources (workers, employees, managers, and so on). Physical participation can be seen but psychological participation can only be felt. Human beings are not machines. They have emotions and feelings. Their behavior affects the organizations and vice versa. Therefore, human resource must be dealt very sensitively.

You can easily observe that, 

the behavior of human beings are different in individuals and different in groups. 

This is due to their psychological ingredients.The psychological participation of human resource makes a heavy impact upon the performance of individual and group behavior.
The concept of positive psychological capital has been originated in “postmodern positive psychology”. It includes the strengths and positive aspect of human behavior. Psychological capital (“PsyCap”) focuses on “who you are becoming” rather than “who you are”.


You may be eager to know that........Why it is named as Psychological Capital ?


It is known as Psychological capital because it emphasizes personal psychological sources with their basic four components i.e self-efficacy, hope, optimism and resiliency.
In simple words, Psychological Capital is the process of examining the psychological capacity of human resources. It processes :
  • Positive attitudes 
  • Feedback and 
  • Criticisms 
- of an individual, group or corporation.

There is a direct relationship between Psychological Capital and Positive Organizational Behavior. This means, higher the Psychological Capital, higher will be the 'Positive Organizational Behavior'.

The four fundamental characteristics or key factors that forms the structure of Psychological Capital are :
  • Self-efficacy 
  • Hope 
  • Optimism and 
  • Resiliency 
Positive characteristics of a person or groups will help to maintain and improve - a sustainable positive psychological capital, in the workplace and general life. It simply brings positive experiences and relationships. A positive experience explores the activities of one’s personal capacity, realize their full potential and achieve high performance levels.

PSYCHOLOGICAL CAPITAL AND POSITIVE PSYCHOLOGICAL CAPITAL


The terms 'psychological capital' and 'positive psychological capital' are used synonomously by various authors and sources .

Psychological capital or positive psychological capital emphasize positive approaches, meanings and results - both in personal and organizational levels.. 

It is described as “a common underlying capacity considered critical to human motivation, cognitive processing, striving for success, and resulting performance in the workplace” .

Hughes has argued that, 
Psychological Capital can be “measured, developed, and effectively managed” for improving the work performance.

The focal point of psychological capital is the positive side of human life, defined as hope, creativity, courage, wisdom, responsibility, and so on. The relationships between psychological emotions of employees, their performance and efficiency are hypostatized.

BASIC COMPONENTS OF PSYCHOLOGICAL CAPITAL


These four components shows a “motivational propensity” to accomplish the organizational goal. The following are the four components which contribute to positive psychological capital:

a) Self-efficacy/Confidence :

In simple words, Efficacy is a perception or belief regarding your personal abilities. Self-efficacy is the general belief of people while they performs and makes a sense beyond the actual abilities . High self-efficacy can influence the motivation in both positive and negative sides.

People who are self-confident knows how to improve their motivation. They choose challenging tasks to extend their performance and motivate themselves against the obstacles faced.

According to Albert Bandura, self-efficacy affects learning in following three ways:
  • Self-efficacy influences the activities and gaps - that individuals choose for themselves. 
  • Self-efficacy influences the effort that individuals puts on the job. 
  • Self-efficacy affects the determination to solve complex task. 
The Research made by Stajkovic, underlined that there is a strong and positive relationship between self-efficacy and performance. Moreover, because of the positive and significant relationship between job satisfaction and performance; it can be easily found that there is also a positive relationship between self-efficacy and job satisfaction.

b ) Hope :

Hope is related to the attitude of mind. It plays a directive role in work performance. It is an energy-focused on the personal goals that directs people to its target. Hope is a tool that motivates people while doing their job requirements.

Hope includes 'The will power (agency )' and 'The way power (alternatives)'.

Achieving the desired goals require the sense of expectations which provide “internalized determination and willpower to invest the energy” to the people. Workers take an example by the leaders in general. Thus, leaders’ hope impacts the employees’ job satisfaction, performance, and motivation.

It is possible to confuse hope with optimism. Hope is the seed of Optimism. Hope supports the desires of positive outcomes. It gives the feeling of being good to make the dreams come true in human life.

Higher the hope, higher is the motivation, higher job satisfaction and higher is the performance of human resource.

c ) Optimism :

Optimism is a positive expectation. It is less related or connected to an individual’s actual ability. It is a psychological intention and expectation - to hope the best possible and positive outcome. It can positively influence peoples’ mental and physical health. This gives individuals a rid of stressfull life.

Optimism must be 'Realistic Optimism' that are attainable and not the 'False (unrealistic) Optimism'.

Researches by Hmieleski, demonstrated that optimism and personal well-being have a positive relationship in psychological capital. It has been supported by Luthans , that optimists have high level of job satisfaction.

d ) Resiliency:

To understand the concept of resiliency in a simple way, let me give you an example :

Say,

Mr X is a student pursuing his Chartered Accountancy course. He has constantly failed for 7 years. If he still faces the exams, then he is said to be highly resilient.

Resiliency is defined as the tendency to recover from adversity or depressing process. It allows people be optimistic in any situations. It is an ability for bouncing back. It is coping skills of people in case of uncertainty, negative situations, and obstacles. It contains all other components ( hope, self-efficacy, and optimism ) in itself. It is a complex process for the people. It includes:
  • Endurance (that is - the power to standby in hardships or stress ) 
  • Tolerance 
  • Reactions
  • Flexibility and 
  • Psychological pressures . 

POSITIVE PSYCHOLOGICAL CAPITAL MANAGEMENT


Positive Psychological Capital can be managed through developing all the components (self-efficacy, hope, optimism and resiliency ) of Psychological Capital.
Well-managed positive psychological capital will help to establish the criteria for long-term business success and gain the competitive advantages. For this sense, organizations should focus on the positive behaviors of employees .
Psychological capital provides people an opportunity for training and improving themselves. 

Developing workers’ self efficacy provides a deep knowledge experiences.By, targeting individual’s hope toward which people can conduct their manner and gain a control. 

If optimism is developed and popularized among people then- they will learn to derive lessons from their mistakes or success.

Practically, resiliency should be taken as a “lifelong developmental journey”. 

Positive psychological capital focuses on the positive sides and properties. It improves personal and interpersonal communications and relationships. It is necessary to adapt psychological capital management and development - for gaining competitive advantages. This will decrease any negative impacts incurred in an organization.

Therefore, psychological capital represents much more meaning than the sum of all of the mentioned components such as; hope, resiliency, self-efficacy, optimism, different life situations, stress, motivation, feelings, pressures, orientation, difficulties, risks, positive and negative sides and so on. The concept of synergistic effect works here. when any one component is influenced, it is most probably that the others will also be eventually influenced.

As per the modern concept of management, human resources are treated as an asset of an organization. So, the managers are suggested to invest upon psychological capitals of their human resource.













Some important links:




Tuesday, August 1, 2017

CASE STUDY FOR DEMAND FORECASTING


# The research department of the Mohan Corn Flakes Corporation (MCFC) estimated the following regression for the demand of the corn flakes it sells:


Qx = 1.0 – 2.0 Px + 1.5 I + 0.8 Py – 3.0PM + 1.0A


Where,

Qx = Sales of MCFC corn flakes, in millions of 10-ounce boxes per year
Px = The price of MCFC corn flakes, in dollars per 10-ounce box
I = Personal disposable income, in trillions of dollars per year
Py =price of competitive brand of cornflakes, in dollars per 10-ounce box
PM = price of milk, in dollars per quart
A = Advertising expenditures of MCFC cornflakes, in hundreds of thousands of dollar per year

This year, Px = $ 2    I = $4    Py = $ 2.50   PM = $ 1 and A = $2

a ) Calculate the sales of MCFC cornflakes this year.

b ) Calculate the elasticity of sales with respect to each variables in the demand function.

c ) Estimate the level of sales next year if MCFC reduces Px by 10 percent, increases advertising by 20 percent, I rise by 5 percent, Py is reduced by 10 percent and PM remains unchanged.

d) By how much should MCFC change its advertising if it wants its sales to be 30 percent higher than this year?



a ) Calculation of the sales of MCFC cornflakes this year:


We have been given the following estimated equation for sales:

Qx = 1.0 – 2.0 Px + 1.5 I + 0.8 Py – 3.0PM + 1.0A

Where,
  • Qx = Sales of MCFC corn flakes, in millions of 10-ounce boxes per year
  • Px = The price of MCFC corn flakes, in dollars per 10-ounce box
  • I = Personal disposable income, in trillions of dollars per year
  • Py =price of competitive brand of cornflakes, in dollars per 10-ounce box
  • PM = price of milk, in dollars per quart
  • A = Advertising expenditures of MCFC cornflakes, in hundreds of thousands of dollar per year

Substituting the given values in the above equation as:

  • Px = $ 2  
  • I = $4   
  • Py = $ 2.50   
  • PM = $ 1 and 
  • A = $2 

We get,


Qx = 1.0 – 2.0 x 2 + 1.5 x 4 + 0.82 X 2.50 – 3.0 x 1 + 1.0 x 2 = 4

Thus, the MCFC would sell 4 million boxes of its corn flakes this year.

b ) Computation of the elasticity of sales with respect to each variables in the demand function:


To solve this, follow the following steps :
  • First calculate the first order derivative of following equation Q= 1.0 – 2.0 Px + 1.5 I + 0.8 Py – 3.0P+ 1.0A  with respect to particular elasticity . For example, If price elasticity (E) is to be found than find out the first order derivative with respect to Px  by treating other variables as constant. 
  • Then, compute elasticity accordingly.

The elasticity of demand for MCFC corn flakes with respect to its price, personal disposal income, the price of competitive corn flakes, the price of milk and advertising are:

Ep = (dqx /dpx) x (px / qx ) =  - 2 x (2 / 4) = -1 

EI = (dqx /dI) x (I / qx ) = 1.5 x (4 /4) = 1.5

EXY = (dqx /dpy) x (py / qx ) = 0.8 x (2.5 / 4 ) = 0.5

EXM = (dqx /dpM) x (pM / qx ) = - 3.0 x (1 / 4) = - 0.75

EA = (dqx /dA) x (A / qx ) = 1.0 x (2 / 4 ) = 0.5 


c ) Estimation of the level of sales next year if MCFC reduces Px by 10 percent, increases advertising by 20 percent, I rise by 5 percent, Py is reduced by 10 percent and PM remains unchanged:


If next year the MCFC reduces Px by 10 percent, increases advertising by 20 percent, I rise by 5 percent, Py is reduced by 10 percent and PM remains unchanged then,

the sales of MCFC corn flakes in the next year ( Qx I ) would be :

Qx I = QX + QX (∆ PX / PX ) X Ep  + QX (∆ I / I) X EI + QX (∆ PY / PY ) X EXY + QX (∆ PM / PM ) X EXM  + QX (∆ A / A ) X EA     

=  4 + 4 (-10% ) X (-1) + 4 (5%) X 1.5 + 4 (-10 %) X 0.5 + 4 ( 0 % ) X (– 0.75)  + 4 (20%) X 0.5

On solving this we get,

Qx I = 4.9

Therefore, the MCFC would sell 4.9 million boxes of its corn flakes in next year.


d ) Computation of changes in advertising that MCFC should change if it wants its sales to be 30 percent higher than this year:


To know that - by how much should MCFC change its advertising if it wants its sales to be 30 percent higher than this year, It must sell 5.2 ( i.e  4 + 30 % x 4 ) million  boxes of corn flakes. This is 0.3 (i. e 5.2 - 4.9 ) million greater than forecast. 

To determine the additional increase in advertisement expenditure, we set up following equation:

Qx X (Z) X ( EA)  =  0.3

where, 
  • Q= 4 
  • Z = Additional percentage increase in advertising
  • E= Elasticity of Advertisement

So, we get 

4 X ( Z) x (0.5) = 0.3 

or, Z x 2 = 0.3

or, Z = 0.15


The additional percentage increase in advertising is Z i.e 0.15

Therefore, 0.15 percent additional increase in advertisement expenditures over this year’s level of $ 200,000 is $ 30,000 ( i.e  $ 200,000 x 0.15 % ).









Note : 
  • The above case study was asked to the MBS post graduates by Faculty of Management, Tribhuvan University.
  • The problem is taken out from the book (Managerial Economics ) written by Dominick Salvatore.