Target Difficulty, Psychological Capital and Work Engagement

This study investigates whether the level of target difficulty that firms set has a positive effect on their employees’ psychological state and behavior. Because traditional goal setting theory assumes that the relationship between target difficulty and performance depends on the employees’ abilities and knowledge, but does not consider their psychological capital, we investigate the role of psychological capital. First, we investigate whether employees faced with higher target difficulty have higher work engagement and whether very high levels of target difficulty are negatively associated with employee work engagement. Second, we examine whether psychological capital, as a moderating variable, affects the relationship between target difficulty and work engagement. Data from a survey of 1,656 employees of a Japanese listed firm were analyzed to test the hypotheses. The results show that there is a positive relationship between the difficulty of employees’ targets and their work engagement, but very high levels of target difficulty are negatively associated with employee work engagement. Further, the results also show that psychological capital strengthens the relationship between target difficulty and work engagement. This study contributes to management accounting research, especially from a psychological perspective, by providing new evidence for the moderating effect of psychological capital on the relationship between target difficulty and work engagement