Mental Capital: The Most Undervalued Asset on Your Balance Sheet

Jul 18

Survival of the fittest would be the way to describe the competitive business world today. You need to have an asset to stand out and move away from your competition and achieve or exceed your goals. These assets aren’t just in terms of numerical values such as profit margins, quarterly revenue, market share, and operational efficiency. Intangible assets such as mental capital are fundamental, but greatly undervalued. This article focuses on mental capital and explains why it is so important.

Table of Contents

What is mental capital?
Why is mental capital so undervalued?
Signs your mental capital is low
What happens if you underestimate mental capital?
How to build and maintain mental capital
Conclusion
References

What is mental capital?

The term mental capital refers to the sum of a person’s or an organization’s emotional, cognitive, and psychological capabilities. More precisely, mental capital involves the following resources:
● Cognitive: problem-solving skills, knowledge, creativity, critical thinking, and memory
● Psychological: focus, motivation, mental agility, and self-awareness
● Emotional: empathy, resilience, emotional intelligence, the ability to manage stress

Mental capital is the foundation of personal and professional growth and overall well-being. In a business setting, mental capital is the basis for innovation, adaptability, and collaboration.
Keep in mind that mental capital isn’t a synonym for mental health, but they are intertwined. Mental capital is not just the absence of some illness, but the presence of stamina, strength, focus, purpose, and flexibility.

Why is mental capital so undervalued?

Despite its importance as an asset, mental capital is still greatly undervalued. One reason mental capital is underestimated is the lack of its presence on the balance sheets. The business market prioritizes tangible assets such as revenue or cash, and equipment. Since mental capital is intangible, it is rarely measured or reported, which is why it is invisible to stakeholders.

Cultural bias toward productivity is yet another reason mental capital is underestimated. In other words, society often equates value with performance or output. For example, value often depends on hours worked, products shipped, or generated revenue. The mental processes making this performance possible are usually taken for granted until stress and burnout come along.

Although financial performance is tracked meticulously, cognitive engagement isn’t measured in most cases. Organizations rarely focus on a person or group’s emotional resilience or psychological health. Many people evaluate their own performance, but don’t assess their mental capital and its status.

Workplace settings often prioritize short-term financial gains over long-term human development. That happens because investments in mental capital, such as training or wellness programs, require time to show results.

Finally, one of the biggest reasons mental capital is underestimated is the stigma surrounding mental health. Mental health awareness has come a long way, but it is still not enough. Many still consider mental health and cognitive development as soft issues, i.e., subjects that are irrelevant for business outcomes. However, the World Health Organization (WHO) reported that poor mental health, such as anxiety and depression, costs the global economy $1 trillion a year in lost productivity. In other words, mental capital is essential for productivity, performance, and efficiency in business.

Signs your mental capital is low

Low mental capital manifests itself in the form of the following signs and symptoms:
● Indecisiveness
● Irritation or cynicism
● Social withdrawal
● Poor focus and concentration, being easily distracted
● Lack of trust in others
● Absence of innovation
● Poor sleep quality
● Changes in appetite
● Low confidence and self-esteem
● Losing passion for work or the project at hand

What happens if you underestimate mental capital?

Underestimating mental capital prevents you from using all the assets you have to achieve your goals in personal and professional aspects of life. It makes you vulnerable to stress, which may lead to burnout if not managed properly. Moreover, workplace stress is also associated with reduced productivity, as the evidence shows. That happens due to cognitive fatigue and emotional distress.

When you underestimate mental capital as an asset, you don’t explore your creativity. It’s difficult to be innovative in those situations. Lack of innovation can affect productivity, problem-solving skills, and overall satisfaction. It’s also trickier to adopt changes and adapt to the new circumstances when you undervalue your own mental capital.

Focusing on mental capital is a strategic move. Prioritizing mental capital as an asset gives people and companies a competitive edge thanks to engagement, innovation, and resilience.

How to build and maintain mental capital

Mental capital is the biggest asset you may have, and here’s how to build and maintain it:
● Focus on lifelong learning: learning new or sharpening current skills enhances cognitive agility and increases career relevance. Engage in continuous education through seminars, courses, and workshops.
● Practice mindfulness: self-care and mindfulness practices strengthen psychological endurance. Good examples of mindfulness techniques are meditation, deep breathing, or walking in nature.
● Build a support network: collaboration increases emotional and cognitive capital. Surround yourself with peers, friends, and mentors who challenge and uplift you.
● Set boundaries: preserves cognitive and psychological resources. Protect your mental energy by saying “no” to non-essential tasks, delegating, or limiting distractions.
● Reflect: regularly evaluate your mental state and adjust habits accordingly. It promotes self-awareness and long-term growth.
● Redesign workflows: limit back-to-back meetings and set up clear decision-making frameworks to reduce cognitive fatigue.
● Promote meaning over metrics: connect tasks to purpose and celebrate progress and learning, not just the results.
● Prioritize cognitive recovery: take mental health days, take micro-breaks, and introduce brain-friendly habits to your lifestyle. These include regular exercise, a well-balanced diet, and sufficient sleep (7–9 hours).
● Use tech wisely: we can’t avoid using technology entirely, but you should do it wisely in a way that doesn’t create mental clutter. Regularly assess your tech use and remove everything unnecessary for your productivity and mental capital.

Conclusion

Various assets can help a person or a group of people stand out, but mental capital is probably the most undervalued one. Mental capital is often neglected because it’s intangible and doesn’t show specifically in metrics that people and companies track. However, neglecting mental capital can show on your balance sheet in the form of poor productivity that leads to minimized output and lower revenue. The good news is that there’s a lot you can do to both build and maintain mental capital.