Imagine it’s the first couple weeks of your new job. Things seem to be going well so far, until you notice a few problems with the company culture: your coworkers are bored, there are a couple of workplace gossipers, and you realize turnover for your position is quite frequent. Naturally, you think to yourself: perhaps this is an area where HR can help! However, there may need to be further intervention to turn this workplace around. Business psychology may be the solution to improve this company’s environment.

Business psychology, at the intersection of psychology and business administration, focuses on improving how productive, efficient, and satisfied people are at their place of work. This branch of psychology adopts a combination of applied social science research methods like focus groups, questionnaires, and case studies to foster more effective organizational outcomes. An overall goal for business psychology is to develop healthy and mutually beneficial relationships for employees and their workplaces alike. When we think back to our example of the concerning trends at that hypothetical company, we can start to see how business psychology might be helpful.

You may be wondering: what does a business psychologist actually do? According to The Association for Business Psychology (ABP), here are just some of the ways that this type of professional may contribute to an organization:¹

• Advise on a variety of issues like career or organizational changes, embracing an unbiased and scientific approach. For example, you may see a business psychologist advise your company on how best to ease employees into transitions when downsizing in a certain area.
• Diagnose workplace challenges, using social science methods to dig deeper into how employees behave. This may include discovering that engagement is dropping due to a new policy being introduced. 
• Design solutions to implement changes that address pain points. For instance, a business psychologist may help out with hiring by creating an assessment tool to pick the best candidate for the position. 
• Deliver solutions to problems at the workplace by facilitation. A business psychologist may conduct a company-wide workshop or training session as a means to address such issues. 
• Evaluate the evidence, sharing with both employees and organizations how both parties may benefit from business psychology—while also recognizing and addressing its limitations. Some methods for evaluation might be surveys before and after intervention, employee interviews, and tests for workplace motivation, engagement, and productivity. 

Business psychology is distinct from, though rooted in, industrial-organizational (I-O) psychology. Typically, I-O psychology focuses on optimizing internal workplace factors, such as improving productivity, enhancing company culture, and handling technical tasks like personnel selection and performance management.² In contrast, business psychology takes a broader, strategic view, addressing challenges that span business operations, strategic relationships, and market dynamics. In essence, I-O psychologists tend to work directly with employees or small groups to improve organizational effectiveness, while business psychologists collaborate with senior leaders to influence company-wide strategies and large-scale initiatives.²

Despite their differences, it’s worth stressing that both fields systematically examine how a company operates to improve performance and efficiency. Some topics that business psychologists may share with I-O psychologists in the workplace include:

1. Personnel selection and assessment: The process of how employees are recruited and hired in a workplace. This includes the initial marketing of a job, the key qualifications someone needs, and screening out those who don’t match.
2. Performance management and appraisal: The process of how the behavior of an employee or group is assessed relative to the expectation of managers at a job. This may include when your new boss provides you with feedback (or doesn’t), and if your duties align with the company’s goals. 
3. Psychometric testing: A type of psychological test used to look at individual differences in the workplace relative to performance, which may be done with either job candidates or current employees. Some examples are personality tests, simulations, or work samples.
4. Organizational culture: Also called corporate culture or company culture, these are the attitudes, beliefs, and norms that define the environment at work. Hopefully, when you start a new job, you notice that there is a positive work culture: open communication, work-life balance, and opportunities to grow in the company. 
5. Leadership development: The various processes and activities that someone can apply themselves to at work to improve skills surrounding current or future leadership positions. This may incentivize employees to stay at a company, grow a more positive work culture, and increase overall morale.³  

Of course, work has changed throughout the 21st century in ways that are almost impossible to comprehend. Business psychology is beginning to consider things like remote work, fair use of AI on the job, and tracking employee data usage—and how these elements impact employee well-being and company performance. What may be next is examining how emerging technology changes how psychologists actually do their jobs, such as how communication apps may facilitate teamwork and positive work culture.

Industrial and organizational psychology (I-O psychology): The study of human behavior within organizational structures, which ranges from focusing on a single employee to the overall company when it comes to problems at work.⁴

Psychometrics: A field in psychology focused on testing, measuring, and assessing a given topic. In business psychology, psychometrics may include tests to evaluate an employee's abilities or personality tests related to their job.

Organizational culture: Colloquially known as company culture, this concept refers to a company’s values, beliefs, and even unwritten social norms that determine the collective mindset of a workplace. One of the overarching goals of business psychology is to create a positive work culture, which may include open communication, a psychologically safe office, and a clear mission with defined values.

Army General Classification Test (AGCT): An early example of a psychometric test in business psychology that was used during WWI and WWII to screen soldiers in the U.S. Army based on intelligence (namely literacy) as well as other skills.⁴

Hawthorne effect:A phenomenon in an experimental setting where participants may alter their behavior due to the fact they are being observed, including in workplace settings.⁴

The origins of business psychology lay in the development of its predecessor I-O psychology in the early 1900s.⁴ It’s important to note that the distinction between the two fields was (and still is) blurry—meaning the exact timeline of business psychology emerging as separate from I-O psychology is not explicitly marked.

During the 20th century, when experimental methods were just becoming popularized, influential thinkers were concerned with applying psychology beyond the laboratory—and more specifically, in the workplace. In 1911, pioneering industrial psychologist Walter Dill Scott published two books titled Influencing Men in Business and Increasing Human Efficiency in Business investigating how the individual aspects of human psychology intertwine with organizational behavior, such as motivation, irrationality, and suggestibility.⁴ In his work, Scott was the first to tie psychology to the business world—giving us some of the initial hints of business psychology. Other topics Scott addressed were how men in business tackled issues on salesmanship and personnel management.

Around the same time, another key figure in applied psychology, Hugo Munsterberg, published Psychology and Industrial Efficiency in 1913,⁴ setting the stage for what is now I-O psychology—and eventually, business psychology, too. Munsterberg contributed insights to help companies and organizations discover “the best possible man” for a job through real-world solutions such as how to select and train employees. 

Both Scott and Munsterberg developed their ideas at the cusp of World War I. Continuing his fascination with who should be chosen for certain types of jobs, Scott came up with a system for the U.S. Army during WWI to classify and assign over three million soldiers to various roles. This classification system set the foundations for personnel selection in how employees are hired for a given job in modern times. These skills tests for army officers may closely resemble psychometrics tests seen today. 

By the time WWII began, approaches like I-O psychology had entered into mainstream focus. Scott’s personnel selection processes became normal ways to place millions of soldiers into the appropriate army positions. For instance, the Army General Classification Test achieved just this in both world wars by sorting soldiers based on skills such as literacy, interviews, and aptitude.⁵ Some of these types of tests went to higher levels of security during this era, namely how the U.S. Office of Strategic Services (what came to be the CIA) picked their agents. Soon enough, both I-O and business psychology methods would become widespread in all types of workplaces. The popularity of these psychology types emerged from new theories in postwar eras, where many factors at work were considered like motivation, bias, and personality.

In the years following World War II, business psychology shifted into other areas of focus aside from picking the right employees based on their productive capacities. Namely, the field became focused on the question: what motivates people at work? In the 1960s and 1970s, optimistic accounts of psychology from humanistic perspectives, like Rogers’ self-actualization and Maslow’s hierarchy of needs, pushed I-O psychology to consider individual traits in the workplace. Such trends pushed companies to consider more equal opportunities when hiring. Not everything was about efficiency anymore—business psychology started to ask about satisfaction, retention, motivation, and fulfillment when at work.

In the 1980s, I-O and business psychology looked at organizational relationships and how to increase workplace retention. Going into the 1990s, the much-talked-about concept of work-life balance became more popular, and how stress is an important factor in our work lives. With shifts in technology, I-O and business psychologists zoomed out, asking, what even is a “job” in the first place?

Today, as we are a quarter into the next century, this question may become even more open to interpretation given how automation is changing work and potentially replacing jobs, big data, artificial intelligence, and other elements that have transformed what we consider work to be. While these technological changes to work culture are key to the business psychology landscape, so are equal opportunities for groups that have been neglected. For instance, with a clear bias for “men in business” in the early 1900s, considering women in our workplaces through a business psychology lens is long overdue—organizational structure and female mentorship may be just some ways to achieve this.

Walter Dill Scott

An American psychologist and academic who was one of the first figures interested in how psychology was applied to business settings like personnel selection and advertising.⁶ Some key contributions of Scott’s are those of quantitative intelligence, advertising, and the army rating scale in WWI and WWII. 

Hugo Munsterberg 

A German-American psychologist known for being a pioneer in both applied and industrial-organizational psychology. To Munsterberg, psychology was all about application to real life. Though torn between his German heritage and American life during both world wars, Munsterberg was highly influential in the personnel selection of U.S. soldiers in the world wars and beyond.

Business psychology has helped organizations to prepare for many changes to what we consider to be “the office” in this day and age. Here are some key takeaways from analyzing the modern workplace using a business psychology lens, including the impacts of adopting digital technology and transitioning to a remote workplace.

Mitigating the Negative Effects of Digital Technology 

Almost all of us use some form of digital technology at work. Usually, this comes with its fair share of psychological perks like convenience, information accessibility, and social communication. But with these, we must still ask: what are the negatives? 

A management team could apply business psychology not only to identify what negative effects technology has but how effective solutions can be integrated. Companies can hire a business psychologist or consultant to analyze this problem from a higher level. An example would be identifying what sources of technology cause the greatest issues, along with if these sources are impacting other aspects of employee motivation that may have a domino effect on company revenue. 

A group of Indonesian researchers decided to analyze this issue across many organizations from a business psychology point of view.⁷ The researchers discovered some key findings from their literature review, especially relative to stress levels of workers using technology on the job resulting from information overload, poor boundaries, time pressure for deadlines, and distractions. These researchers proposed some solutions to our digital angst, too. Some ideas included setting limits on the use of digital tools, clear policies on said use, and awareness of how these negative impacts are present. From this research, we can imagine how business psychology can make a big difference in regulating stress levels.

Analyzing Work-from-Home Transitions

The shift to hybrid and remote work has reshaped the workplace landscape, making it essential to examine this transition through a business psychology lens. Research by Becker et al. (2022) demonstrates how factors such as job control and workplace isolation influence employee well-being during remote work.⁸ Their findings indicate that employees who feel greater control over their work experience less exhaustion, improved work-life balance, and reduced loneliness—insights that can guide business psychology-driven adjustments to remote work policies.

By applying business psychology principles, companies can better understand the psychological needs of employees in a remote setting. For example, a consultant might collaborate with executives to assess their current work-from-home policy, using surveys to identify common feelings of isolation or burnout. Business psychologists would analyze these responses to detect organizational patterns, helping managers determine which adjustments—such as flexible work schedules or a structured hybrid model—could improve both productivity and employee well-being.

This analysis not only supports individual well-being but can also elevate organizational performance. When employees feel valued and have a sense of agency in their work, job satisfaction and engagement increase. Business psychology’s focus on company-wide, proactive policy improvements—rather than ad hoc adjustments—enables firms to create remote work environments that foster resilience, social connection, and motivation across the entire workforce. For instance, adopting a hybrid model with structured in-office days may promote the balance employees seek, aligning their needs with business goals and reinforcing a positive work culture.

Business psychology, just as with any other branch of psychology, has critiques we need to be mindful of. While it is true the discipline has come a long way in the past century or so, questions remain on the validity of insights we can extract using this lens. Further, persistent negative feelings and experiences surrounding the workplace raise concerns that business psychologists may not be adequate in intervening sufficiently.

Research-Practice Gap

A significant challenge in business psychology is bridging the gap between research findings and practical application, which some suggest may even be widening over time. This “research-practice gap” can hinder the effectiveness of business psychology by preventing the latest evidence-based insights from informing workplace practices. Key issues contributing to this gap include a lack of awareness among practitioners about current research, skepticism toward scientific findings, and difficulty translating complex theories into actionable strategies.⁹

To address these issues, experts in the field suggest a multifaceted approach: increasing awareness, building credibility for research findings, and enhancing implementation.⁹ For instance, encouraging collaboration between researchers and practitioners can foster mutual trust, helping managers and HR professionals become more receptive to scientific methods. By working together, researchers and consultants can better understand organizational needs, while practitioners gain hands-on exposure to evidence-based tools.

One suggested strategy is to present research findings in tangible, relatable ways—such as developing clear, example-based guidelines that managers can integrate into their workflows. Furthermore, fostering a sense of community across fields such as business psychology, human resources, and management consulting could create networks for sharing evidence-based practices and successful strategies.

Ultimately, closing the research-practice gap requires an integrated effort to align research more closely with the realities of business practice. By enhancing trust, building relationships across disciplines, and making research accessible, business psychology can strengthen its practical impact on workplace outcomes.

If Business Psychology Works, Shouldn’t We Be More Mentally Well at Work?

In Canada, mental health is perpetually a public health concern—where every week at least half a million Canadians miss work due to mental illness.¹⁰ This is not only an emotional cost to the individual, but harmful to the greater economy too: the sum of these weekly absences adds up to about $51 billion a year. These numbers tell a bigger, more complicated story than the scope of business psychology can include, yet the branch does play a role in analyzing some of the issues at work pertaining to mental illness. 

The Canadian Psychological Association (CPA) suggests that two of the most prevalent mental health problems are psychological strain and burnout.¹⁰ Another striking finding is that one in three Canadians of working age experience burnout. How, then, can business psychology play its part when mental health issues are on the rise in the workplace? Some recommendations from the CPA, that may be integrated via a business psychologist, could be implementing mental health leadership training, mental health literacy training to reduce stigma, and finding better ways for return-to-work processes. At the same time, we must not ignore that business psychology interventions to take care of employees like training sessions may not live up to expectations.

The Hawthorne Studies

I-O and business psychology are not strangers to the various biases and effects that come with the spread of behavioral science disciplines. Of utmost importance may be the Hawthorne Effect: the phenomenon that people who are observed in an experimental setting are more likely to change and often improve their behavior when observed. Case in point: if your boss is watching you do your work, it is more likely that you’re going to work harder than if no one is looking over your shoulder. 

This effect came about from the equivalently named Hawthorne Studies, a series of experiments in the late 1920s and 1930s at the Western Electric Hawthorne Works Plant in suburban Chicago.¹³ The first of the studies, titled the illumination experiment, looked into how lighting levels may impact worker performance at a telephone parts factory. Researchers found themselves perplexed: when the lighting level was turned up or down, productivity improved nonetheless. Other conditions like working hours and breaks were checked too—and still, they observed productive work from these factory employees. After testing these conditions, the researchers claimed that productivity changed not as a result of working conditions, but instead, due to being worried as someone watched their work. 

The Hawthorne effect is just one example of the challenges in business psychology research, highlighting a broader question: can we truly understand how people behave, act, and feel at work, or is this only fully known through personal experience? It may be that capturing an accurate account of work experiences requires methods that observe employees more naturally, without making them aware they’re being studied. This approach could reveal insights that more explicit observation might overlook.

Is Your Coworker a Psychopath?

Do you think that you have ever met a psychopath before? Statistically, the chances are not zero…¹⁴ but how about in your workplace?

In a 1995 case study, Paul Babiak explored the prevalence of psychopathic traits in the workplace from a business psychology perspective, examining the concept of the "industrial psychopath."¹² The case study adopted a model that implied that a psychopath may be able to use manipulation skills to persuade colleagues to successfully build a career—especially in a chaotic, changing organization. In contrast to the stereotyped antisocial environments of a psychopath, Babiak asks: what is the ability of a psychopath to mask their antisocial traits in presenting a prosocial disposition on the job?

The researcher describes how he located the subject called by the pseudonym “Dave” during a broader organizational study. For a year, Babiak directly observed the said psychopath in over a dozen in-person meetings, staff meetings, team building exercises, and at social events for the company—all some of your typical business-psychology-type research environments. Though we must be wary of how generalizable a case study is, the observations are telling of how extreme personalities in our workplaces can have drastic effects on coworkers, managers, and the company itself. 

Babiak outlines three of Dave’s patterns: his internal networking with powerful individuals, avoiding group meetings to keep his dynamic personality hidden, and fostering conflicts to prevent colleagues from sharing information about him. What we may take away from this case study is how more unconventional personalities can exist, and thrive on many organizational levels. Future research of business psychology may need to consider psychopathy in industry—and how this may taint an otherwise good work culture, and good workplace.

Nudging organizational visions into reality with Katie Rice

Sometimes at work, we need a nudge or two in order to foster a healthy, positive work culture. In this episode of The Decision Corner podcast, Katie Rice, Lead Knowledge Analyst at Boston Consulting Group discusses how behavioral change can be applied to change management. More specifically, she shares some interventions for behavior in today’s dynamic, fast-paced world.

Disasters at work: Daniel Kaniewski 

Have you had something really bad happen at work before? How did your employer respond? In this interview with former Deputy Administrator for Resilience at FEMA, and Managing Director of the Public Sector at Marsh McLennan, Daniel Kaniewski talks about how he helped manage some of the worst disasters in the history of the U.S. On a surprising note, Daniel shares how human behavior seems to be amongst the more predictable aspects of disaster management situations.

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