Business Psychology

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.