What Is Business Psychology, and Why Is It Important?

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An employee relations specialist meets with a small group of employees.

“To win in the marketplace you must first win in the workplace,” according to Doug Conant, former Campbell Soup Company CEO.

Conant’s quote makes quite the case for the field of business psychology, as do statistics from a 2018 Gallup study that indicate more than half (53%) of employees in the United States are not engaged with their work, and 13% are actively disengaged.

With employee engagement directly related to performance and productivity, companies can benefit from hiring human resources employees and others with a background in business psychology. Individuals interested in pursuing such roles and helping companies build stronger teams should consider a bachelor’s degree in organizational psychology.

Defining Business Psychology

Business psychology (also referred to as organizational psychology) is an applied science that uses a focus on human behavior to evaluate how an organization and its employees can implement strategies to increase engagement and drive profits. The Association for Business Psychology describes the field as a combination of the “science of human behavior with experience of the world of work to attain effective and sustainable performance for both individuals and organizations.”

Professionals whose task it is to improve a company’s performance using business psychology first diagnose the issues within the organization and then design, implement and evaluate solutions. They have a variety of methods at their disposal to collect data on employee behaviors and feelings, including interviews, questionnaires, polls and surveys.

In analyzing this data, business psychology professionals use both descriptive and inferential statistics. Descriptive statistics allows professionals to summarize all of the data in a quantifiable manner — creating charts and graphs to illustrate employee survey results, for example. With inferential statistics, on the other hand, they work with a subset of data (random employee interviews, for example), and draw conclusions or make inferences about the entire employee population based on that sample.

Content and thematic analysis is another important tool for these professionals. It allows them to analyze qualitative data such as audio, video and text for recurring keywords and other patterns or themes that may provide vital employee insight.

How Business Psychology Benefits Organizations

Organizations that implement a distinct business psychology strategy can reap a variety of benefits, including improved productivity, stronger team building, more efficient conflict resolution and higher employee satisfaction.

Improved Productivity

Employee productivity, which is closely related to engagement, is a major issue that affects the financial growth of an organization. Professionals with business psychology experience can establish a baseline for engagement, work with company management on strategies to raise it and then monitor the engagement level going forward. For example, they may analyze responses from simple weekly questionnaires to determine barriers to engagement and productivity such as lack of training or poor work-life balance. Working with management, they can develop and implement solutions to overcome those barriers (perhaps dedicated training time or a telecommuting policy) and then evaluate their ongoing effects.

Stronger Team Building

Collaboration is key to any successful team, including those in the business world. A hostile work environment can be created when employees fail to engage with one another. To accomplish organizational goals and tasks, employees must value each other, communicate effectively and work together.

Business psychologists can work with employees to identify particular areas that are causing a breakdown in communication; in some cases, something as simple as different communication styles may be the cause of the friction. These professionals can work with employees (individually or in groups) to develop effective communication strategies. They may encourage management to embrace open-door policies to encourage communication and trust, or institute quarterly company retreats where employees can engage with each other outside of the stressful confines of work.

Conflict Resolution

Business psychologists can develop methods to help with conflict resolution in the workplace and have an important role in cultivating a healthy dialogue among clashing co-workers. As objective parties with backgrounds in human behavior, these professionals can help employees find common ground through guided communication, active listening and other conflict resolution techniques. They can also meet with management and company leadership to examine which of their behaviors, policies or expectations might be contributing to conflicts in the office.

Higher Employee Satisfaction

Unsurprisingly, a productive and engaged workplace focused on team building and conflict resolution can result in happier, more satisfied employees. But business psychologists also can help an organization uncover and implement other strategies for improving employee satisfaction across a wide variety of areas, from compensation and benefits to corporate ethics to workforce diversity. Employees with a high level of satisfaction don’t just make for a pleasant workforce. Multiple studies have shown a connection between employee satisfaction and company growth and success. In a 2019 study, Glassdoor found a statistically significant correlation between employee satisfaction and customer satisfaction. The impact doubled for companies in “high customer contact sectors” such as health care, retail and food service.

The Role of the Business Psychologist

Business psychologists play an important role in creating a more positive, productive workplace environment. They leverage a variety of skills — analytical, critical thinking and interpersonal skills — to evaluate workplace dynamics and develop and implement workplace strategies.

Evaluate Workplace Dynamic

Workplace issues that business psychologists may address must be identified before they can be improved. As discussed previously, professionals in this field use a host of data collection methods to evaluate an organization’s workforce behaviors and attitudes. They use their education and experience as well as key analytical and critical thinking skills to dive into the results, determine the explicit and implicit issues, and prioritize areas for improvement. Strong interpersonal skills are also a necessity for business psychologists during the evaluation stage as they communicate with employees individually and in groups.

Develop and Implement Workplace Strategies

Once issues have been identified, business psychologists work with company leadership to address them. How can the organization improve engagement, increase teamwork, enhance communication and create a more productive and successful workforce? These are the true goals of a business psychologist. Proposed solutions could touch on any of a number of areas, such as training and development, HR policies, employee and manager coaching, performance evaluation or physical work environment.

Business psychologists will use their critical thinking skills to determine the best solutions and their interpersonal and communication skills to roll out new programs or policies. This work can help business leaders improve their decision-making over time, as they become increasingly aware of the impacts, both positive and negative, of their communication style, policies and procedures, and company culture.

After the introduction of a new policy or program, business psychologists will evaluate its effectiveness and continue to monitor employee sentiment. As new data comes in, new policies can be introduced or current policies can be altered.

Explore a Career in Business Psychology

The business world is in constant flux, and leaders are always looking for innovative ways to increase workplace efficiency and productivity. One way they do that is by hiring professionals with a background in business psychology.

Rider University’s organizational psychology program can prepare students for those careers, including roles in human resources, employee relations and training and development. The program — which has two paths to choose from, a Bachelor of Science in Business Administration in Organizational Psychology and a Bachelor of Arts in Organizational Psychology — offers a multidisciplinary approach that exposes students to various psychological and managerial concepts that can help them in their careers.

Discover how an online bachelor’s in organizational psychology from Rider University can prepare you for a career helping increase workplace productivity and performance.

Recommended Readings

How to Measure Employee Engagement and Satisfaction
Social Anxiety at Work: Statistics and Strategies to Help
What Is I-O Psychology? Careers and Resources for Merging Psychology and Business


American Psychological Association, Helping Businesses and Organizations
The Association for Business Psychology, What Is Business Psychology?
Forbes, “How Much Are Your Disengaged Employees Costing You?”
Frontiers in Psychology, “Work and Organizational Psychology Looks at the Fourth Industrial Revolution: How to Support Workers and Organizations?”
Gallup, “Employee Engagement on the Rise in the U.S.”
Glassdoor, “Happy Employees, Satisfied Customers: The Link Between Glassdoor Reviews and Customer Satisfaction”
Psychology Today, “What Is a Business Psychologist?”
Workday, “CFO Perspective: How Employee Engagement Influences the Bottom Line”