While businesses and organizations around the world may be different sizes and have varying functions, they have at least one thing in common: people. Many elements contribute to organizational success, but one of the most important is whether individuals effectively communicate with one another and work together to achieve a common goal.
Business and organizational leaders keep employees on track by setting goals and making sure everyone knows their role in meeting those goals. Business leaders not only train, manage and assess their employees, but also understand the importance of their employees’ mental wellness alongside workplace productivity.
Because of this, industrial-organizational psychology (I-O psychology) plays an integral role in business. When business leaders learn how psychological theories apply to their organizations, they can better understand why employees think and behave in certain ways.
There are many benefits of incorporating I-O psychology into business. Elements like behavioral assessment connect to foundational business concepts, such as communication, motivation and employee well-being. When business leaders and managers have a thorough understanding of these principles, they can enhance their organizations’ potential for profitability and growth.
What Is I-O Psychology?
I-O psychology is a branch of psychology that seeks to understand human behavior in work environments and how employees’ physical and mental wellness contributes to a company’s overall productivity. The field of psychology has two major components — research and practice — that join together to help psychologists explain the thoughts and behaviors of individuals.
I-O psychologists study, assess and analyze three different types of subjects: the dynamics in an individual, the interaction between members of a group, and the dynamics of an organization comprising many individuals and groups.
Components of I-O Psychology
I-O psychology has two major components — industrial and organizational:
The industrial aspect of I-O psychology can be called “personnel psychology” because it revolves around employees and how they fit into certain positions. While individuals can be an excellent fit for some jobs, they may ot work well in others. This aspect of psychology helps determine what characteristics and skills make good candidates for specific jobs. The industrial aspect of I-O psychology also consists of management tasks, from how managers train their employees to how they conduct performance reviews.
While the industrial aspect examines individual employees, the organizational aspect of I-O psychology seeks to understand how all the organizational elements impact an individual employee. It studies groups of individuals as well as how groups relate to the whole organization. It also studies how organizational standards, managerial leadership styles and the expectations of meeting certain company goals impact employees’ physical and mental well-being.
Specific Areas of Study
Within the industrial and organizational components of I-O psychology are specific areas of study that can theoretically and practically apply to a business:
Improving workplace ergonomics
This aspect of I-O psychology seeks to understand how individuals can work more efficiently in their work environments through using specific methods, procedures, equipment and technology.
This aspect of I-O psychology consists of studying the process of how managers select employees for specific positions in a company or organization. It involves interviewing and screening individuals to assess what characteristics and skills best match potential positions. It also helps managers understand whether individuals qualify for certain jobs.
I-O psychologists in this area assess what types of jobs need what kind of training and development programs. They seek to understand what skill sets are necessary for certain jobs and how managers can help employees develop or enhance those skills through training.
As performance reviews are an integral aspect of business, I-O psychologists study how managers assess what their employees are doing well and what they need to improve upon.
This aspect of I-O psychology aims to reveal how organizations can become better overall, through increasing revenue, improving products, changing marketing techniques, establishing more effective policies and enforcing regulations.
As psychology seeks to understand why individuals think and behave in certain ways, I-O psychologists understand the importance of recognizing employees and advocating for their physical and mental wellness. Since productivity and quality of life are intrinsically connected, I-O psychology applies research that shows how to make jobs more meaningful for employees.
I-O Psychology and the Importance of Human Resource Management
I-O psychology can help a company manage its workforce more efficiently. It can also influence key human resources (HR) decisions, such as hiring the right applicants and keeping them satisfied on the job.
As I-O psychologists study the elements of what works and what needs improvement in organizations, they can also contribute to the overall effectiveness of human resource management (HRM). Professionals in I-O psychology and HRM play important roles in their organizations, serving as leaders for building teamwork and cooperation among employees.
One difference between the two roles is that I-O psychologists can work as either outside consultants or employees, while HR managers are usually permanent employees. While I-O psychologists study and implement research in the workplace, HR managers are experts in implementing legal policies and regulations.
However, while I-O psychologists and HR managers may have distinct roles, they work together to improve an organization’s quality of work and employees’ quality of life through hiring, retention and training. The research that I-O psychologists gather about employee morale, behavioral patterns and thought processes can help HR managers better handle employees’ issues.
Professionals working in I-O psychology as well as HRM have important responsibilities, including the following:
I-O psychologists and HR managers serve as leaders in their companies and help managers and business leaders implement training strategies.
Creating interviews and tests
Professionals working in I-O psychology and HRM help develop interviews and tests for managers to identify the best candidate for a potential position.
An important role of HRM is to encourage workplace diversity and cultivate an environment where employees from different backgrounds can work together.
Whether they’re conducting research on employees’ workplace needs or implementing practices to boost employee morale and productivity, both I-O psychologists and HR managers help improve employee performance.
I-O Psychology Salary
Salaries in I-O psychology range according to levels of education and years of experience. While individuals can begin their careers with a bachelor’s in organizational psychology, becoming an IO psychologist typically requires a master’s.
According to the U.S. Bureau of Labor Statistics (BLS), I-O psychologists made an annual median salary of $92,880 in 2019. Salaries across different fields and locations can vary. Individuals pursuing careers in I-O psychology can find work in management, scientific and technical consulting services. While there are many different careers in psychology, those interested in applying theories and principles to organizations and businesses may find a career in I-O psychology consulting services particularly rewarding.
Company managers and leaders directly consult with I-O psychologists to make decisions that can improve the effectiveness of their companies. The BLS reports that I-O psychologists working in management, scientific and consulting services made an annual median salary of $95,470 in 2018.
I-O psychologists working in scientific research and development services made an annual median salary of $149,780 in 2018, according to the BLS. These jobs can be found in various fields, including business, finance, architecture, engineering, education, design, health care, service, sales, production and transportation.
I-O psychologists working in higher education made an annual median salary of $70,360 in 2018, according to the BLS. As I-O psychologists build upon research and establish new theories and principles, colleges and universities look to educated psychologists to work as professors and teach the next generation of psychologists. The BLS reports that about 24% of all psychologists work in educational environments.
While some work in elementary, middle and high schools, the vast majority work in higher education. I-O psychologists also work in professional schools and business schools. Working in higher education can be a particularly rewarding career, as individuals can continue their research while teaching future I-O psychologists.
Industrial-Organizational Psychology Careers
I-O psychology includes many different specialties, and individuals can pursue various careers, including the following:
Human Resources Manager
Since the roles of I-O psychologists and HR managers are so connected, many professionals who study I-O psychology choose to pursue careers in HRM. HR managers serve as the bridge between an organization’s managers and employees. By working alongside business managers as well as employees, HR managers can help cultivate a healthy work environment and establish a sense of community in an organization.
HR managers are often in charge of an organization’s hiring and training processes. They work to develop materials for interviews and training sessions as well as help employees develop certain skills. HR managers work as supervisors and oversee employee productivity in different departments of a company. They address problems such as disputes and issues among employees and assess the level of intervention that different situations call for.
The job outlook for HR managers is positive: Employment is projected to grow by 7% between 2018 and 2028, according to the BLS. While some careers in I-O psychology require an advanced degree, employers usually only require HR managers to have a bachelor’s degree. The annual median salary for HR managers was $116,720 in 2019, according to the BLS.
Market Research Analyst
Another career option for those pursuing jobs in I-O psychology is market research analyst. Individuals in this career typically work as consultants for managers and often work in finance and insurance. Market research analysts create plans for collecting and analyzing data that can help organizations better understand their consumers and competitors. Through software that collects data via polls, questionnaires and surveys, market research analysts evaluate the effectiveness of marketing strategies.
The job outlook for market research analysts is rosy: Employment is projected to grow by 20% between 2018 and 2028, much faster than the average for all careers (5%), according to the BLS. The BLS reports that most employers expect market research analysts to have a bachelor’s degree and strong analytical skills. The annual median salary for market research analysts was $63,790 in 2019.
Training and Development Manager
A common career choice for professionals in I-O psychology is training and development manager. Training and development managers oversee employees to ensure that they’re effectively trained to carry out the organization’s goals. They prepare materials for training sessions and programs to focus on relevant issues and work as supervisors to help employees develop and enhance specific skills.
Training and development managers earned an annual median salary of $113,350 in 2019, according to the BLS. Employment of training and development managers is projected to grow by 8% between 2018 and 2028.
Management analyst is another career that incorporates many of the goals of I-O psychology. Management analysts often work as consultants, collecting information on problems from financial issues to personnel conflict and offering solutions. Management analysts produce reports regarding employee productivity and recommend that business leaders make changes through policies or procedures.
Management analysts made an annual median salary of $85,260 in 2019, according to the BLS. Most employers will hire management analysts with only a bachelor’s degree, although many favor professionals with a Certified Management Consultant (CMC) credential. Employment of management analysts is projected to grow by 14% between 2018 and 2028.
Gaining a Vital Edge in Business
Just as employees need to work together to meet the goals of their companies, organizations need effective leaders to run them. Managers can consult with professional I-O psychologists or hire them as permanent members of their staff. Organizations may also hire professionals with backgrounds in I-O psychology to work as managers. Incorporating the principles of I-O psychology into business development and growth strategies not only helps an organization’s productivity but also improves the quality of life for its employees.
Students and professionals looking to pursue a career in business can begin by establishing a foundation in I-O psychology. By understanding the theories and principles of how people think and behave in the workplace, future business leaders can have a better understanding of how to run efficient organizations. If you’re interested in merging I-O psychology and business, explore how Rider University’s online bachelor’s in organizational psychology can help you pursue your professional and business goals.