Knowledge Kingdom

Behind the Slides: Introduction to Business Psychology

Michael Doroszewski

04 Oct 2024 — 8 min read

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In my work as an Agile Coach and psychologist, I frequently encounter the question: “How does psychology influence our daily actions in the business world?” This question is not only relevant to students but also to professional colleagues and anyone interested in the human aspects of organizations.

Originally, I prepared this manuscript as supplementary material for my Business Psychology lectures at the University of Ludwigshafen, where I teach once a year. It was intended to serve as “Behind the Slides,” offering a deeper insight into the topics we discuss in class. However, after numerous conversations with colleagues and repeated requests to make the fundamentals of this fascinating field more accessible, I’ve decided to share it here on my blog.

Introduction

Psychology is ubiquitous, yet for many, it remains a mystery. Terms like conditioning, archetype, or subconscious are embedded in our everyday language, but their true meanings are unclear. We have images of psychologists who either observe lab rats or provide therapy to patients on a couch. However, these stereotypes fall short and obscure the true depth and diversity of psychology.

Business psychology is a fascinating field that bridges human behavior and economic processes. It explores how we make decisions, how we interact within organizations, and how our individual and collective actions influence the economy. Topics such as communication, leadership styles, and corporate culture are central to this discipline.

Example: Imagine a company struggling to motivate its employees. By applying concepts from motivational psychology, the company can develop strategies to increase employee satisfaction and boost productivity.

In this course, we will jointly explore the world of business psychology. We will understand how psychological principles can be applied in the workplace to make better decisions, build more effective teams, and successfully lead organizations. Along the way, we will challenge common clichés and develop a deeper understanding of the role of psychology in business.

What is Psychology?

Psychology is the science of human experience and behavior. What does that mean? Various definitions provide us with insight:

The subject of psychology is human experience, behavior, and action. (Hussy et al. (2013))
The Dorsch Dictionary of Psychology describes it as the science of experience and behavior: content, structure, systematics.
The German Association of Psychologists (BDP) emphasizes: Scientific psychology aims to recognize, using models and research strategies from the humanities, social sciences, and natural sciences, how people experience, understand, and organize their personal lives in social relationships and communities.

Common to all definitions is the focus on humans: how we feel, think, and act. Psychology is an empirical science that aims to describe, explain, and predict human behavior. It investigates both internal processes like thoughts and emotions and external influences such as the environment and social interactions.

Example: If a company wants to understand why certain advertising campaigns are successful and others are not, it applies psychological principles to analyze the impact of messages on consumer behavior.

There is no single definition of psychology, and that’s a good thing. The diversity of perspectives allows us to understand humans in all their complexity.

The Roots of Psychology: Philosophy and Antiquity

Psychology has a long past but only a short history.
– Hermann Ebbinghaus

The questions that psychology poses are as old as humanity itself. In antiquity, philosophers like Plato and Aristotle delved into the human mind and soul.

Plato illustrates in his famous Allegory of the Cave how our perception may only be a reflection of reality. He questions whether we truly see the world as it is or if we only recognize shadows of the true forms.

Aristotle authored De Anima, the first comprehensive work on the soul. He examined the functions of the mind, laying the groundwork for many areas of modern psychology.

These philosophical reflections formed the foundation for modern psychology. They show us that the quest to understand the human mind is deeply rooted in our history.

The Four Temperaments: An Ancient Personality Theory

Nanos gigantum humeris insidentes (Dwarfs standing on the shoulders of giants)
– Bernard of Chartres

The idea that people have different temperaments dates back to ancient physicians and philosophers. Galen of Pergamon developed a typology of temperaments based on the doctrine of the four bodily humors:

Sanguine: Optimistic, sociable, and warm-hearted. Their nature is dominated by blood.
Phlegmatic: Calm, reliable, and composed. Phlegm is their dominant bodily humor.
Choleric: Energetic, passionate, and irritable. They are dominated by yellow bile.
Melancholic: Thoughtful, sensitive, and often serious. Black bile shapes their temperament.

Example: Although the four-temperament theory is scientifically outdated today, its influences are found in modern personality tests, such as the Myers-Briggs Type Indicator, which categorizes people into different personality types to better understand their preferences and behaviors.

This theory was a central model for explaining personality differences for many centuries. It provides us with an interesting insight into how early humans attempted to categorize and understand behavior.

The Rise of Modern Psychology

In the 19th century, psychology began to establish itself as an independent science. Wilhelm Wundt founded the first psychological laboratory in Leipzig in 1879. This marked a turning point: psychology became experimental and empirical.

Behaviorism: Focus on Behavior

Behaviorism emerged as a reaction to the difficulty of measuring internal processes. Proponents like John B. Watson and B.F. Skinner emphasized that only observable behavior can be scientifically studied.

Ivan Pavlov, a Russian physiologist, significantly contributed to behaviorism with his experiments on classical conditioning. His famous experiment with dogs demonstrated how reflexive reactions can be learned through association.

Example: In advertising, the principle of classical conditioning is applied. A product is repeatedly paired with positive stimuli like pleasant music or attractive images to evoke positive emotions in consumers.

Principles of Behaviorism:

Behavioral Analysis: Systematic investigation of behavior under controlled conditions.
Observable Behavior: Focus on directly observable and measurable behaviors.
Animal Experiments: Use of animal studies to derive universally valid behavioral principles.
Avoidance of Speculation: Rejection of theories about internal mental processes.

Psychoanalysis: Exploring the Unconscious

Simultaneously, Sigmund Freud developed psychoanalysis. He argued that many of our actions are driven by unconscious motives and conflicts. Through techniques like dream interpretation and free association, he attempted to access the unconscious.

Example: In brand communication, companies use unconscious motives to appeal to customers. Luxury brands tap into the need for status and recognition, often without consumers being aware of these motives.

Principles of Psychoanalysis:

Unconscious Processes: Many behaviors are driven by unconscious motives and conflicts.
Structural Model of the Psyche: Id (drives), Ego (reality principle), Superego (conscience).
Therapeutic Approach: The goal is to bring repressed content into consciousness, thereby alleviating psychological disorders.

Cognitive Revolution: Back to Thinking

In the 1950s, psychology experienced a cognitive revolution. Researchers like Jean Piaget and Noam Chomsky began to focus on mental processes such as thinking, perception, and memory.

Example: In personnel development, cognitive learning strategies are employed to effectively teach employees new skills. Understanding memory processes allows for the optimization of training programs.

Principles of Cognitive Psychology:

Mental Processes: Investigation of how information is received, processed, and stored.
Information Processing: Analogies to computers; the brain as an information-processing system.
Objective Methods: Use of experimental methods to study cognitive processes.

Humanistic Psychology: The Human at the Center

Humanistic psychology, shaped by Abraham Maslow and Carl Rogers, emphasized individual growth potential and self-actualization.

Example: Companies like Google promote the self-actualization of their employees by providing freedom for creative projects. This is based on Maslow’s concept of self-actualization as the highest human motivation.

Principles of Humanistic Psychology:

Self-Actualization: Striving for personal growth and fulfillment.
Holistic Approach: Viewing the person as a unity of body, mind, and soul.
Positive Perspective: Focus on resources and potentials rather than deficits.

Branches of Psychology: What Psychology Students Learn

Psychology is diverse and interdisciplinary. Here is an overview of the curriculum’s focal points:

Developmental Psychology

Investigates how people change over their lifespan.

Example: Toy manufacturers use developmental psychology insights to create products that align with the cognitive and motor skills of different age groups.

Biological Psychology

Explores the biological foundations of behavior.

Example: Neuromarketing uses brain scans to study how consumers react to stimuli, making advertising messages more effective.

Studies how we are influenced by others.

Example: In teamwork, social influences like groupthink can lead to suboptimal decisions. Social psychology interventions can improve decision quality.

Differential and Personality Psychology

Focuses on individual differences.

Example: In personnel selection, personality tests are used to identify applicants who fit well with the company and the position.

General Psychology

Seeks universal principles of human experience and behavior.

Example: Insights about attention help design work environments that minimize distractions and enhance productivity.

Psychological Methodology

Provides the tools to conduct psychological research.

Example: In market research, statistical methods are applied to analyze customer data and identify trends.

What is Business Psychology?

"Economy is made by people.” – This simple yet profound quote by Fichtner (2018) captures the essence. Business psychology deals with human experience and behavior in economic activities.

Example: A company aiming to increase its sales can develop marketing strategies by analyzing customer purchasing behavior and preferences.

It combines psychological insights with economic questions. How do people make purchasing decisions? What motivates employees? How do leadership cultures emerge?

The German Association of Psychologists (BDP) describes business psychology as applied psychology that deals with human experience and behavior at work and its effects on organizations and employees.

Fields of Activity for Business Psychologists

The areas of application for business psychologists are diverse:

Human Resource Management

Personnel Selection: Developing selection procedures that consider not only qualifications but also personality and potential.

Example: A company uses structured interviews and psychometric tests to identify the best candidates for leadership positions.

Personnel Development: Designing training measures, coaching, and mentoring.

Example: Tailored training programs prepare employees for future challenges.

Leadership Development: Supporting leaders in their personal and professional growth.

Example: Leaders receive coaching to reflect on and enhance their leadership styles.

Organizational Development

Change Management: Guiding change processes within companies.

Example: During the merger of two companies, business psychologists help bridge cultural differences and reduce resistance.

Team Development: Promoting effective collaboration.

Example: Team workshops improve communication structures and resolve conflicts.

Corporate Culture: Designing and transforming organizational values and norms.

Example: A company seeks to establish a more innovation-friendly culture and initiates programs to foster creative thinking.

Market Research and Consumer Behavior

Consumer Psychology: Understanding why people purchase products.

Example: A beverage manufacturer analyzes the buying motives of its target group to successfully launch a new product.

Advertising Psychology: Designing marketing strategies that resonate.

Example: A/B testing optimizes advertisements to increase the conversion rate.

Branding: Building strong brands that evoke emotions.

Example: A fashion brand uses storytelling to create an emotional bond with its customers.

Occupational Psychology

Job Satisfaction: Implementing measures to enhance well-being in the workplace.

Example: Employee surveys reveal dissatisfaction, leading to initiatives to improve working conditions.

Health Management: Preventing stress and burnout.

Example: Introducing stress management seminars and flexible working hours.

Work-Life Balance: Promoting a healthy balance between work and personal life.

Example: A company offers remote work options and part-time models.

Financial Psychology

Investment Behavior: Understanding why people make certain financial decisions.

Example: Banks use insights from behavioral economics to develop investment products that meet customer needs.

Risk Perception: How do we assess risks and opportunities?

Example: Insurance companies tailor their products to match customers’ subjective risk assessments.

Usability and User Experience

Product Design: Developing user-friendly products and technologies.

Example: A software company tests its applications with users to optimize usability.

Website Design: Crafting intuitive and engaging online experiences.

Example: Eye-tracking studies improve website navigation to enhance user satisfaction.

Final Thoughts

Business psychology opens our eyes to the human factors behind economic processes. It shows that numbers and data tell only part of the story. It is people—with their emotions, motives, and behaviors—who shape the economy.

In this course, we will discover how psychological knowledge can be leveraged to overcome economic challenges. We will learn to think critically, recognize connections, and develop innovative solutions.

I invite you to be curious, ask questions, and actively engage.