This paper will go over what psychology is and what business management is on its own. Once clarified, their similarities will be discussed as to how they are intercorrelated. The overlap between the two subjects will then expose how they benefit and advance over time.
Since the beginning of time, humans have found different ways to survive. This means having to work to find what we need. As this has progressed to the twenty-first century, work has turned into an art of negotiation and persuasion, otherwise known as businesses. Businesses don’t just handle themselves but rather contain people who observe their consumers in order to find what appeals to them. This creates a desperate need for those in business management to understand psychology.
Although commonly mistaken for pseudoscience by the general public, psychology is not as simple as creating a correlation between the two concepts. Wilhelm Wundt changed this idea by introducing empirical psychology, “a discipline concerned with the presentation of a consistent and reasoned account of the mind in use. Such psychology, typically, respects the authority of the past thought more than the data of present experimentation” (Carmichael, 1926, p.524).
Once Wundt was recognized as making psychology a science through empirical evidence, it expanded towards other ways to analyze the behavior and mental state of an organism. Technology allowed for a further understanding of biological components within organisms. In addition to the biological reactions organisms undergo in a particular situation, unconscious and conscious behavior also play a major role in understanding the psyche of a being.
“The rediscovery and mapping of the depths of the human consciousness initiated by Sigmund Freud” show that even though “contemporary human beings would like to believe that we have transcended our evolutionary origins, our animal nature lives within us—in our minds” (Ophuls, 2011, p.69-70). Despite our current knowledge of the mind, there is still much that is not completely understood. Not only does it difficult to analyze, but it is also difficult to conduct experiments due to ethical reasons and the effect it may have on the results.
On the other hand, business management is its own complex cobweb. As management entails, it means the necessity of creating new and innovative ideas, organizing, directing, leading, maintaining, and controlling. “Managers fulfill many roles and have many different responsibilities at each level of management” (Kyriazoglou, 2012, p.33). They contain the ability to coordinate any situation to be as efficient and successful in every way possible. Not only do they have to think about the success of a product, but how every employee interacts with one another.
This includes the training the workers have to go through, implementing the line of authority, and, most of all, clear communication. Their job is to lead, and “as leaders, managers create, inspire, motivate, and encourage their people to reach common organizational goals” (Kyriazoglou, 2012, p.34). These goals can signify anything from appealing to a consumer, meeting deadlines, or setting up functions for charity. This is to ensure that every person is doing their part of the job so every other aspect can run as smoothly as possible.
Psychology and business management tend to be seen as two completely different subjects. However, this is not always the case. They tend to overlap very frequently since both rely on the outcome of normal human behavior. While management may be seeing the well-being of the employees, they also study the population to ensure that everything being proposed seems appealing. Psychology, in the same sense, studies the public in order to improve the approach people have to different interactions or situations.
Kahneman and Tversky allowed modern society to start blurring the lines between business and psychology by questioning a theory that was once held by the business community. “Because modern portfolio theory rested on the assumption of rationality, the suggestion that individuals made decisions irrationally was revolutionary” and led to a need for “new revolutionary thinkers to help us reorient our perspective… who came not from the economic department but from psychology classrooms” (Hagstrom, 2013, p.67).
These thinkers led to an insight into how people approach choices. The way a product is framed may end up changing the view of the consumer. Now known as loss aversion, “Kahneman and Tversky were able to prove that people do not just look at the final level of wealth but rather at the incremental gains and losses that attribute to this wealth” (Hagstrom, 2013, p.69). That does not mean that human action can always be predicted.
Psychology doesn’t always give a straightforward answer that managers may seek. Over time, “evolving technological and social environment demands a changing curriculum… Humans are unpredictable and often irrational, managers no less so than others” (Harrigan, 2016, p.56). As a leader of the group, they must keep in mind the different identities within the workplace. The way a person conducts themselves can be based on their beliefs and values that are founded on their culture.
Understanding all perspectives is essential for communication when exposed to so many different people. Since a workplace tends to be a team effort, the messages being received by one person must be a hundred percent understood for every other part of the team to function. Thus making, “job analysis is a major topic, as well as personal selection, performance appraisal, and training and development” (Bechtoldt, 2011, p.11). By keeping these aspects in mind, managers can maintain a general idea of the performance of the employee at the workplace.
Management has used psychology to change the methods being used today. Teaching management entails “people, teams, and organizations as well as electives about organizational behavior, managerial negotiation, managerial decision making, and Ph.D. electives on social personality and cultural psychology” (Harrigan, 2016, p.62). Not only do they use psychology to approach the business world, but they analyze it to benefit the future of the company. This analysis and recording of interactions of managers in the business world have, in turn, benefitted psychology. Examining social behavior and the effect of a promotion or laying off an employee has given psychologists a different understanding of the business world.
Psychology and business management have worked hand in hand. This has created a better understanding of the human approach to the business world as well as the prosperity of the businesses themselves. Managers now have the ability to use various types of ways to handle their audience. By no longer being veiled by the misconception that all human decisions are rational, new techniques are used to understand the mind on its innate behavior.
