Nov 7, 2019 in Business

Psychology in the Business World

In the modern world, psychology affects virtually all areas and activities of human life, including the economic. However, it cannot be considered strange, since psychology studies human motivation, feelings, and emotions, which are also present in business. After all, the business exists and functions at the expense of communication between people. Thus, in order for it to be successful, the communication at all of its stages should be as efficient as possible – from telephone conversations with partners to negotiations and concluding the deals. However, psychology and business are related to each other much more closely than it may seem for a person that does not get into the specifics of business psychology. In fact, entrepreneurship involves the art of the efficient management of the productive forces and the improvement of business relationships. After all, the high-quality goods are produced not by machines, but rather due to the efforts of the specific people that are in a certain relationship with each other. It turns out that the well-organized team of professionals is an essential tool for any production, and the most important commodity for the entrepreneur to deal with is the labor force that has different prices depending on its quality and productive capacity. Thus, the head of any production must ensure the compliance with the technological requirements that oblige him to actively interact with people, and, therefore, understand them on the psychological level. All these facts contribute to the significance of physiological sciences for the business. However, it should be noted that psychology as a whole cannot be applied to each of its aspects, which has emphasized the creation of the specific branches of this science. Therefore, the following work is dedicated to the study of the role of psychology in the business on the different levels: personality, enterprise, and international relations.

Personality in the Business

Many entrepreneurs, as well as the other people, think that in business, one should strive to build the enterprise as a self-regulating system, being able to work without the interference of the entrepreneur. In particular, it is a logical desire to step back from the business and operational management, as these activities are rather strenuous. However, the problem cannot be resolved in such a way as the company is a lifetime monument to its creator, or rather, an instantaneous photograph, reflecting his personality. In particular, the researchers studying the corporate culture argue that as the most inertial control object, it is almost entirely dependent on the personality of the founder of the business. Indeed, it is a man, who had the idea of creating this business, the person that defined the way to enter the market, the development strategy of the business in its first 10-15 years, is strongly associated with the name of the company in the minds and aspirations of humanity. The personality of the first head of the company determines the firm’s lifestyle that subsequently develops into a system of relations with partners, customers, and employees. The style of communication of that man creates a style of relationships within the organization. His life priorities define the corporate values of the organization for many years to come.

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However, this situation occurs only if the leadership in the company is uniquely determined by the right of ownership of its CEO. In case there are several partners that are not only working in a joint, but also have a bitter struggle for power among themselves, the company may face a number of serious consequences. Such a situation can be illustrated by a simple example. In one trading company, there were two directors, one being an optimistic extrovert, a joker and humorist, and the second – a classic introvert, prone to introspection and thinking about long-term solutions. They came to the need to separate their zones of influence, as they could hardly make quick decisions together. As a result, the first has become engaged in the sales, and the second – in the foreign economic activity. However, their personalities were not suited for such type of work. Therefore, such a decision has resulted in the purchase of expensive goods without focus on the end customer, a complete mismatch of styles of communication departments reporting to the different directors, and, as a consequence, a total disorganization of the company and the corresponding financial results.

This example clearly shows that the organization of the business, its development strategy, and corporate culture are very dependent on management style, and, consequently, the personality of its head. Therefore, the role of personality in the business, especially the one of a leader, cannot be overestimated.

Industrial and Organizational Psychology

On the contrary to the psychology of the personality that is focused on the single person, industrial and organizational branches of psychology deal with the entire groups of people in the workplace. They are engaged in finding out the impact of an industrial structure of the company, practices, coworkers, managers, and the work environment as a whole on the staff. Being a multi-discipline, these branches of psychology consist of heterogeneous components. One of the most important of them is the psychology of personnel that is focused on the recruitment, selection, training, and evaluation of the employees and assisting them in the context of the current and future needs of the organization. Another significant branch is the organizational psychology that studies how people build relationships with each other and with the organization and how to take into account their emotional and social needs. In addition, ergonomics as a branch of industrial psychology deals with the modification of tools and the other physical aspects of the manufacturing environment in order to facilitate the work and enhance its effectiveness and safety. Finally, the psychology of consumer behavior studies how to adjust the goods and services produced by the organization to the needs and desires of the consumers and establish the efficient marketing.

Despite this branch of psychology is focused on the people in the working environment, the problem and solutions offered by it can be related to many others aspects of the daily life. Many people devote the most part of their time to work, namely business, gaining self-esteem and social prestige mainly through their professional identity. In case their business is successful, they are likely to be satisfied with life while dissatisfaction with their job can make them unhappy. Almost everything that people use, including clothing, shelter, transportation, healthcare and educational services, entertainment is a product of labor, and the purchase of goods and services is possible due to the efforts of all workers, from business owners and managers to those that have just joined the staff.

Moreover, the prosperity or decline of the entire country depends not only on its natural resources, geographical location or socio-political history, but also its workforce. Some countries with an unfavorable geographical location and difficult history, namely Japan, have managed to become highly developed and successful. Such a success is the merit of the people of these countries, as it has been reached due to their efforts, and because of their attitude to work. Therefore, personnel psychology is one of the most important areas of business psychology not only on the scale of a particular person, but also the company and even the country as a whole.

Finally, without the discipline of ergonomics, cars, furniture, appliances, and surgical instruments would be less user-friendly due to the fact that human factors were not properly taken into account during their designing. Without ergonomics, the opportunities for the development of such areas of business as air transport or robotics would be limited while nuclear and space industries would not have existed at all. Finally, the psychology of consumer concerns the everyday life of every person, including almost everything the people own or acquire, and making it possible to predict certain changes in their behavior and develop a successful marketing strategy. Therefore, it is possible to say that the industrial and organizational branches of psychology have the most significant impact not only on the functioning of the business, but also its development.

Psychology of the International Business

Nowadays, international business is considered one of the most prestigious and well-paid fields of activity. However, by working closely with foreigners one may come to the conclusion that people of the other cultures are strikingly strange. Sometimes it seems that it is absolutely impossible to reach a mutual agreement with a foreign partner. Moreover, due to the national differences, the parties often cannot conclude a lucrative contract. For example, when asking a Japanese to borrow a hundred dollars, the answer will be positive. However, it does not guarantee that the money will be borrowed. By agreeing, the Japanese only informs that he has heard the request, and nothing more. In business, such a misunderstanding may have a high price. Therefore, when faced with the other cultures it is required to study their national characteristics. Namely, it can be achieved with the help of psychology, which gives an insight on the attitude of a particular nation.

First of all, psychology of the international business gives the knowledge about the concept of time for different countries. Depending on its significance, it defines mono-active, poly-active and reactive cultures. In mono-active cultures, such as Germany, managers carefully plan their activities in a specific sequence or schedule. In poly-active cultures, such as Spain, the decisions are made on the basis of momentary preferences. The residents of these countries can easily break schedules. The U.S. usually occupies an intermediate position between these two due to it being a melting pot for many various cultures. In the Islamic world, time moves cyclically: in accordance with the sunrise and sunset, as well as the changing seasons. Thus, managers of these cultures do not hurry. Moreover, they believe that there is always a second chance, and in the next time cycle, the people will be wiser and more prepared for the deal. The most outstanding representatives of reactive cultures are such countries as Saudi Arabia and Afghanistan.

Another important aspect is the sense of collectivism. In the Western countries, the employees of companies are mostly focused on the personal gain. On the other hand, the eastern managers consider the common good. For example, during the greeting, an American will say: “Adam Richardson, wholesale department, Microsoft Corporation”. In the East, which is dominated by collectivism the order of words will be changed: “Sony Corporation, marketing department, Ken Yamamoto.” In the course of negotiations with foreign partners, cross-cultural differences of speech styles are also manifested. Namely, a direct style expresses the true intentions of the speaker. It is characteristic mainly for the United States. The opposite is indirect (artsy) style. It is characterized by voice messages that camouflage and conceal the true intentions of the speaker. As a rule, the indirect style is inherent in the cultures of Southeast Asia and the Arab world. In addition, during the communication with foreigners, most of the information transferred nonverbally. An inserted pause or innocent (from the perspective of a particular culture) gesture may not only distort the meaning of what was said, but also cause a negative reaction of the interlocutor.

Thus, in the case of contact with the other people’s business culture managers often experience the so-called culture shock. It is accompanied by anxiety, tension, a sense of loss and rejection. The degree of shock depends on the value of cross-cultural differences, but its effect can be reduced with the help of knowledge of the certain cultural peculiarities of the people of a particular country, i.e. the knowledge of psychology of the international business. As a result, the ability to adequately react on the actions of the representatives of the different business cultures increases the chances for making a successful deal, signing the contract, or creating a joint venture, which has a positive effect on the company represented by the interlocutor. These facts further emphasize the importance of psychology for the business.

Conclusion

As a conclusion, it is possible to say that business is a process of the development of people and for the people. Therefore, it is not the economy and finance that are the main subjects of study for businessmen, but rather the psychology, the study of which leads to an understanding of the inner life of the people around them. Business is a unity of labor, health and creative ideas while psychology is a discipline focused on the development of efficiency of labor, strengthening the welfare, and the development of the inner resources of the people. In a certain sense, businessmen and psychologists are colleagues engaged in one case – contributing to the development of people’s lives. As a result, the modern enterprise is simply unthinkable without the involvement of professional psychologists to develop the business teams. For today’s business, the understanding of the role of the psychologist in a private firm becomes a norm as the modern world is focused on the development of the other economic and business relations based on genuine mutual respect and responsibility for the one’s own business culture.

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