The Psychology of Business

The modern world is dominated by global businesses and corporate houses and any large scale enterprise requires a systematic understanding of employee and consumer demands, both material and non-material. The performance of business organizations depends on the performance of employees and the needs and expectations of the consumers, and so the ‘human’ factor is central to the success of any business. In recent years, say from the last part of the 20th century, there have been several changes in our understanding of human nature as it relates to work and performance in organizations and the primary focus in now on communication, leadership skills, and employee satisfaction. All these factors are important in enhancing the overall performance of any business organization. The psychology of business is thus primarily the psychology of employees and the psychology of consumers and it’s the organization that is responsible for maintaining the balance between consumer demands and employee demands. The Psychology of Employees - First let us talk about the psychology of employees. Any business house is operated by a number of employees and some of them are part of the higher management and are also considered as partners of business. The major elements that should be part of understanding the psychology of employees would be 1. Communication – Employee communication and understanding of business goals is an integral part of success and it is the duty of the management of an organisation to maintain direct and clear communication procedures through video conferences or seminars and presentations that would clearly state the mission and vision of the company. The communication between management and the other employees is thus a key aspect of employee or personnel psychology 2. Leadership – Any human resource manager or career counselor would focus first on developing leadership skills and leadership is an integral part of business because our inner leadership skills help us to break the mould and do something different and pioneering. Leadership skills in employees are important as team leaders in an organization are required to motivate other employees to attain certain company objectives. Leadership is thus closely related to motivation as a highly motivated individual will also be more likely to show leadership skills 3. Satisfaction – Employee satisfaction is an important aspect of business and we hear of several companies declaring large pay packages and incentives to retain the best talent. Job satisfaction, material satisfaction in terms of salary and bonuses, and social satisfaction with regard to the work ambience are essential aspects of business and all businesses will have to pay specific attention to employee social, financial and emotional satisfaction. Fulfilling the needs of employees should be the primary focus of companies and this could be in accordance with Maslow’s hierarchy of needs in which it has been suggested that financial security, personal safety would be very important to humans followed by emotional need for social contact and connection and then we have esteem needs for social status and reputation. Employee psychology is thus based on these three major factors or elements of business and all businesses should pay considerable attention to employee communication, leadership and motivation and employee satisfaction as essential aspects of psychology of business that can in turn enhance performance. The Psychology of Clients/Consumers – Apart from employees, the consumers or customers are an integral aspect of business and the business management or corporate heads will have to understand the needs of customers as well in order to expand their business potential. Consumer psychology is based on several elements and this has a direct relation to whether businesses will thrive in a competitive global environment. Consumer psychology is shaped by the following related factors.

1. Innovation – Consumers are ever curious and eager to buy new products and services and their own expectations and satisfaction tend to drive business innovation. Innovation is the direct result of consumer necessities and any innovative or novel product immediately gets consumer attention. The apple iPod or iPhone attracted consumer attention with the novelty so innovation as it relates to business has a direct impact on consumer psychology.

2. Branding – Brands indicate social status and many individuals prefer to buy branded products as these products promise quality and enhances social prestige. Women spend thousands on Gucci or Chanel products simply they want to be seen with designer clothes, shoes and accessories. Designer brands apart, regular brands for food products let’s say Kellogs or Nestle are company names which are perceived as brands signifying quality. Consumers are not just interested in innovation and innovative products but they are also interested in familiarity and thus innovative products of renowned/familiar brands or companies are the most successful in the market. Psychologically we are seekers of novelty and we are also seekers of familiarity and a certain amount of routine. Thus both these needs have to be balanced in case of consumer expectations and only then businesses can be successful. Brands are synonymous with company reputation and increase consumer confidence.

3. Performance – Company performance in terms of stock market indications, annual reports, projections of company profits improve consumer confidence and in business performance drives performance. Thus if a company’s prospects are bright and company growth is projected, the business halo effect works immediately and further improves business. When employee psychological factors should be considered to enhance company performance, performance in turn is a factor to meet consumer psychological demands. So business performance is a two way process, it is driven by consumer expectations and drives employee contribution. Thus consumer psychology which is based on demands and expectations for products and services are guided by these following factors of the extent of innovativeness of a company, the brand or reputation of the company and the performance of the business organization. Employee psychology which in turn is also based on demands and expectations of employees highlights the extent to which they have communication facilities and the extent to which employees are motivated or satisfied in their jobs. Thus the psychology of business has two distinct branches – that which deals with employee interests and that which deals with consumer interests and although these can at times overlap, the elements are distinct and I have tried to differentiate between the key elements of consumer business psychology and employee business psychology. Thus any composite organizational business psychology will consist of both these aspects of employee personal development through human resource management consisting of elements of motivation/leadership, communication and satisfaction; and expansion of consumer base through organisational goal achievements through performance, innovation and branding. Apart from the elements discussed here, business psychology involves a whole gamut of psychological aspects considering needs of consumers, employees and the organization in general and this is also closely related with advertising, marketing, and business orientation and objectives of a company. In fact business psychology should also include company strategies as basic elements of an organizational psychology as well. Thus business psychology is comprehensive including consumer needs and employee needs and although these needs may encompass organizational needs, a distinct organizational psychology could well be drawn out from this and I will take this up in a latter discussion of this ongoing series in psychology.

Wall Street Plunges As Oil Price Jumps

City traders are braced for a white knuckle ride when markets reopen tomorrow morning, after Wall Street plunged 400 points late on Friday. Fresh fears emerged that the credit crunch will drag America deep into recession. Oil prices jumped by $10 a barrel in a day, to close above $139, after remarks by Israel appeared to threaten military action against Iran; and investors took fright at the impact of yet higher energy costs for the gas-guzzling American economy. 'Everybody here is on tenterhooks,' said Brian Bethune, chief US financial economist at consultancy Global Insight. 'It was like throwing a grenade into the pigeons in Trafalgar Square.' He said Wall Street had become too complacent about the prospects for economic recovery and Friday's sell-off marked a reality check. But the extraordinary $10 jump in the oil price also underlined fears that the market has been boosted by huge flows of speculative cash and is destined for a dramatic correction. One of America's leading auto industry experts is calling on Congress to act to prevent a market crash. 'We have seen this before,' said David Cole, head of the Centre for Automotive Research in Detroit. 'In the late 1970s the price ran up to previously unimaginable heights and once it reached a peak it came crashing down, way below the levels traded before prices started to rise.' Cole believes that a sudden price fall could cause as much economic turmoil as the rapid rise seen over the past year. 'When prices collapsed in the late Seventies all investment in alternative fuel technology ceased and essentially led the auto industry to the mess it is in today,' Cole says. 'The same would happen if prices fell below $50 a barrel today. The whole cycle would repeat itself.' Cole, with the support of leading US auto industry executives, is expected to call on Congress to set a lower limit for the price of oil. 'If we set a floor of $50 a barrel the investment the big auto manufacturers are making in alternative technologies will be protected,' he said. 'If not they will fail.'

Economists Worry as Consumers Spend Rebate Checks on Food and Gas

The U.S. economy only saw a .02 percent bump after consumers began receiving their "economic stimulus" checks last month. That’s because for most folks, rising gas and food prices have turned them into "stretch the budget to the next payday" checks. The Bush administration had hope that giving people back a little bit more of their own money ($110 billion in total) might give a much needed boost to the tanking U.S. economy. However, in the past few months, $4 a gallon gas and sharply rising food costs have forced those who fantasized about buying that big-screen TV to consider how they need to focus instead on keeping a roof over their heads. "In the economic grand scheme of things, I'm not quite sure that's what they intended us to spend our money on — inflation — but that's where ours went," said Brandi Dobbins to reporters. Dobbins wasn’t alone. Countless stories were shared of people who had initially thought about spending their economic-boost checks on vacations or high-tech toys, but then realized they needed to pay overdue bills or stock up on necessities. Chris Benton, 40, a network manager, told reporters, "I just put mine right in the bank," saying he’d originally wanted to buy some luxuries but changed his mind. "I'd like to buy a Blu-ray disc player," said Benton. "But with gasoline prices the way they are, I decided to hold on to it." Economists say they’re worried. United States economist Joseph LaVorgna from Deutsche Bank told reporters at ABC he was surprised by how much of consumers’ checks are going to be spent on energy costs. "It's not going to give you the bang for the buck as originally envisioned," said LaVorgna to reporters. "The odds of it having a longer-lasting impact on the economy are less. People were [originally] not planning to use so much of it on energy and food." There are, of course, some people who decided to either throw caution to the wind or defended their splurges as altruistic attempts to boost the economy. Sales at electronics stores saw a mild up tick during the month of April. Best Buy has been offering a "rebate check" deal, in which 10% of the check’s value is added to the total and transferred to a gift card redeemable at the store if the entire check is cashed there. "[Customers] are spending those checks on home theaters, big-screen TVs, desktop and laptop computers, and digital cameras," said Jesse Guzman, who works at a Best Buy store in Tennessee. But Guzman himself is not spending his rebate at the store where he works. "I have kids who need their wisdom teeth removed," said Guzman to reporters. "That's where mine is going." One economist, Diane Swonk from Mesirow Financial in Illinois, says that people deciding to spend their windfalls on basic living expenses is a sign of "a very stressed consumer." However, other economic experts say the picture isn’t as dire as it might seem, and predict that the U.S. will not even slide into a full recession. Only time will tell. In the meantime, folks remain grateful that they’re getting the money, even while worrying about how far it may go. "Honestly, I think it's kind of silly that the government is paying us money when it's having such a hard time paying its own bills," said graphic designer Sara Jackson, to ABC. "But shoot, who's going to turn down money when they give it to you?"