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Why Knowledge of Psychology Is a Leadership Skill Worth Cultivating

Master of Business Administration (MBA) program curricula typically include coursework focused on leadership and organizational behavior. Through these studies, aspiring managers gain insight into the psychology of employee behavior and motivation in the workplace. Understanding these aspects of employee psychology is essential for driving productivity, job satisfaction and organizational change.

Pittsburg State University’s MBA General online program explores the study of psychology in business through coursework focused on consumer behavior in the context of marketing, consumer analytics and corporate social responsiveness.

Psychological factors impact both business-facing and customer-facing managerial practices. Therefore, knowledge of the intersection between psychology and business management is a leadership skill that managers in the making would do well to develop.

How Does Psychology-Informed Management Impact the Workplace Environment?

The American Psychological Association (APA) emphasizes the central role of psychology in the workplace. APA explains that psychology “helps managers at all levels of organizations select, support, motivate and train employees … build better workspaces and foster healthy behavior.”

A business’s success depends on employee productivity and talent retention. Employee motivation, engagement and job satisfaction are major determinants of productivity and retention. These aspects of the employee experience are interrelated and largely psychological in nature, rooted in behavior and relationships.

Take job satisfaction for example. According to McKinsey & Company, “Countless studies show the empirical link between employee satisfaction, customer loyalty, and profitability.”

McKinsey analyzed various international surveys regarding main drivers of job satisfaction. Again, interpersonal relationships topped the list. Interestingly, 86% of survey respondents cited relationships with management as the top driver of “satisfaction in interpersonal relationships at work.”

Managers play a key part in creating workplaces and work cultures built around strong interpersonal relationships. Ensuring psychological safety for employees, which McKinsey defines as “the absence of interpersonal fear as a driver of employee behavior,” is an essential component of strong interpersonal relationships.

Second only to interpersonal relationships, having an “interesting job” was the top driver of job satisfaction for 35% of survey respondents. An “interesting job” could be thought of as work that is intrinsically motivating, meaningful, engaging and positively challenging.

Basing one’s leadership and management style around the psychological drivers of motivation and engagement helps create meaningful work for employees. Doing so involves giving staff what they need to do their jobs well, namely clear and attainable expectations, guidance, trust and support in both practical matters and emotional health.

A Forbes article also shines a light on research regarding managerial actions that can improve the psychological well-being of employees. Creating a work culture that supports inclusion and interpersonal connections helps mitigate isolation and decrease harmful behaviors like bullying and sexual harassment. Practices like providing mindfulness training and increasing natural light in the work environment can help reduce stress and improve job satisfaction.

What Kinds of Customer-Facing and External Business Practices Are Influenced by Psychology?

Lexico defines psychology as “The scientific study of the human mind and its functions, especially those affecting behavior in a given context.” The study of consumer behavior is a form of psychology in the context of how consumers interact with businesses, make buying decisions, develop brand loyalty and more.

Businesses strive to understand consumer needs and desires, designing and offering products and services accordingly. Marketing strategists research what makes consumers tick, why they connect with brands and how marketing efforts can best reach and engage those consumers. Customer relationship management nurtures that connection, driving brand loyalty and long-term sales.

Most aspects of customer-facing business practices are rooted in the psychology of consumer behavior. For instance, psychological principles underlie traditional marketing practices like manipulating perceptions of supply and demand or novelty to motivate buying decisions.

Increasingly, businesses are employing more customer-centric approaches to consumer engagement, like personalized and inbound marketing techniques. Consumers have grown to expect this degree of personalization and, along with it, value-alignment with the companies they support.

McKinsey notes the importance of applying behavioral psychology principles to create truly customer-centric organizations. This application can improve customer interactions and a brand’s reputation, driving brand recognition and loyalty.

As a demonstrated form of value-alignment, a company’s reputation for social responsiveness has also become a factor in customer buying decisions. Moreover, social responsiveness is driving the employment decisions of job candidates, too. As a result, companies that want to attract top talent must understand and be responsive to job seekers’ psychological motivations and values.

The psychological underpinnings of public perception, consumer behavior and the employee experience have many implications for business strategy and leadership. Through cultivating knowledge of psychology, business leaders can improve employee satisfaction, productivity and retention as well as customer relationship development. These positive outcomes are crucial factors for success in today’s complex business environment.

Learn more about Pittsburg State University’s Professional Master of Business Administration online program.

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