Role of psychology in business administration

Psychology, the study of behaviour and mental processes, is so obvious to have link and role in every field and every action of our life, including business administration, as studying human behaviour would help us understand the meaning, purpose, background and philosophy of every action in every human made process. The role and implementation of psychology as a subject and as a phenomenon is so vast due to its direct link with the human behaviour which affects all the processes and operations run by or under humans. So it plays a vital role in the field of business too as humans are directly involved in it as manufacturers, sellers, managers, buyers, consumers, retailers etc.

Organizations are run by the managers who are highly qualified, experienced and capable of dealing with the employees effectively. In short, managers deal with the situations and handle their human resource by planning, organizing, controlling and leading, all of which involve mental capabilities and thoughts to be put into process, which obviously is psychology.  The perception and behaviour of the employees on the other side plays an equal role as the managers’ in organizations, which also is nothing other than psychology.

Dealing with the financial matters of an organization, which is apparently solely related to numbers and quantities, also involves psychology. The assessment of costs and thinking of ways to reduce them, thinking of supplementing labour with machines, comparing different period’s costs and analyzing the market situations and rise and fall in the stocks, understanding the behaviour of investors, competitors and other stock holders, all involve psychology as a phenomenon.

The most important department of business related to psychology is the marketing department, which tends to understand the needs of consumers/customers and fulfilling those needs in the best economical way. Contrary to the conventional way of business known today as production concept, which involves manufacturing a product and selling it, considering that the buyers will buy the goods widely available to them, the newest concept, namely marketing, involves more understanding of the customers’ needs and the market situations and then producing best products to give value to customers is wholly psychology’s game; though the other two concepts involve psychology too.

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So psychology has its wings spread over all the p

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rocesses which involve humans by any means and thus help us in understanding the behaviours and dealing with them effectively, especially in business administration.