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ROLE OF PSYCHOLOGY IN BUSINESS ADMINISTRATION

Psychology is the science of behavior and cognitive process; where as

Administration (Business) is the organizing of Humans and resources

effectively so attain common goals.

So just by going through the definition we can understand the relationship

between psychology and business administration; that business are

comprised and exist only due to human beings and if we can describe,

explain, predict, control and modify human behavior1 we can manage

business more effectively and efficiently2.

In this way we can create opportunities for the business and all the stake

holders to take business to new horizons, if we can control the (major)

human factor related to any business.

There are many subjects and fields of business administration in which

Psychology can be helpful:

HRM3: If business executives can understand the mental level of the

recruited personnel, they can employee those who are more productive to

the business and well understand their further needs and compensation

plans.

Marketing: Customers are the ultimate link in the business cycle. Psychology

enables businesses to understand the behavior of the customers and so

provides and a competitive edge; making firms built to last.

Finance: Economic resources are the back bone of any business. If Finance

managers are well educated in the field of Psychology they can better

predict the needs of different projects/ departments etc. thus making the

budgeting and financial process more close to reality and decreasing the

probability of deviating from the budgeted amounts.

Organizational Behavior: Every organization act as a human being showing

its own behavior, through its culture. If employees can understand this

culture through the knowledge of Psychology they can make them selves

more culturally fit for the organization.

1 5 major goals of Psychology2 major goals of Business Administration3 Human Resource Management

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Economics: Psychology makes business to understand the market trends

more resourcefully, thus providing an upper hand to business decision

makers.

International Business (Comparative) Management: Equipped with the art of

Psychology mangers of MNCs become are able to comprehend and choosethe best international market for there products.

USA is one the top in producing best Business Administrators; one reason is

that; Business Administration and Management and Psychology are the first

and second most popular undergraduate majors in the U.S.4, and for good

reasons. It enables business administrators to understand the organization

and human behavior and so they are able to deliver 100% and gain mutual

benefit for them selves (career development) and for the organization

(wealth maximization). I strongly agree that Psychology must be made a

compulsory part of Business Administration in Pakistan also.

4 Source: Palo Alto University (website) USA

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