The Business Benefits of
Industrial/Organizational Psychology
at ACME Aluminum
Trial Case Study: The Skeptical CEO
Behavioral Factors APPL641.185
Dr. Tom Mitchell
Cathy L. Harville
September 20, 1999
The Business Benefits of
Industrial/Organizational Psychology at ACME Aluminum
Dramatic increases in technology and consumer demands are changing the methods
many organizations use to remain competitive and to meet economic goals. From its roots
in the early 20th century, Industrial/Organizational (I/O) psychology has helped numerous
organizations experience economic growth and remain competitive in a demanding
marketplace.
This paper will describe the basis and origins of I/O psychology as well as general
applications that benefit businesses today. The final section of the discussion will focus on
the application of I/O psychology in order to create solutions for current business issues at
Acme Aluminum.
Description of I/O psychology
I/O psychology is a science where the topic of study is human behavior and how
this behavior may affect employee performance and the realization of organizational goals.
The approaches used in I/O psychology are the result of rigorous scientific testing under
the scrutiny of peer review. In addition, the field of I/O psychology is interdisciplinary.
Scientists from other fields, such as industrial engineering, management science, business
computing and ergonomics, participate in research and business applications (Beehr,
1996; Scherer, 1998).
I/O psychology is easily explained by considering the three levels it encompasses:
individual, group, and organizational (Beehr, 1996). At the individual level, the interaction
of employees with their jobs and environments are examined. Studies at this level may
prove helpful in addressing morale issues. At the group level, the focus is on interpersonal
interactions of group members and their effect on work. The dynamics of unions are a
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good example of group behavior. Finally, the organizational level emphasizes the impact
that organizational issues have on employees in the organization, and how groups in the
organization may interact with each other. An example of a topic for organizational study
is the interaction of unions with management.
It is easy to see that I/O psychology encompasses issues at all levels in the
organization, making this scientific discipline a comprehensive approach to problem
solving and growth.
History of I/O psychology
Even before WWI, psychologists were interested in employee behavior in the workplace
and how productivity may be optimized. In 1911, Frederick Taylor, a prominent industrial
engineer of the day, studied how manual laborers’ productivity could be increased and
optimized (Schultz & Schultz, 1996). As the industrial revolution gained momentum,
businesses were challenged with increasing production for a hungry economy, while still
maintaining a healthy environment for employees. Since increasing production (which
requires more efficient production and/or additional capital) and maintaining a healthy
work environment (which implies higher costs for production) are often diametrical,
business dilemmas developed that required immediate attention from scientists. For
example, in the 1920’s and 1930’s, a series of studies now referred to as “The Hawthorne
Studies” investigated the workplace to determine which conditions affected worker
productivity (Schultz & Schultz, 1996). An industrial engineering approach was used in
all of the studies performed by the Massachusetts Institute of Technology (Beehr, 1996). It
was found that job satisfaction, social conditions and the resulting morale that the
employees experienced were more important factors in the efficiency of production than
the physical conditions of the workplace (Schultz & Schultz, 1996). This finding
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demonstrated that interpersonal activities are important in the workplace, and are critical to
the success of organizations (Beehr, 1996).
Today, many types of I/O psychology exist that focus on specific areas, including
organizational psychology, organization development, personnel psychology and
organization behavior management (Beehr, 1996). All of these disciplines draw
information from each other to advance the understanding of human behavior and improve
the functioning of organizations (Beehr, 1996; Scherer, 1998). I will now focus on how I/O
psychology can benefit Acme Aluminum.
Application of I/O Psychology to Acme Aluminum
Employees of Acme Aluminum recognize the rapid growth the company has
experienced in the past five years. With 50% additional employees and two additional
manufacturing sites, it is obvious that the leadership of Acme is investing heavily in the
future of the company. However, there are issues present at Acme that are common to
many growing organizations today. For example, it is well known that morale is low and
there are problems with the unions in two of the Northeast sites. I/O psychology strategies
are available to address morale as well as labor issues.
Morale problems may stem from a number of reasons. A survey of employees
specifically developed to assess job satisfaction will most likely reveal whether the causes
are pay inequity, social characteristics, or possibly benefits among others (Berkowitz,
Fraser, Treasure & Cochran, 1987). Since rapid growth has occurred at Acme, the
motivators for employees may be different than in the past, and different considerations
may need to be explored (Rousseau, 1997). In my internship at ABComputing, Inc., I
developed a morale survey to ascertain the reasons for high turnover at the company. We
discovered that in five short years, the criteria for job satisfaction among employees had
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completely changed. Now ABComputing has the opportunity to implement plans to
rebuild morale and lessen turnover.
The rapid growth at Acme also provides a timely opportunity to fire up the
frontline and develop an organizational pride in union as well as in non-union employees.
Employees can be encouraged to maintain pace with changes by a “top down” approach to
training and communication. By inculcating core values of the organization, loyalty and a
sense of importance are fostered in the minds of the employees. The U. S. Marine Corps
use those tactics to produce highly disciplined and top performing troops (Santamaria,
1999).
The cost of engaging the bottom half of the organization is low compared to the
cost of retraining and poor productivity (Santamaria, 1999). Employee participation in
goal setting and performance feedback have also been shown to increase worker
productivity (Shidar & Das, 1995). Much evidence exists that properly executed personnel
strategies will be economically favorable in the long term. Studies of the implementation
of well-researched recruiting, training, performance appraisal and compensation systems at
major corporations confirm the many economic benefits of personnel psychology (Johns,
1993).
In considering groups in organizations, unions have endured many decades of
change in American business. It follows that the methods used to engage union members
may also need to change. Older union members may have different goals than younger
union members, and conflict may arise. I/O psychologists have found that by emphasizing
the organizational interests and goals, within group conflict may be decreased and
productivity increased (Chatman, Polzer, Barsade & Neale, 1991). The U.S. Marine Corps
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stress common goals and values, the importance of each individual, and the importance of
leadership to promote group cohesion (Santamaria, 1999).
The functioning of an organization is primarily affected by its members, since the
people are as important as the organization (Beehr, 1996). Although the individual, group,
and organization cannot be completely separated, approaches are needed that address
organizational issues. Recent research points out that the changes within the organization
often direct the course of research and the resultant strategies used by the organization
(Rousseau, 1997). Therefore, it is important to assess the organizational changes occurring
within Acme, and develop appropriate systems to address the outcomes of the changes.
A technical analogy may be made to manufacturing equipment. Technology is used
to assess what type of equipment is necessary to manufacture products. As time goes on,
the equipment is monitored for changes, problems, and how it may be updated to continue
to meet economic needs.
Similarly, in organizational development, research results are used to determine
what employees need today and how their needs may differ when changes occur in the
organization. By using organizational psychology, the potential of employees may be fully
realized with needs analysis, proper training and flexible career development. Involving
employees in organizational communication and inclusion in decision-making processes
also fosters dedication to company goals.
In summary, several opportunities exist for Acme Aluminum to increase
productivity, address labor issues and improve employee morale. Acme is already using
parts of I/O psychology in many ways. By employing an I/O psychologist with practical
experience, Acme can realize improved and timely returns on its investment of human
resources with systematic business approaches.
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References
Beehr, T. A. (1996). Basic organizational psychology. Boston: Allyn & Bacon.
Berkowitz, L., Fraser, C., Treasure, P. & Cochran, S. (1987). Pay, equity, job
gratification, and comparisons to pay satisfaction. Journal of Applied Psychology, 72, 4,
544-51.
Chatman, J. A., Polzer, J. T., Barsade, S. G., Neale, M. A. (1998). Being different
yet feeling similar: The influence of demographic composition and organizational culture
on work processes and outcomes. Administrative Science Quarterly, 43, 4, 749-781.
Johns, G. (1993). Constraints on the adoption of psychology-based personnel
practices: Lessons from organizational innovation. Personnel Psychology, 46 (3), 549-593.
Rousseau, D. M. (1997). Organizational behavior in the new organizational era.
Annual Reviews of Psychology, 48, 515-46.
Santamaria, J. A. (1999). Firing up the front line. Harvard Business Review, 77
(3), 107-118.
Scherer, E. (Ed.). Shop floor control - A systems perspective: From deterministic
models towards agile operations management. Heidelberg & New York: Springer.
Schultz, D. P. & Schultz, S. E. (1996). A history of modern psychology. Fort
Worth: Harcourt Brace.
Shidar, A. A. & Das, B. (1995). A field study of worker productivity
improvements. Applied Ergonomics, 26, 1, 21-27.
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