Your browser (Internet Explorer 6) is out of date. It has known security flaws and may not display all features of this and other websites. .

The Nature of Organisational Psychology

What question does it answer?

How does the science of psychology apply to work and organizations?

How it Began

Organizational Psychology developed from Industrial Psychology as a field of inquiry which endeavours to understand how people working together in organizations.  Since work is central to societal functioning, giving us both material benefits, identity, psychological well-being and a structure to our time and activity, organizational psychology necessitates an understanding of work as a fact of life.


The nature of work has changed as our society has evolved.  Moving from basic subsistence to a modern understanding of work which seeks to be more meaningful to the individuals.  Work and organizations are not fixed, they are socially constructed and they change and evolve alongside our society and cultural changes.

Key Terminology

Industrial Psychology – Testing, selection and Training applicable to industry

Employee Well Being – That part of an employee’s overall well-being that they perceive to be determined primarily by work and can be influenced by workplace interventions.

Organizational Effectiveness – how effective an organization is in achieving the outcomes the organization intends to produce

In Brief

The purpose of organizational psychology is to “understand the psychology of organizations and people, and to apply that basic psychological science to help people become more fulfilled and to help organizations become more effective.” (Kozlowski, 2012)

There are different approaches to Organizational Psychology which demonstrate the complexities and challenges of studying organizations and the behaviours that occurs within them.

Industrial and Organzational Psychology – Not an either or, but an and.  Industrial and Organizational psychology represent domains of research and application that have evolved historically, focusing on areas such a human characteristics, behaviour and organizational performance.

Employee Wellbeing and Organizational Effectiveness – Applying psychological principles to improve the experience of workers and the effectiveness of the organization and how this work in tandem to improve organizational performance.

Basic and Applied Science – Developmental, Social or Neuroscience.  The fields are vast but the goal is the same – to discover generalized principles of human behaviour that cut across a wide range of situations

Science and Practice – Explaining important phenomena through the development of meta-theories, systematic research, investigation, codification of knowledge and the development of tools – applied by practitioners in the workplace.

What does this Mean for Organization Development?

Organisation Development is a field of knowledge that concentrates on the development of organisation effectiveness, especially during change. It uses group and human dynamic processes from applied behavioural science methods, research and theories to facilitate movement of groups and organisations.  This includes drawing from Organizational Psychology.

Organisation Development is based on research, including that from the field of organizational psychology, which demonstrates that every part of an organisation is integral to a system that relies on and impacts other elements of the internal and external environment in which the organisation operates.  Key areas of research include (although this is not an exhaustive list);

  • Human Characteristics and differences and their impact of individual/team/organizational functioning
  • Assessment, tests and technology used in people activities; including employee performance assessment, job design, training, selection etc.
  • Assessment of individual differences in abilities
  • Organizational systems theory, Organizational Behaviour and change and effectiveness
  • Leadership and Motivation
  • Leveraging synergies across the micro and macro divide e.g. understanding how Organizational strategy shapes the needs of employees
  • Human capital and its impact on strategy, capability and effectiveness
  • Application of psychological principles on well-being e.g. impact of organizational restructuring and business reengineering, including stress and survival anxiety of employees
  • Cognitive neuroscience and brain function – impact on decision making, mood and disorders
  • Personality, attitudes, values and interpersonal interactions
  • Motivation from achievement, power and renumeration
  • Influences on leadership and group processes
  • Behaviour outcomes on job performance, attitudes and other reactions
  • Principles for understanding important classes of work bheaviour
  • Tools to influence, shape and enhance human performance

Organizational Psychology – Organizational Culture and Climate

Answers the Question

How are Organizational Culture and Organizational Climate inter-related?

How it Began

Organizational culture and climate focus on how those participating within and with an organization observe, experience, and make sense of their work environment (Schneider, Ehrhart & Macey, 2011).  In regards to Organizational Psychology Climate and Culture are considered to be fundamental building blocks for describing and analyzing organizational phenomena (Schein, 2000). 


Historically, climate, as a construct preceded culture. The social context of the work environ- ment, termed “atmosphere,” was discussed as early as 1910 (Hollingworth & Poffenberger, 1917; Munsterberg, 1915; Scott, 1911), and was investigated in the UK during the 1930s by the National Institute of Industrial Psychology (NIIP). The 1960s introduced Climate as a theoretical concept proposed by Kurt Lewin (Lewin, 1951; Lewin, Lippitt, & White, 1939). As early as the 1930s cultural perspectives within organizations were examined however, it was not popularized in management literature until the 1980s.

Academically culture and climate are viewed as two complementary constructs that reveal overlapping yet distinguishable nuances in the psychological life of organizations (Schneider, 2000). Each is deserving of attention as a separate construct as well as attention to the relationship between the two constructs.

Key Terminology

Culture – the set of ideas, behaviours, attitudes, and traditions that exist within large groups of people (usually of a common religion, family, or something similar).

Climate – the process of quantifying the “culture” of an organization; a set of properties of the work environment, perceived directly or indirectly by the employees, that is assumed to be a major force in influencing employee behaviour

In Brief

While climate is about perceptions of what happens or what people experience, culture helps define why these things happen. Meanwhile, Culture relates to fundamental ideologies and assumptions which are based on a symbolic interpretation of organizational events and artifacts. Culture evolves collectively within the historical context of the organization and is embedded in systems, and resists attempts to change it.

Climate is less stable and more immediate than culture. Upon entering an organization individuals perceive the climate through how the organization looks, emotions and attitudes of employees and the treatment the individual receives. When individuals perceptions become shared, a higher-level social construct emerges.

Climate develops from the deeper core of culture. Climate, or “what,” organizational experience can result from shared values and assumptions based on policies, practices, and as such, their integration can be accomplished by viewing climate as the lens through which the deep cultural layers can be understood.

What does this Mean for Organization Development?

Practices, policies, procedures, and routines play a role in both culture and climate. They are viewed as artifacts in culture and form climate perceptions therefore the organizational practices, management practices, policies, and procedures reflect cultural influences.

Climate perceptions provide employees with direction and orientation about where they should focus their skills, attitudes, and behaviours in pursuit of organizational goals. Alignment between culture, practices, and climate is necessary for employees to respond and behave in ways that will lead to organizational effectiveness.

For an organization to be effective, rganizational members must perceive the practices in a manner consistent with the underlying values and intended strategic goals.  Inconsistencies between culture and climate are likely to have occurred through some misalignment or poor implementation of the set of practices. If practices do not reflect the culture, or are poorly implemented, climate perceptions may develop that are counter to the underlying cultural values and assumptions (Bowen & Ostroff, 2004).

Strong Climate and Cultural situations include:

  1. Agreement – the level of agreement to which employees interpret and encode the organizational situation in the same way.
  2. System-based –  the culture or climate is pervasive and all-encompassing throughout the entire organization, imposing strong expectations on employees in regards to behaviours through strong socialization and sanctions for behaving outside norms
  3. Alignment – the alignment between culture and actual organizational practices and between organizational practices and climate



Organisational Psychology – Person-Environment Fit in Organizational Settings

Answers the Question

How do individuals simultaneously desire to fit in terms of being similar to others and be distinctive from others?

How it Began

Person-Environment fit has been a subject of increased interest over the past two decades.  Understanding how the relationship between people and their work environment and the impact that the ‘fit’ between the two elements have on performance, satisfaction, adjustment, turnover, effective team work, creativity and innovation is essential to competitive advantage.  Person-Environment fit is as old as rational thought.  Plato emphasized the importance of matching people to jobs that aligned with their temperament and ability.  In the 1900s theories around congruence began to be developed.  In 1909 Parsons introduced fit in regards to matching individual attributes to those of different vocations.  Person-Environment fit foundational theories stem from Murray’s need-press model and interactionism (1938)


Throughout the 1950s additional models appeared such as needs-supply theory, psychological stress and strain and Ability-Demand Theories.  By the 1960s theories regarding adjustment, and the dynamism of processes involved in Person-Environment Fit were introduced by Dawis & Lofquist (1964).

Since that time the concept of fit is a foundation stone of most organizational research.  Selection and assessment, performance management, Learning and Development, Career management, Leadership, organizational culture, attrition, diversity and stress all use a fit perspective to research behaviour and performance.

Key Terminology

Fulfillment – Individuals needs or values are fulfilled, or individuals’ abilities meet or fulfil the environmental job demands.  Getting what one wants.

Interactionism – The interplay between characteristics of the person and situational factors namely in the form of match or congruence.

Similarity – Congruence between the characteristics of people and the corresponding characteristics of the environment.  Being in accord.

Compilation – Attributes that differ but support and reinforce one another.  Combination of related but distinct characteristics.

In Brief

Person–environment fit theory offers a framework which enables an organisation to assess and predict how characteristics of the individual employee and the organisational work environment determine, jointly, employee engagement, performance and well-being. In understanding the characteristics which are identified as relevant a model for developing interventions to prevent misalignment and/or increase fit.

Person Environment fit can be viewed from the following perspectives;

  • Employee’s needs – needs–supplies fit
  • Job–environment’s demands – demands–abilities fit

The term needs–supplies fit refers to the degree to which the needs of the individual employee, such as the need to use their skills and abilities, are supplied by the work environment and opportunities are available to satisfy the needs of the individual.

Demands–abilities fit refers to the degree to which the job’s demands are met by the employee’s skills and abilities. These two types of fit can overlap. For example, poor work-life balance may leave the organisation’s job role demands unmet as well as damage the individual employee’s need to be able to satisfy others.

A variety of different approaches to the measurement of Person Environment fit enhance the model’s potential for predicting well-being and performance. For example, Edwards and Harrison (1993)used statistical modelling to demonstrate that Person Environment fit explained about 6% more variance in job satisfaction than was explained by measures of Person or Environment characteristics alone.

What does this mean for Organisation Development?

The person-environment fit theory is an important aspect in organisational psychology, and significant in the Diagnosis and Intervention phase of the Organisation Development Cycle.

Measures of Person-Environment fit can also be used to measure and monitor the perceptions of fit amongst the employees and establish a measure of their wellbeing and satisfaction. This is particularly useful in Change interventions, particularly those which have an affect the perceived values and goals of an organisation. For evaluation purposes agreement on a standard measure of Person-environment fit to compare before and after the Organisation Development intervention would be useful in assessing the effects of those changes.

Personal-Environment Fit can be noticed throughout the workplace environment, but managers and leaders rarely consider the cause or effect of personal-environment conflicts in business environments and the subsequent impact of individual, team and organisational performance.  Ongoing comparisons throughout an organisation of person-environment fit vis-a-vis line management capability would also be useful. Person-environment fit can also be utilised in the selection, assessment and recruitment context for improving work-related job performance and approaches to ongoing development and career management.

Whether relating how a person fits in with the demands of a job or resources presented by a job, incongruent person-environment fit can lead to serious conflicts and poor performance in any organisation. Increased levels of stress, absenteeism and lack of productivity are all natural outcomes of person-environment conflicts.

In the area of Stress and Well-being, incongruent person-environment fit inevitably leads to stress. If an employee does not have the same motives, values or beliefs as the organisation where they work then conflict, stress and disaffection can occur because two different ends are trying to be met.

If an organisation places and individual in a position where they are unable to complete the demands of their job, either due to lack of training or unreasonable demands the results can be very stressful. It may be caused by personal lack of ability, skill, or knowledge, which is a result of poor selection and assessment or lack of training. But the problem can also be caused by insufficient funds, staffing shortages or other resources being unavailable. If the means to complete tasks are not available this can be very stressful for an employee.

It is important to match abilities with demands.

Further Reading



Organizational Psychology – Performance Management

Answers the Question

What is meant by job performance and what are the core elements of performance management?

How it Began

Organization Psychology focuses on assessing individual differences and developing a deeper understanding of the person, as opposed to simply the context within which an individual is operating.   Various topics that are examined in performance management are the individual skills required for a particular job and how individual differences influence an individual’s work performance. A goal of performance management is to improve organizational performance by placing the right people in the right jobs, thus enhancing the fit between the individual and the organization.  Performance Management covers such topics as selection, training, performance measurement, and evaluation.Performance management is more than an annual performance review meeting between a supervisor and employee, instead it includes ongoing coaching, feedback, and support from the supervisor.

Performance Management

Key Terminology

Performance Management – A continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization.

Job Performance – Something that People actually do and can be observed including those actions or behaviours that are relevant to the organization’s goals and that can be measured in terms of each person’s proficiency

Contextual Performance – Organizational Citizenship behaviours includes personal support, organizational support and conscientious initiative.

Task Performance – Goal-directed activities that are under that individual’s control.

Grit – a positive, non-cognitive trait, based on an individual’s passion for a particular long-term goal or end state coupled with a powerful motivation to achieve the objective.

In Brief

A central premise of performance management systems is that individual (and team) goals need to be closely aligned with higher level organizational goals.  At an individual level, goal setting is also an important element of effective performance management..  Perhaps the most central tenet of goal setting theory, illustrated in hundreds of studies, is that specific, difficult goals lead to higher performance than “do your best” goals.

There has been a paradigm shift from thinking of performance appraisal as a discrete event to a continuous process of performance management in which coaching is inherent in the process.  This draws away from the traditional appraisal research focused on measurement issues towards examining how job performance can be enhanced.

The management of performance is now being related to key issues such as the physical and mental well-being of employees. A meta-analysis of selection methods found that general mental ability was the best overall predictor of job performance and training performance.

But intelligence isn’t everything.  Motivation is another key component of job performance. Achievement motivation refers to a person’s drive to accomplish, to learn skills and concepts, to be in charge, and for quickly reaching a top standard (Murray, 1938). Those who are highly motivated to achieve more are more likely to be successful in realising their goals.

Discipline and talent are important. Simon (1998) coined the concept of “The 10-year rule”—the notion that those who are top in their fields spend 10 years of full-time, highly invested practice. Top scholars, students, and athletes have all been found to be talented, but also incredibly self-disciplined (Bloom, 1985).  Research is finding that self-discipline matters more than intelligence (Duckworth & Seligman, 2005, 2006).  In a longitudinal study of eighth-grade students, self-discipline measured in the fall accounted for more than twice as much variance as IQ in final grades, high school selection, school attendance, hours spent doing homework, hours spent watching television (inversely), and the time of day students began their homework. The effect of self-discipline on final grades held even when controlling for first-marking-period grades, achievement-test scores, and measured IQ. These findings suggest a major reason for students falling short of their intellectual potential: their failure to exercise self-discipline (Duckworth & Seligman, 2005, 2006).

Duckworth & Seligman further contend that equally talented people are separated by their grit, and the fervour and dedication they have for a long-term goal.  An individuals’ perseverance of effort develops the fortitude required to overcome obstacles or challenges that lay within a gritty individual’s path to accomplishment, and serves as a driving force in achievement realisation.

Commonly associated concepts include “perseverance,” “hardiness,” “resilience,”ambition,” and “need for achievement.” These constructs can be conceptualized as individual differences and have been studied in psychology since 1907, when William James challenged the field to further investigate how certain individuals are capable of accessing richer trait reservoirs, enabling them to accomplish more than the average person. Duckworth and colleagues (2007) believe this dual-component of grit to be a crucial differentiator from similar constructs. Grit is conceptualized as a stable trait that does not require immediate positive feedback. Individuals high in grit are able to maintain their determination and motivation over long periods of time despite experiences with failure and adversity. Their passion and commitment toward the long-term objective is the overriding factor that provides the stamina required to “stay the course” amid challenges and setbacks. Essentially, the grittier person has the fortitude for winning the marathon, not the sprint.

What does this mean for Organization Development?

Effective performance management systems offer many potential advantages.  These include: greater clarity about organizational goals, as well as the behaviours and results required for successful employees’ understanding of their strengths and weaknesses (and hence valuable developmental activities); increasing employees’ motivation, competence, and self esteem; better distinguishing between good and poor performers and thereby increasing the fairness of remuneration and reward decisions; protecting the organization from lawsuits; and facilitating organizational change.  Ineffective performance management systems have the potential to waste time and money, damage relationships, decrease motivation and job satisfaction, increase employee turnover, create perceptions of unfairness and thereby increase the risks of litigation.

The belief that behaviour must be understood from the point of view of the individual and the context within which the individual is behaving. Kurt Lewin’s famous statement that behaviour is a function of the person and the environment is the foundation on which OD operates.

Instead of focusing solely on the individual, OD emphasises the impact that social forces have on performance and the factors that result in similar individual behaviour across situations. A goal of OD is to ultimately improve organizational performance through the creation of a suitable social environment by focusing on such topics as motivation, rewards and recognition, leadership, group processes, conflict resolution, organizational culture, organizational change, and organizational performance.

In addition to analysing behaviour from the point of view of both the individual and the environment, it is important to utilise more than one perspective when completing an OD diagnostic of an organization.  It is important that an OD consultant examines organizational issues at the individual, the group, and the organizational levels. At the individual level the diagnosis might cover such areas as individual differences, motivation, and diversity. The group level might emphasises groups and teams and the dynamics involved and the organizational level might examine elements such as leadership, organizational culture, organizational change, and organizational effectiveness.  Each of these three levels must be taken into consideration when examining an organizational problem or issue so that it is possible to plan and intervention at the level(s) which is/are the most relevant to improving the overall performance of the organization.



Organizational Psychology – Personnel Selection

Answers the Question

How can personnel selection ensure sustainable organizational effectiveness through the acquisition of human capital

How it Began

There has been over 100 years of research, and there is a great deal of psychological understanding regarding how to best identify KSAO requirements for jobs, the development of methods to assess KSAOs and using the scores from assessments to make appropriate selection and recruitment decisions.  But by itself, this research does not ensure that selection delivers sustainable organizational effectiveness.  In 1998 Schmidt and Hunter summarized the relationships between different selection predictors such as cognitive ability and conscientiousness with job performance, but ignored the consideration of sustainable organizational effectiveness.

Personnel Selection

In 1964 McNemar called for ‘social usefulness’ that is how individual differences such as intelligence contributed to real world outcomes.  In the 1970s research by Schmidt, Hunter and colleagues led to validity generalization and meta-analysis, which had a profound effect on personnel selection and practice.  Validity generalization ended the situational-specificity hypothesis to the point that professional guideliness sucha s SIOP Principles (2003) now explicitly recognize the role of meta-analysis as a validation strategy.

In the 1980s the conceptualization and measurement of job performance, and research addressing a number of fundamental selection issues were major contributions.   Followed into the 1990s by the reemergence of personality and the validity-diversity dilemma.  Today the focus is on the performance domain, such as counterproductive work behaviours, types of predictor methods and constructs.

Key Terminology

  • Personnel selection – the process used to hire or promote individuals.
  • Human Capital – the aggregate of individual knowledge, skills, abilities and other characteristics. (KSAOs)
  • Knowledge Worker – employees whose primary contribution is based on ideas and information
  • Predictive Validity – the extent to which a score on a scale or test predicts scores on some criterion measure.
  • Recruitment – attracting applicants through advertising, word-of-mouth or other methods; it can be used to include the pre-screening phase of selection;
  • Selection – employment decisions made by responsible members of an organization, usually choosing between multiple candidates, and using one or more methods of candidate assessment. It can include the decision of the candidate whether to accept or reject an offer of employment made by an organization.
  • Distributive justice – whether the outcome is seen to be fair and appropriate
  • Procedural justice – whether candidates perceive the process followed to reach the outcome to be fair and whether the selection process is viewed as being job-related.
  • Interpersonal justice – whether candidates perceive that they are dealt with professionally and sensitively during the selection process
  • Informational justice – whether candidates perceive that good quality information and timely feedback is given during and after the process

In Brief

Unlike other forms of capital, human capital cannot be owned by an organization.  Individual employees can, and do, choose to withhold effort, switch jobs or still ideas and take them to a competitor.  With the advent of cross functional working and project teams, jobs are more fluid than at any other time, and once a project is completed the team disband. There is also a recognition that globalization and technology, such as the internet, has transformed the workplace, making the world flat and meaning that human capital no longer has to be in the same geographical area, exposing people to diverse cultures and languages.

Societal changes, such as an aging workforce, more diverse workforce and a global economy has increased the importance of human capital, popularized by Mckinsey in 1997 with the publication of the ‘War for Talent’

Selection is a two-way process; organizations choose employees, but employees also choose an employer. If selection is to be effective then both of these processes must be working effectively. At a human level, Martin et al. (2005) explore some of the issues which arise during the selection process for applicants, which could be seen as being under the umbrella of ‘psychological factors’ including self-esteem and stress. Their research suggests that, for unsuccessful applicants stress levels were higher and self-esteem levels lower than for successful applicants.

What does this mean for Organization Development?

There is a danger that best practice selection methods can be viewed as a panacea, or a way of guaranteeing an effective workforce. This is not the case. No selection method is perfect. The very best personnel selection methods can promise is that we can make use information gathered to make some reasonably accurate predictions about future performance. In this sense, personnel selection might be viewed as a risk management procedure that helps organisations to avoid recruiting unsuitable applicants.

Care must be taken to manage candidates’ perceptions of the selection process because they impact upon candidates’ views of the organization and the likelihood of accepting job offers. If a selection process that identifies the best candidates discourages them from accepting the job offer, it is of little use.  This issue can be minimised through the proper design and execution of selection processes.

Work performance is shaped by a huge number of factors. Two equally able employees might perform differently because one has a very competent manager, while the other has an ineffective manager. Employees may receive different levels of exposure to learning and development opportunities. Some may work in a well functioning team, while others find themselves working with colleagues who are dysfunctional or ineffective. Changes in processes and systems might make the job easier for some employees but not others. Over time, the job that the successful candidate is required will also change, possibly changing to something that the candidate is not suited for.

It is clear that organizations have a wide variety of selection tools to choose from, and must consider multiple criteria (i.e. technical qualities and candidate perceptions) when devising a selection process. If a selection method has good predictive validity for a particular job role, in a particular organisation it might be that this validity does not transfer to other organisations or other job roles. Therefore in order to establish whether a selection tool works well across different situations, meta-analysis should be used to draw general conclusions about the effectiveness of a selection tool. This type of analysis also helps to identify the particular features of a selection tool that seem best, and provide guidance on how to make it work better and those features that might harm its effectiveness.

An effective workforce is not just the product of effective selection. Depending on the roles required, work performance will be determined by different OD intervention.  For example an organisation may require highly skilled engineers in a particular niche area. Given that this role requires a rare set of skills, it will be very difficult to recruit people who already have those skills. Therefore, learning and development will be more important to achieving the desired outcome. Selection might focus on identifying the people with the potential to develop such skills. It might also be that there are some engineering tasks that are so difficult that the majority of the working population are not able to complete them, even after training. This might indicate that equipment re-design or task re-design is required, and selection would focus on identifying those with the aptitude to work with the re-designed equipment or task.

From an it is crucial that selection processes are not considered in isolation from the organisational context, and the constraints and opportunities it presents.

Recommended Reading

  • Cook, M. (2009). Personnel selection: Adding value through people. (5th Edition). London: Wiley Blackwell.
  • Robertson, I. T., & Smith, M. (2001). Personnel selection. Journal of Occupational and Organizational Psychology, 74, 441-472.
  • Sackett, P. R., and Lievens, F. (2008). Personnel selection. Annual Review of Psychology, 59, 419-450.
  • Hough, L. M., Oswald, F. L. (2000). Personnel selection: Looking towards the future – remembering the past. Annual Review of Psychology, 51, 631-664.