{"id":3339,"date":"2016-12-06T04:56:22","date_gmt":"2016-12-06T04:56:22","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/?post_type=chapter&#038;p=3339"},"modified":"2024-05-17T15:12:11","modified_gmt":"2024-05-17T15:12:11","slug":"putting-it-together-industrial-organizational-psychology","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/chapter\/putting-it-together-industrial-organizational-psychology\/","title":{"raw":"Putting It Together: Industrial-Organizational Psychology","rendered":"Putting It Together: Industrial-Organizational Psychology"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Objectives<\/h3>\r\nIn this module, you learned to\r\n<ul>\r\n \t<li>describe the purpose of industrial-organizational psychology and examine its application to hiring and evaluating employees<\/li>\r\n \t<li>explain how industrial-organizational psychologists assess leadership and organization<\/li>\r\n<\/ul>\r\n<\/div>\r\nIf you spent roughly 50 years of your life at work and work roughly forty\u00a0hours a week, you can expect to work well over 100,000 hours in your lifetime. That's a lot of time! It's no surprise then\u00a0that psychologists are interested in the social and organizational aspects of the workplace. Business owners, human resource officers, managers, employers, and employees alike can benefit from understanding industrial-organizational psychology. Particularly in our modern, fast-paced, profit-driven society, researchers are interested in behavior in the workplace as well as consumer habits. Psychologists in these fields often team up with economists, marketers, and business academics to discover more about what motivates behavior.\r\n\r\n<span class=\"av_dropcap1 \">Consider the following: h<\/span>ow much does a CEO make compared to the average worker? If you\u2019re like most Americans (many economists included), you probably have an estimate in your head that roughly translates as \u201ctoo much.\u201d Pressed for a number, you might come up with a\u00a0figure around 30 to 1[footnote]http:\/\/pps.sagepub.com\/content\/9\/6\/587.short[\/footnote].\r\n\r\n<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/855\/2016\/12\/02155534\/5684720360_78550e1bc9_z.jpg\"><img class=\"alignleft wp-image-4419\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/855\/2016\/12\/02155534\/5684720360_78550e1bc9_z.jpg\" alt=\"Woman checking out groceries at Walmart.\" width=\"367\" height=\"244\" \/><\/a>\r\n\r\nThat\u2019s a lot. Far more than what Americans say they\u2019d like it to be\u2014about 7 to 1\u2014but much, much less than what it actually is:\u00a0<a href=\"http:\/\/www.aflcio.org\/Corporate-Watch\/Paywatch-2014\" target=\"_blank\" rel=\"noopener\">CEOs make more than 300 to 1 compared to the average worker<\/a>. Put in real dollars, the average CEO at a S&amp;P 500 company today makes about $12 million a year to the average employee\u2019s $36,000. We\u2019re just as bad at\u00a0<a href=\"https:\/\/youtu.be\/QPKKQnijnsM\" target=\"_blank\" rel=\"noopener\">guesstimating wealth inequality<\/a>.\r\n\r\nBut despite our ignorance, the vast majority of Americans care a lot about the widening gap between the rich and the middle class. In a recent poll by Pew Research, Americans named\u00a0<a href=\"http:\/\/www.pewglobal.org\/2014\/10\/16\/middle-easterners-see-religious-and-ethnic-hatred-as-top-global-threat\/\" target=\"_blank\" rel=\"noopener\">inequality the greatest threat to the world<\/a>\u00a0\u2014 ahead of ethnic conflict, nuclear weapons and climate change.\r\n\r\nBut do we care enough to change where we shop?\u00a0<a href=\"http:\/\/www.hbs.edu\/faculty\/Publication%20Files\/15-091_eb472863-c73b-4aca-a8ee-d7dc1748a91d.pdf\" target=\"_blank\" rel=\"noopener\">New research suggests we do<\/a>.\r\n\r\nIn a series of online experiments, researchers Bhavya Mohan, Mike Norton and Rohit Deshpand\u00e9 at Harvard Business School found people were much more willing to buy a range of products, like towels and televisions, from companies that pay their CEOs salaries closer to what they pay their average employees.\r\n\r\nFor example, in one experiment, they told people about a set of high-quality, 100 percent Turkish cotton towels. They told one group that the CEO of the company makes $24 million and the average worker makes $24,000 \u2014 a 1,000 to 1 ratio like Walmart is estimated to have. The other group was told that the CEO makes 60 times more than the average worker (as is the case at Costco) \u2014 in this case, $1,344,000 to the average workers\u2019 $24,000. Then they asked them how fair they thought the company\u2019s wages were and how willing they were to buy the towels. People said they were much more willing to buy from the Costco-type store than the Walmart one.\r\n\r\nThe researchers ran the experiment again, using different products \u2014 batteries, vacuum cleaners, restaurant gift cards \u2014 and varying CEO pay ratios \u2014 1,000 to 1, 60 to 1 or 5 to 1. In all their experiments, people said they were much more willing to buy from companies with lower pay ratios.\r\n\r\nThey tried varying prices, offering 10, 20 and 50 percent discounts on products sold at the store with a higher pay ratio. They also had people compare stores side by side and asked them how much they would be willing to pay for identical products. Again, people still liked the stores with more equal wages \u2014 so much so that consumers said they would pay more for products at stores with low ratios, while stores with high ratios like Walmart would have to slash prices in half just to entice consumers to buy.\r\n\r\n\u201cWe were surprised by how much it took to get a similar willingness to buy,\u201d Mohan told me. \u201cThe high pay ratio really affected their perception of the company and their product.\u201d\r\n\r\nOne explanation for the finding is that consumers hate buying from stores\u00a0<a href=\"http:\/\/www.jstor.org\/stable\/3152092?seq=1#page_scan_tab_contents\" target=\"_blank\" rel=\"noopener\">they think are making a huge profit<\/a>\u00a0off them. But this rationale doesn\u2019t necessarily apply to wages. As Mohan and her colleagues note, companies with a high pay ratio might actually appear to be more competitive and have higher quality products, because they can attract the best talent with lavish compensation packages. Companies with low ratios, on the other hand, might appear too \u201csoft.\u201d\r\n\r\nSo they tested that too. But Mohan and her colleagues didn\u2019t find that consumers\u2019 judgments about a company\u2019s management or the quality of its products were affected by paying their CEOs less.\r\n\r\nThey also looked at which consumers were most likely to be persuaded by pay ratios. It could be that a low ratio might turn off Republican buyers who, according to a number of studies,\u00a0tend to favor slightly greater inequality\u00a0than their Democratic counterparts. Democrats and Independents, as the researchers expected, liked companies with lower ratios more, but Republicans were indifferent, suggesting if a company like Costco advertised their low pay ratio they wouldn\u2019t be alienating many, if any, of their customers.\r\n\r\nIt\u2019s also yet to be seen how people\u2019s preferences play out in real life. The participants in Mohan\u2019s study didn\u2019t actually buy televisions or towels or lamps. They just said how willing they were to buy them. And as Mohan was quick to point out, it\u2019s much easier to state our best intentions than follow through with them.\r\n\r\n\u201cCEO pay is out of control. I agree about that, absolutely,\u201d Elson said. \u201cBut most consumers are completely, utterly unaware about the internal management of companies. People buy on quality and price.\u201d\r\n\r\nElson equates it to a PR scandal. When workers in Apple\u2019s Chinese factories\u00a0began killing themselves\u00a0or when Bank of America awarded its executives multimillion dollar bonuses in the midst of the financial meltdown, public outrage did not result in change.\r\n\r\nBut even if the\u00a0results in Mohan's study were a bit exaggerated, real life results tend to go in the same direction. In follow-up studies, Mohan and her colleagues are now testing to see if consumers actually\u00a0<em>do<\/em>\u00a0choose stores with low pay ratios over others when shopping with their own money. The final tally isn\u2019t in, but preliminary data suggests they do.","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Objectives<\/h3>\n<p>In this module, you learned to<\/p>\n<ul>\n<li>describe the purpose of industrial-organizational psychology and examine its application to hiring and evaluating employees<\/li>\n<li>explain how industrial-organizational psychologists assess leadership and organization<\/li>\n<\/ul>\n<\/div>\n<p>If you spent roughly 50 years of your life at work and work roughly forty\u00a0hours a week, you can expect to work well over 100,000 hours in your lifetime. That&#8217;s a lot of time! It&#8217;s no surprise then\u00a0that psychologists are interested in the social and organizational aspects of the workplace. Business owners, human resource officers, managers, employers, and employees alike can benefit from understanding industrial-organizational psychology. Particularly in our modern, fast-paced, profit-driven society, researchers are interested in behavior in the workplace as well as consumer habits. Psychologists in these fields often team up with economists, marketers, and business academics to discover more about what motivates behavior.<\/p>\n<p><span class=\"av_dropcap1\">Consider the following: h<\/span>ow much does a CEO make compared to the average worker? If you\u2019re like most Americans (many economists included), you probably have an estimate in your head that roughly translates as \u201ctoo much.\u201d Pressed for a number, you might come up with a\u00a0figure around 30 to 1<a class=\"footnote\" title=\"http:\/\/pps.sagepub.com\/content\/9\/6\/587.short\" id=\"return-footnote-3339-1\" href=\"#footnote-3339-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a>.<\/p>\n<p><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/855\/2016\/12\/02155534\/5684720360_78550e1bc9_z.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft wp-image-4419\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/855\/2016\/12\/02155534\/5684720360_78550e1bc9_z.jpg\" alt=\"Woman checking out groceries at Walmart.\" width=\"367\" height=\"244\" \/><\/a><\/p>\n<p>That\u2019s a lot. Far more than what Americans say they\u2019d like it to be\u2014about 7 to 1\u2014but much, much less than what it actually is:\u00a0<a href=\"http:\/\/www.aflcio.org\/Corporate-Watch\/Paywatch-2014\" target=\"_blank\" rel=\"noopener\">CEOs make more than 300 to 1 compared to the average worker<\/a>. Put in real dollars, the average CEO at a S&amp;P 500 company today makes about $12 million a year to the average employee\u2019s $36,000. We\u2019re just as bad at\u00a0<a href=\"https:\/\/youtu.be\/QPKKQnijnsM\" target=\"_blank\" rel=\"noopener\">guesstimating wealth inequality<\/a>.<\/p>\n<p>But despite our ignorance, the vast majority of Americans care a lot about the widening gap between the rich and the middle class. In a recent poll by Pew Research, Americans named\u00a0<a href=\"http:\/\/www.pewglobal.org\/2014\/10\/16\/middle-easterners-see-religious-and-ethnic-hatred-as-top-global-threat\/\" target=\"_blank\" rel=\"noopener\">inequality the greatest threat to the world<\/a>\u00a0\u2014 ahead of ethnic conflict, nuclear weapons and climate change.<\/p>\n<p>But do we care enough to change where we shop?\u00a0<a href=\"http:\/\/www.hbs.edu\/faculty\/Publication%20Files\/15-091_eb472863-c73b-4aca-a8ee-d7dc1748a91d.pdf\" target=\"_blank\" rel=\"noopener\">New research suggests we do<\/a>.<\/p>\n<p>In a series of online experiments, researchers Bhavya Mohan, Mike Norton and Rohit Deshpand\u00e9 at Harvard Business School found people were much more willing to buy a range of products, like towels and televisions, from companies that pay their CEOs salaries closer to what they pay their average employees.<\/p>\n<p>For example, in one experiment, they told people about a set of high-quality, 100 percent Turkish cotton towels. They told one group that the CEO of the company makes $24 million and the average worker makes $24,000 \u2014 a 1,000 to 1 ratio like Walmart is estimated to have. The other group was told that the CEO makes 60 times more than the average worker (as is the case at Costco) \u2014 in this case, $1,344,000 to the average workers\u2019 $24,000. Then they asked them how fair they thought the company\u2019s wages were and how willing they were to buy the towels. People said they were much more willing to buy from the Costco-type store than the Walmart one.<\/p>\n<p>The researchers ran the experiment again, using different products \u2014 batteries, vacuum cleaners, restaurant gift cards \u2014 and varying CEO pay ratios \u2014 1,000 to 1, 60 to 1 or 5 to 1. In all their experiments, people said they were much more willing to buy from companies with lower pay ratios.<\/p>\n<p>They tried varying prices, offering 10, 20 and 50 percent discounts on products sold at the store with a higher pay ratio. They also had people compare stores side by side and asked them how much they would be willing to pay for identical products. Again, people still liked the stores with more equal wages \u2014 so much so that consumers said they would pay more for products at stores with low ratios, while stores with high ratios like Walmart would have to slash prices in half just to entice consumers to buy.<\/p>\n<p>\u201cWe were surprised by how much it took to get a similar willingness to buy,\u201d Mohan told me. \u201cThe high pay ratio really affected their perception of the company and their product.\u201d<\/p>\n<p>One explanation for the finding is that consumers hate buying from stores\u00a0<a href=\"http:\/\/www.jstor.org\/stable\/3152092?seq=1#page_scan_tab_contents\" target=\"_blank\" rel=\"noopener\">they think are making a huge profit<\/a>\u00a0off them. But this rationale doesn\u2019t necessarily apply to wages. As Mohan and her colleagues note, companies with a high pay ratio might actually appear to be more competitive and have higher quality products, because they can attract the best talent with lavish compensation packages. Companies with low ratios, on the other hand, might appear too \u201csoft.\u201d<\/p>\n<p>So they tested that too. But Mohan and her colleagues didn\u2019t find that consumers\u2019 judgments about a company\u2019s management or the quality of its products were affected by paying their CEOs less.<\/p>\n<p>They also looked at which consumers were most likely to be persuaded by pay ratios. It could be that a low ratio might turn off Republican buyers who, according to a number of studies,\u00a0tend to favor slightly greater inequality\u00a0than their Democratic counterparts. Democrats and Independents, as the researchers expected, liked companies with lower ratios more, but Republicans were indifferent, suggesting if a company like Costco advertised their low pay ratio they wouldn\u2019t be alienating many, if any, of their customers.<\/p>\n<p>It\u2019s also yet to be seen how people\u2019s preferences play out in real life. The participants in Mohan\u2019s study didn\u2019t actually buy televisions or towels or lamps. They just said how willing they were to buy them. And as Mohan was quick to point out, it\u2019s much easier to state our best intentions than follow through with them.<\/p>\n<p>\u201cCEO pay is out of control. I agree about that, absolutely,\u201d Elson said. \u201cBut most consumers are completely, utterly unaware about the internal management of companies. People buy on quality and price.\u201d<\/p>\n<p>Elson equates it to a PR scandal. When workers in Apple\u2019s Chinese factories\u00a0began killing themselves\u00a0or when Bank of America awarded its executives multimillion dollar bonuses in the midst of the financial meltdown, public outrage did not result in change.<\/p>\n<p>But even if the\u00a0results in Mohan&#8217;s study were a bit exaggerated, real life results tend to go in the same direction. In follow-up studies, Mohan and her colleagues are now testing to see if consumers actually\u00a0<em>do<\/em>\u00a0choose stores with low pay ratios over others when shopping with their own money. The final tally isn\u2019t in, but preliminary data suggests they do.<\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-3339\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Putting It Together: Industrial-Organizational Psychology. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA: Attribution-NonCommercial-ShareAlike<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Walmart checkout. <strong>Authored by<\/strong>: Walmart. <strong>Provided by<\/strong>: Flickr. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.flickr.com\/photos\/walmartcorporate\/5684720360\">https:\/\/www.flickr.com\/photos\/walmartcorporate\/5684720360<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><li>High CEO Pay Can Push Consumers Away. <strong>Authored by<\/strong>: Max Nesterak. <strong>Provided by<\/strong>: The Psych Report. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"http:\/\/thepsychreport.com\/science\/high-ceo-pay-can-push-consumers-away\/\">http:\/\/thepsychreport.com\/science\/high-ceo-pay-can-push-consumers-away\/<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA: Attribution-NonCommercial-ShareAlike<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section><hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-3339-1\">http:\/\/pps.sagepub.com\/content\/9\/6\/587.short <a href=\"#return-footnote-3339-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":29,"menu_order":11,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Putting It Together: Industrial-Organizational Psychology\",\"author\":\"\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by-nc-sa\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Walmart checkout\",\"author\":\"Walmart\",\"organization\":\"Flickr\",\"url\":\"https:\/\/www.flickr.com\/photos\/walmartcorporate\/5684720360\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"High CEO Pay Can Push Consumers Away\",\"author\":\"Max Nesterak\",\"organization\":\"The Psych Report\",\"url\":\"http:\/\/thepsychreport.com\/science\/high-ceo-pay-can-push-consumers-away\/\",\"project\":\"\",\"license\":\"cc-by-nc-sa\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"683b6eb2-354f-4c0c-943f-e5c8a70f8160","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-3339","chapter","type-chapter","status-publish","hentry"],"part":523,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/pressbooks\/v2\/chapters\/3339","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/wp\/v2\/users\/29"}],"version-history":[{"count":13,"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/pressbooks\/v2\/chapters\/3339\/revisions"}],"predecessor-version":[{"id":8352,"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/pressbooks\/v2\/chapters\/3339\/revisions\/8352"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/pressbooks\/v2\/parts\/523"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/pressbooks\/v2\/chapters\/3339\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/wp\/v2\/media?parent=3339"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/pressbooks\/v2\/chapter-type?post=3339"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/wp\/v2\/contributor?post=3339"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/waymaker-psychology\/wp-json\/wp\/v2\/license?post=3339"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}