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Business Concepts Consulting Psychologists Need to Know

To do high-impact work, you need to understand enough to be dangerous.

Key points

  • Consulting psychologists can magnify their impact by tactically applying their well-honed empathy to their clients’ business contexts.
  • Mission-driven leaders want to have a positive influence but lie awake thinking about returns, growth rates, and their number one constraint.
  • A deeper understanding of business leaders’ key worries and motivators can enable psychologists to build clients for life.
Jeff Bergen/iStock
Source: Jeff Bergen/iStock

There is a high chance that you entered the field of psychology because you have an ingrained passion and talent for understanding what drives people. On the other hand, this might also mean that you may have some limiting self-beliefs around your commercial skill or will, such as:

  • “I don’t need to know about business.”
  • “I’m not a numbers person.”
  • “I consult on behavioral issues, not business strategy.”

This post aims to persuade you that if you truly want to do high-impact, high-integrity work with business leaders, you need to understand enough about business to be dangerous.

While business disciplines are rational entities, the people who drive and lead them are deeply irrational. That’s why knowledge of both worlds would allow you to be the best practitioner.

What sets leading psychologists who can count top leaders on their client lists apart is a deeper understanding of not just what makes people but also businesses tick. They have discovered that it’s not a zero-sum game of being either a commercial business strategist or a people-oriented psychologist. Rather than neutralizing or negating their understanding of behavioral sciences, these psychologists leverage their deep psychological insights and complement those with another skill set to act as the most trusted advisor to those at the top.

To match your understanding of the psychological DNA of leadership, you should know about three concepts that leaders who run large organizations care about.

Returns Explained

Simply put, a return is the value created after a certain amount of value is invested. This fundamental concept lies at the heart of explaining the success or failure of any organization on the planet.

A not-for-profit that builds bridges that connect people in rural communities to the town center (and, therefore, to healthcare, education, and jobs) measures its success by the number of people’s lives that are positively impacted divided by the dollars that are invested in building the bridges.

A multinational life sciences company measures its success by the number of lives saved or improved and the economic value that it creates after all expenses are taken into account.

A head of manufacturing, building aircraft measures success by the number of high-quality planes manufactured and the price they earn, divided by the cost to make and sell them.

Return on investment. Cost-benefit. Cash-on-cash return. Internal rate of return. Cash multiple. Social return on investment. These terms all achieve the same concept. At the beginning of a consulting relationship, take the time to really understand how value is created, and understand the leader’s drive to maximize returns. Then solve people's problems that help enhance those returns, and you are on your way to winning a lifelong client.

Growth Rates

Growth rates are how fast something is growing or shrinking. Here is good news for all my fellow psychologists who don’t view themselves as “math” people—the math that underpins all huge companies, not-for-profits, and governments is not calculus or anything you studied and forgot in school. The math used to guide the planning and execution of any size organization is simple addition, subtraction, multiplication, and division. And the metric that CEOs, Presidents of Countries, Executive Directors of large not-for-profits, and entrepreneurs pay most attention to are growth rates.

If revenues of a consumer products client are up 21 percent and the peer group is growing at 10 percent, that’s a success. If earnings before interest, taxes, depreciation, and amortization (EBITDA) (which is a common form of your pre-tax profit) is shrinking by 10 percent over the past year, and competitor EBITDA is up 10 percent, that’s not good. For governments, if the tax revenue burden on citizens and companies is up 12 percent, yet key outcomes associated with jobs, education, healthcare, and wellbeing are down, that’s bad.

If a start-up is growing at 30 percent and its industry is growing at 20 percent, that’s great. The point here is to pay attention to growth rates versus peer group, the plan, or historical averages. That’s what keeps CEOs and government leaders up at night.

Constraints

My colleague and co-author, Randy Street, Harvard MBA, taught me many years ago the concept of a constraint. Under Randy’s leadership, our firm grew ten-fold (which is 1,000 percent growth over ten years – that’s a great growth rate). The number one constraint an organization has is its primary obstacle to success.

By asking a client what their number one constraint is, you are helping the leader begin to identify the main obstacle to be overcome in order to shake loose from previous performance levels and achieve a higher level of success.

If an auto manufacturer cannot source enough chips to make enough cars to keep up with demand, sourcing chips is the number one constraint. Or a community may identify a lack of early childhood education as the number one constraint to high school graduation. Or a tech firm cannot retain top talent. Helping a leader identify and solve their number one constraint (which often involves a hiring, development, or team effectiveness solution) is very valuable. And once that constraint is solved, it’s time to identify and solve their new number one constraint.

I’m hopeful that not too many of your eyes glazed over as you saw returns, growth rates, and constraints. These are a few concepts that I believe we as psychologists are wise to study and understand as we attempt to win and sustain long-term advisory relationships with influential leaders.

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