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It’s All in Your Head – Why Psychology Is the Single the Biggest Predictor of Business Success

Updated: Apr 12, 2022

When it comes to entrepreneurship, it can be tempting to think that success depends on the product, the market or branding – but if you’re not paying close attention to psychology, you’re ignoring the single biggest predictor as to whether a startup will succeed or fail.

That’s what Professor Nigel MacLennan, a chartered psychologist with a doctorate in leadership coaching, states. “Success takes place inside the brain,” he says. At The Work Psychologists, we agree – but we think that psychology isn’t just the single biggest predictor of whether a startup succeeds or fails: we think this applies to all businesses, from small family run firms to multinational conglomerates.

Now, this isn’t just a fluffy opinion we’ve plucked out of thin air: a wealth of research and evidence-based research backs this up.

Psychology is defined in all sorts of ways, but essentially it is about the scientific study of the human mind and its functions, and how they affect our behaviour.

When applied to business, psychology impacts every element running a business from leading a team to selling, from fundraising to risk-taking, from marketing to being agile and innovative.

Here are just a few key areas where psychology can make or break a business.

Humans & Machine

Yes, AI is coming, but people are and will always be the driving force and epicentre of every business. People, however, are not rational and you can’t put them into a neat box.

Understanding what makes your people tick and how to get the best out of them is mission critical if you are to do a good job of creating a high-performing, deeply engaged and fulfilled team.

Psychology is vastly underutilised in most businesses. We see far too many hires based on intuition, unconscious bias and a lack of tangible evidence and which do not utilise psychological evidence.

This also applies to your customers. Creating a loyal, passionate customer base requires understanding them – their wants, needs, values and fears. The frontrunners in every industry understand the value of using data to understand and build relationships with their customers.

Data looks like it’s about statistics, but really it is fundamentally rooted in psychology: if we can make sense of what people do through identifying patterns hidden in data, we are likely to be able to replicate that and sell to them.

When we understand the why behind what people do, we are much more likely to be able to recreate those conditions in more innovative and truly game-changing ways.


Leadership psychology is critical at every life stage of a business’s journey – pre-launch, launch, post-launch, scaling and even transitioning. Different psychological concepts come into play at different points of the process: what is needed to build a small team differs from what is needed to create a sense of togetherness in a team of over 100 people – or even 5000 people.

Leading successfully involves numerous, overlapping skills and competencies – with psychology impacting and sitting at the core. From motivating and inspiring others, driving engagement (Gallup found that just 15% of people are engaged in their jobs, a pretty appalling statistic), managing processes, maintaining relationships, understanding customers, managing risk, or planning and execution to name just a few areas.

The ability to lead and manage yourself is critical. Every event that happens during the course of a normal working week – big, routine or small – will generate an emotional and psychological reaction. These reactions guide behaviour – the way you react in a given the moment, the decisions you make and the habits you form – and determines what happens next. The more self-aware you are, the more likely you are to be able to manage your reaction.

Our inner dialogue and ability to do what psychologists refer to as self-regulation – is essential, being in charge of rather than at the mercy of our emotions and thoughts – determines our behaviour and reactions, not the events themselves.

Stress and Anxiety

Stress and anxiety are very much a modern epidemic – the World Health Organisation has called stress the health epidemic of the 21st century – and they do not appear to be going anywhere.

If we ourselves aren’t stressed, then we almost certainly know people who are. A bit of stress can be a good thing, but chronic stress and anxiety have an extremely detrimental impact on our physiology and prolonged exposure to stress can lead to total burnout.

In 2016-17, there were over half a million cases of work-related stress, anxiety and depression in the UK, with 12.5 million working days lost to stress – a 6.8% increase compared to the previous year. Stress accounts for almost 50% of work-related absence. Needless to say, that amounts to millions of pounds in lost productivity and revenue.

Both stress and anxiety have physiological, emotional and psychological consequences. Our sympathetic nervous systems switch on in response to threats, kicking the fight, flight or freeze response into play. Being in the fight-flight state for short periods can be useful – it’s nature’s in-built survival mechanism – but we are not designed to live in that state. Many of us do, though, which long term can lead to adrenal fatigue, chronic illness, immune system issues and even total burnout.

So what does psychology fit into all of this? While people often cite workload as the primary cause of work-related stress, neurologists have demonstrated that the brain responds to imagined stressors as if they were real. Utilising this knowledge can help executives to develop their own and their teams’ emotional intelligence and to become more resilient. These, we now know, are both essential to maximise productivity and generate a happy, engaged workforce.

In other words, people’s thoughts, attitudes and beliefs about their workload – and their ability to manage those thoughts and the accompanying emotions (again, what psychologists call self-regulation) – have as big an impact on stress and anxiety levels as the workload itself.

In Conclusion

The many psychological processes at play in our day-to-day lives – some of which we are aware of, others of which are unconscious – can either contribute to a business’s success, failure or stagnation.

In other words: if you want to build a successful business, ignore the human mind at your own peril.

About the Author

Sarah Jane Last is a Business Psychologists, Executive Coach and co-founder of the Work Psychologists. Her current research interests are focused around the early identification of Intraprenurial & disruptive talent. She coaches private clients, Channel 4, We Work, Experian and works with a multitude of tech entrepreneurs.


Interview with Professor Nigel MacLennan:

Gallups’s engagement statistics 2018:



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