The Big Business of Psychology

Many people are unaware of the big business that is now Organisational psychology. I have long argued when reporting the myths of psychology that one of the great myths is that it is a discipline driven by science. The reality however is that it is a discipline often under pinned by commercial interests.

I have known of many legal battles between psychometric testing companies as they try to monopolize market share. I would imagine for most companies their marketing spend dwarfs research and development. Very few if any modify their models based on science but modify their business on commercial grounds.

As the recession closes in (or begins to weaken depending on which country you are in) it is important to remember the recent history of the business of psychology, especially over the last few years. The business has been built on mergers, private equity, share offers, acquisitions, and takeovers, many of which turn out to be quite messy. As an example I draw attention to one of the more famous management breaks ups, that of SHL. This involved both parties jostling for position and resulted in commercial battles that continued for years after.

This is not a critique of anyone involved; it is the nature of the game. However, to quote Francis Bacon: ‘Nature to be commanded must be understood’ and for this reason all practioners and scientists in the area should be mindful of the often covert drivers of the industry:

From the Telegraph Business News (2002):

‘Further two directors go as SHL equilibrium tested’ By Alistair Osborne, Associate City Editor, 24 December 2002

‘SHL, the psychometric testing group, yesterday ousted two rebel directors from the board but at the price of discovering that more than 40% of investors did not support chairman Neville Bain or chief executive John Bateson.

At a shareholders meeting to settle the internecine warfare on the board, company founders Roger Holdsworth and Peter Saville were forced out of the company, respectively by 55.2% and 54.8% of votes cast.

They followed another non-executive director, David Arkless, the Manpower representative ousted last month, but who voted his company’s 7% stake with the rebels.

However, the rebels’ counter-motions to oust Mr Bain, the former Post Office boss, and Mr Bateson, gained a respective 40.9% and 41.6% of the votes. About 90% of shareholders voted. The meeting, from which Mr Bain banned the press, was at the City offices of SHL lawyer Barlow, Lyde & Gilbert.

Afterwards, Mr Holdsworth, 67, said that, despite the verdict: “We’re feeling relieved and a teeny bit inebriated – there’s been a lot of tension.”

He said that the vote was “not a ringing endorsement of the board”, adding that he and Mr Saville, who owns 11% of the shares, had been “overwhelmed by the support from virtually all SHL employee and ex-employee shareholders”. “We have at least demonstrated the fragility of the situation and that they have a serious communication problem with their staff.”

The four-times married Mr Holdsworth said he and Mr Saville, 57, would now “keep all our options open” over further shareholder action, while hinting they could start a rival business.

Mr Bain said he was “delighted” with the outcome. He denied that having over 40% of votes cast against him and Mr Bateson was a resigning issue. “Absolutely not,” he said. “What we have got is the full support of the institutions.” One institution, 3i, voted with the rebels.

Mr Bain said “I deeply regret they called this EGM, but we’ve had the vote and now we must get on with running the business.” He banned the press because “it was a private meeting”.

Mr Holdsworth denied the bust-up proved psychometric testing did not work, advocating “a more thorough test of all non-executive directors”.

And from The Guardian Business News:  By Simon Bowers, Tuesday, December 24, 2002

‘A shareholder row at SHL, the loss-making psychometric tests company, ended yesterday in a vote to expel the company’s two founders from the board. Peter Saville, Roger Holdsworth and a third non-executive director, David Arkless, were forced out after 55% of shareholders gave their backing to the current management.

Mr Saville and Mr Holdsworth had led a campaign to overthrow the management, blaming it for £7m of write-downs in just over a year.

The rebels called yesterday’s shareholder meeting, at London law firm Barlow Lyde & Gilbert, appealing to investors to remove Chairman Neville Bain and chief executive John Bateson.

“Of those who voted, 41% voted to remove Mr Bain and Mr Bateson,” they said after the meeting. “We have been overwhelmed by the support that we received from virtually all SHL employee and ex-employee shareholders.”

SHL’s management, under former Post Office chairman Mr Bain, claims the company’s recent write-downs were the result of poor management under Mr Holdsworth and Mr Saville, combined with a sharp deterioration in the recruitment sector.

They claim that rationalising internet operations and sacking a number of psychologists at overseas divisions was essential to a consolidation programme.

Rebel shareholders, who were backed by recruitment firm Manpower, which holds a 7% stake, insisted Mr Bateson had brought about a “flight of intellectual capital” and had focused the business on an unworkable internet model which was too expensive.

Yesterday’s vote, which took place behind closed doors, came at the end of a week of meetings between institutions and rival shareholder camps. In the end, the majority of institutional investors, including Hermes and Fidelity, gave their backing to present management’.

 

The business of psychology is now very big business. This I think should always be understood by practioners when evaluating providers in the industry and the claims of their solutions. I do wonder what Cattell would make of it all!

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