The Observation Step of Business Research Methods

Observation is a critical step of business research methods.
Observation is a critical step of business research methods. (Image: BananaStock/BananaStock/Getty Images)

Business research is vital to help organizations keep track of their progress, determine new ventures for innovation and differentiate them from their competitors. There are many methods available depending on the goal of the research, but in most of them, observation is a crucial step that allows for the collection of data, that is then used in further stages. Observation can be the collection of benchmarking data, or measurement of the progress since the last time a similar business research project was initiated.

Types of Observation

There are two major types of observation. The first, passive observation, is a technique that involves the direct observation of phenomena in uncontrolled situations. This type of observation is most frequently used in business, management, marketing and social sciences research, and does not necessarily require the consent of the subjects. The other type of observation is of consequences or behaviors during situations controlled by the researcher. This is typical of medical and psychological research where the participants have given their consent to take part in the research.

Three Approaches

There are three approaches that can be used in observation. In covert observational research, the researchers are unidentified and interact with the subjects undetected, or observe them from a distance. The overt observational approach requires that the researchers identify themselves and explain the purpose of their presence to the participants. Finally, in the approach of researcher participation, the researcher participates fully in what they are observing to get an insider’s view of the phenomena.


Although observation is a single step that can be used as part of various business research methods, it is also made up of its own specific steps. The stages of the observation step include review of the literature, assessment of established theory, theoretical conjecture, hypothesis or empirical generalized formulation, defining measuring instruments, sampling, testing and analysis, as well as confirmation and refined theory.


When a researcher observes a phenomenon, it is not necessary for him to rely on the willingness and ability of respondents to report accurately on the events that occurred. It also means that the bias effects are reduced and sometimes eliminated, which ensures that the collected data is objective and accurate. Observation also allows for research that is more flexible since researchers can change their approach as needed, depending on the behaviors they observe.


Compared to quantitative research, the observational step of business research tends to be less reliable in uncontrolled situations. It may take some time before a specified action takes place for the researcher because it is not meant to be provoked. Another limiting factor is the inability to record things such as attitudes, emotions, motivations and states of mind. When trying to determine buyer motivation or employee engagement levels for example, the observation step is not the most reliable step to gather data to measure these components.

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