Psychological contract

26th July 2021 |   Colin MacKenzie

Psychological contract

Introducing the psychological contract into sales education

Introduction

This paper discusses the relevance of the “psychological contract” to the sales process and its potential contribution to the field of sales education.

This viewpoint has emerged through the author’s 40 years etic and emic perspectives of direct observation of sales executives, five years involvement in national and international university sales competitions, teaching Human Resource Management, and from a current evaluation of the curriculums being taught as part of the Southeast Asia Sales Competition. SEASAC is an Erasmus+ project, a pan-Southeast Asia initiative funded by the European Union to develop a regional sales pedagogy.

The “psychological contract” is commonly applied within organisational psychology literature to the relationships between employers and employees; it is expressed in terms of “the unwritten expectations that exist, not in a formal contract but in implicit expectations, often covertly held and infrequently discussed” (Green and Francis, 2005). Rousseau (1989) says that psychological contracts are “individual beliefs in a reciprocal obligation between the individual and the organization”.

There is an important difference between a “psychological contract” and an “implied contract”. An “implied contract” is a form of activities normally undertaken between two parties that, if breached, a court may potentially construe that a “formal contract” existed, even if not written down; by contrast, a “psychological contract” is much more loose, unwritten and often unsaid. It can be regarded as set of mutual expectations, the strength of which may differ as each participant has their own, and therefore subjective, interpretation.

In essence, each actor in the relationship is constructing, and adjusting, their own understanding (Seeck, and Parzefall, 2008); therefore, it could be argued these relationships are formed through a constructivist perspective.

Within sales education and sales training, many taught processes and skills practice focus on the end-result of “closing the sale”, and so obtaining a “formal contract”: ie, an agreement to buy.

To “close” a sale is a form of transactional language. Traditional thoughts around “closing” are under pressure as the costs of seeking new customers often outweighs building relationships with existing clients. For some, repeat business is a strategic direction in lowering their cost base (Hendry, 2010).

Using traditional language and terms to move the sales process along could be a double-edged sword; whilst supporting a push for an eventual desired outcome, it can also suggest a short-termism mind-set that could hinder the building of a longer-lasting psychological contract. It is accepted that a vital result of all marketing and business is to make sales. Gaining an agreement to buy is vital; however, how it should best be achieved needs to be considered within a thought-through sales strategy.

There is therefore a prerequisite in raising awareness among “sales educationalists” and “sales practitioners” of a need to encompass the wide contextual variations of business relationships that exist within the sales environment and about creating a framework where sales follow naturally from relationships and behaviours.

Psychological contracts feature not only in human-relations literature but also within the research relevant to supplier-chain management. This research can enlighten organisations on what clients would consider to be breaches of the psychological contract (examples: Kingshott, and Pecotich, 2007 and Esslinger, and Eckerd, and Kaufmann, and Carter, 2019).

Despite this knowledge base there is little evidence that this concept is making its way into the specific area of sales education. Existing sales education often focuses on transactional managerial functions of salespeople or sales managers and may encompass basic skills education and practice.

As the subject of sales education develops around the world, the importance to sales professionals of transferring knowledge from the other fields becomes increasing relevant and important. Supplier-buyer relationships have been shown to demonstrate long-term commitment (Rutherford, Boles, Barksdale, and Johnson, 2008) and this article suggests that transferring an understanding of the psychological contact to sales students would be a significant addition to sales education.

Sales education is not just about learning simple processes, but about developing skills that support long-term business relationships, especially for those companies that develop products or services which benefit from repeat business.

If researching and understanding the psychological contract is important in employer-employee relations and in supplier-management, it follows that this is relevant and has applications in sales-client relationships where skills-based education can have important impacts on practice.

The “psychological contract” approach in organisational terms makes claims for greater mutual commitment and motivation (Rousseau, 1995) and reciprocation (Coyle-Shapriro and Kessler, 2002).

Best-practice practitioner sales training promotes trust-based relationship building, in order to overcome price objections and maintain profit margins. However, it does not necessarily explain how this can be achieved in practice.

The sales mantra “people buy from people they like” is an oversimplification; there are many actions that cause salespeople to fail that are not about personality (Ingram, Schwepker, and Hutson, 1992). No matter how “personable” a sales executive, there is much more to sales professionalisation.

Lövblad, Hyder, and Lönnstedt, L. (2012) suggest the psychological contract is an antecedent to affective commitment in business-to-business (B2B) relationships and this emotional connection between the buyer and salesperson promotes loyalty, trust, reciprocity and interdependence. Practitioner sales training acknowledges the need “to build rapport” with clients; however, there is little depth of knowledge or theory application on how this skill can be developed within many current sales courses. Advice on how to achieve this is commonly at a superficial level. Within a university and sales education context there are opportunities to discuss relevant theory and broaden research into skills practice and development.

Businesses require high-value sales professionals who are not only equipped with the knowledge but also the skills to develop and maintain high-quality relationships.

Psychological contract concepts also extend to e-tailing, and breaches in this sales area have been demonstrated to impact online business (Malhotra, Sahadev, and Purani, 2017). It follows that sales managers and sales executives would benefit from understanding the social exchange at different levels: the organisational level (between the client and business), the sales manager-sales professional (between the employer-employee dyad) and also between the client-sales executive dyad. Each of these levels may have unsaid promises and understandings, and have the ability to increase trust and commitment between all parties.

Even if the sales professional is employed within an online business as a buyer or adviser to the marketing department, there is often a disconnect between what customers think of as a social contract and the legal contracts found in the small print (Malhotra, Sahadev, and Purani, 2017).

Trust

One of the key aspects of the psychological contract is “trust”. This appears in practitioner sales processes and training, whether it is Need-based/Problem-solving selling (Rackham, 2020), Adaptive selling (Weitz, Sujan, and Sujan, 1986), Solution selling (Bosworth, 2002), Relationship or Trust-based selling (Ingram, 1995) – and it can be argued that trust is also integral for Challenger sales techniques (Dixon and Adamson, 2011).

Creating and building trust or relationships is not simply about being amiable, nor is it about “being friends” with the client. Trust has affective and cognitive elements (McAllister, 1995) and deeper understanding and appreciation could enhance the ethical dimension of the sales process. Trust is a mediator between perceived value, satisfaction and loyalty, and is important in an international sales context (Paparoidamis, Katsikeas, and Chumpitaz, 2019).

Sales education is not just about learning simple processes, but about developing skills that support long-term business relationships.

While the organisational performance of a business (service support, price guarantees, values, and so on) contributes to the growth of trust, this paper suggests that sales education should not only include discussion around tangible performance issues but also the less tangible aspects of relationships that enhance trust and the other antecedents that promote a strong psychological contract. It is also about introducing a strong ethical element into the buyer-client relationship.

Tellefsen and Thomas (2005) found that organisational trust promoted commitment at the organizational level, but that personal trust is a driver for personal commitment. If the psychological contract is about individual beliefs of mutual expectations, then trust is only a part of the equation. Trying to understand client-employees’ perceptions is important.

There are tools for measuring the quality of relationships at organisational and dyadic levels: for example, the Kano Model (Kano, Seraku, Takahashi, and Tsuji, 1984) or the popular

SERVQUAL (Parasuraman, Zeithaml, and Berry, 1995). These models may be helpful for sales managers and sales leaders to think about deliverable and measurable outcomes. They may also be useful at an organisational level to gauge customer perceptions and support gap analysis; however, they may not easily translate into person-to-person selling, which is often about perceptions of the individual. As with many quantitative measures not all intangibles are likely to be captured.

This leads to a question about how to introduce the concept of the psychological contract into sales education.

Conclusion

What should sales education consider? If understanding the value of the psychological contract is useful in employee-employer and in supplier-manager relationships then this paper argues that sales courses at university level, whether for potential sales managers, sales executives or marketing students should consider introducing discussion and workshops around the “psychological contract” as part of the sales curriculum.

It is accepted that the psychological contract may share many elements with a wide variety of sales theories and skills practice such as: trust, adaptability, needs, relationship building, challenging, empathic listening and ethics. However, it is the combination and exploration of how tangible and intangible elements can be brought together that differentiate the psychological contract from specific theories, and which suggests this topic can be a useful adjunct to sales education.

As well as adding depth to sales theories, as a taught concept it has the potential to improve sales managers’ critical perspectives supporting contact and communication in a manager-sales executive context. It also can help sales managers and sales leaders construct organisational continuous improvement around tangible considerations that develop value and commitment. In turn, this can form an important part of the sales-training process loop.

Understanding the psychological contract has the potential to develop critical thinking around the intangible and less quantifiable aspects of relationships, those interconnections between thoughts, feelings and actions.

This paper argues that the introduction of the psychological contract into sales education can be achieved using theory conversation, cultural exchange, and practical discussion workshops, combined with skills practice focusing on empathy and listening. It can underline the importance within the personal selling techniques of rapport-building and mutual agenda setting.

The ontological position of this paper is that sales relationships are not just constructivist but can be socially constructed. Giving students an appreciation of this perspective may support them in their co-creation abilities and give businesses and sales executives extra resilience during periods when tangible outputs cannot be controlled.

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Academic at Edinburgh Napier University

Colin MacKenzie, DBA, MSc, FHEA is a long-term business practitioner, now academic for Edinburgh Napier University in Scotland. He has taught across a range of subjects, including sales management, sales process, entrepreneurial leadership, and human resources management. He is currently a business consultant, board director and advisor to a number of businesses. MacKenzie is also the Global Press Officer for the Southeast Asia Sales Competition (SEASAC), an international sales competition for students. He has been an invited lecturer to a number of world-class universities on the subject of sales and sales leadership. Over the years he has regularly been invited to contribute to BBC radio on business matters.