What Is A Psychological Contract And How Does It Impact Relationships In Procurement?

As procurement professionals, we all understand the importance of contracts in our industry. But have you ever heard of a psychological contract? While it may not be a legally binding document, it can have a significant impact on relationships between procurement teams and suppliers. In this blog post, we’ll dive into what exactly a psychological contract is, how it differs from traditional contracts, and why understanding its role in your business relationships could make or break your procurement success. So grab your notebook and get ready to learn something new!

What is a psychological contract?

A psychological contract is an unspoken agreement between an employer and employee that dictates the expectations, roles, and responsibilities of each party. This contract can be based on many factors, such as an individual’s personality, values, and past experiences. The psychological contract can have a profound impact on relationships in procurement, as it can dictate how each party views and interacts with the other.

For example, if an employee feels that their employer has not fulfilled their end of the bargain (e.g., they are not being paid enough, given adequate resources, etc.), they may become disgruntled and less likely to cooperate. On the other hand, if an employer feels that their employees are not meeting their expectations (e.g., they are not working hard enough, are constantly making mistakes, etc.), they may become more demanding and less patient. In either case, the relationship between employer and employee can become strained, which can impact procurement negotiations.

It is important to be aware of the psychological contract in order to manage expectations and avoid conflict. If both parties are aware of the contract and make an effort to uphold their end of the bargain, it can help create a more positive and productive relationship.

Types of psychological contracts

The psychological contract is the unwritten understanding between an employer and an employee that dictates the expectations, roles, and responsibilities of both parties. It can be seen as the “unspoken agreement” between an employer and employee.

There are four main types of psychological contracts:

1. The transactional contract is based on a quid pro quo arrangement, where each party agrees to certain terms and conditions in exchange for something else. For example, an employee may agree to work overtime in exchange for more pay or extra time off.

2. The relational contract is based on trust, respect, and mutual understanding between both parties. This type of psychological contract often exists between long-term employees and their employers.

3. The collective contract is created when a group of employees work together towards a common goal. This type of contract can foster a sense of teamwork and esprit de corps among employees.

4. The virtual contract is created when an employer and employee are not physically present in the same location. This type of contract is becoming increasingly common in our globalized world, as more companies allow employees to work remotely.

Pros and cons of psychological contracts

Psychological contracts are often seen as beneficial to both employees and employers. They can help improve communication and understanding between the two parties, and can provide a framework for measuring and managing expectations. However, there are also some disadvantages to psychological contracts that should be considered.

One potential disadvantage is that they can create an us-versus-them mentality, with each side feeling like they need to protect their interests at the expense of the other. This can lead to mistrust and conflict, which can erode the relationship between employees and employers.

Another downside is that psychological contracts can be inflexible, preventing either side from making changes that could be beneficial. For example, if an employee wants to take on more responsibility or change their role within the company, they may feel limited by the terms of their psychological contract.

Finally, psychological contracts can sometimes be used as a tool for control, rather than as a way to foster mutual understanding and trust. If one party feels like they are not getting what they want out of the contract, they may try to manipulate the other party into giving them what they want. This can damage the relationship between employees and employers and lead to resentment on both sides.

How to create a psychological contract

A psychological contract is an agreement between an employer and employee that defines the expectations, roles, and responsibilities of each party. This contract can be verbal or unspoken, but it plays a significant role in shaping the relationship between Procurement and the rest of the organization.

When creating a psychological contract, it is important to consider the needs and expectations of both parties. The employer should clearly state what they expect from the employee, and vice versa. This will help prevent misunderstandings and build trust between the two parties.

It is also important to keep in mind that psychological contracts are not static; they can change over time as the needs of both parties change. For example, an employee who starts out working in Procurement might have different expectations than someone who has been working in the field for many years. It is important to be flexible and open to changes in order to maintain a healthy relationship.

How do psychological contracts impact procurement?

Psychological contracts are often unspoken agreements between an employer and employee that go beyond the terms of the formal contract. They can include unwritten expectations around job responsibilities, working hours, career development, and more. Psychological contracts can have a big impact on procurement, as they can shape the way employees view their relationship with their employer. For example, if an employee feels like they have a strong psychological contract with their employer, they may be more likely to be loyal to the company and less likely to look for new opportunities. On the other hand, if an employee feels like their psychological contract has been violated (for example, if they feel like they are not being given enough responsibility at work), they may be more likely to look for new opportunities.