Managerial gamification

Here is the case.

For instance, there’s 1 000 000 euro worth contract for implementing super complex project, for n years. Probability that your company will be chosen by the client is equal to ½. In order not to complicate the game, there’s another one competitor willing to get the bid. Duopoly.

But we’re not considering your actions against you’re the only one competitor, I would like to see how company A (your company) acts so that it is getting competitive advantage against another company (company B).

Let’s say 2 sales reps are working on the case from company A side. According to sales letter from CEO of the company, each sales rep is getting 5% out of the overall contract price. By doing comprehensive calculations we’re getting 50 000 usd out of the closed deal as a maximum payoff.

Then the game starts…

a1 –is a sales rep 1

a2- s a sales rep 2

They have to work so that at the end client picks company A, but not B.

Let’s take a look at utility functions for each party of the game… But before, we need to set possible actions for each of the player, let it be (work hard and goof off). So we’re getting classical Prisoner’s Dilemma here. We just have to decide, if our players will be ‘looking’ for equilibrium, or they will be selfish person acting based on principle of Adam Smith’s ‘Wealth Theory’, which states that ‘In competition individual ambition serves the common good’, i.e. individual should act on the interests of his own self, but not the group.

So let’s see at the payoff functions for both players:

S1 (a1, a2)= (Work hard; Work hard)= (25 000; 25 000)

S2 (a1, a2)= (Work hard; Goof off)= (50 000; 0)

S3 (a1, a2)= (Goof off; Work hard)= (0; 50 000)

S4 (a1, a2)= (Goof off; Goof off)= (0;0)

It is pretty much clear now, that it is better for both of the players to work hard, not to goof off, cause payoff of goofing off is zero in any case.

Obviously, 2 equilibriums, S1 and S4. The rest –game is incomplete.

Normally, people should realize this and act rational, but at THAT particular moment, everything depends on the management strategy. So if CEO’s policy is to cultivate competition among its staff, then both players will chose S2 and S3 accordingly, i.e. one is acting on the interest of his own selfish self. But if the company management is interested in closing the deal, then choosing S1 strategy makes pretty rational sense.

Rationally I understand that working only for your own interest will pay more, but it might happen, that due to hidden competition between uncoordinated sales reps activities, client will prefer to work with company B. This is more behavioral stuff, more managerial stuff, than strategic.

Motivation is the key.