Posted in Human Resources Articles, Total Reads: 828
, Published on 20 February 2015
When doing something without being told, you’re overstepping your authority. However when your boss does the same thing, that’s initiative.
Working in a corporate set-up, such realizations are often very commonplace. Exposed to the world of corporate competition and the dreaded appraisal cycles that often promotes politics, one would realize that such an environment and the behaviours shown therein have much to do with signalling, credible threats and playing the right moves. Yes we are turning corporate politics into games. Let us assume a scenario just for the sake of explanation. The moment one is done with the training period he or she is put in a team to work on a project.
Everyone in the team have their own levels of strengths and performs accordingly. But often when it comes to the appraisal season, the ratings seem not just a culmination of performance and effort, but also how well you mastered the art of corporate karate, if you know what I mean. In this essay as I make a humble attempt to depict a case of corporate rivalry through the eyes of game theory, in hindsight I feel that strategy plays a very important role in how one plans his or her efforts and how one decides to make it look to his or her colleagues in an attempt to gain an advantage.
Chatur and Simar (names changed) are two members of the Data Migration Team of ABC IT Solutions Pvt. Ltd. Both had joined the company last year and are well aware of each other’s strengths. Chatur on one hand has a very high level of technical competency; Simar on the other has a decent level of the same but less than that of Chatur. However in accordance with the infamous work culture of the city they work in, both were lethargic to put in more time and effort unless required. In the mid-year performance review a strange thing was observed. Simar had actually fared better than Chatur despite the limitations with respect to the technical competency. Now Chatur was enraged. But let us first analyse why Chatur lost the competition despite having better competencies. Let us first draw a pay-off matrix for the two competing colleagues along with their pay-offs in each cell.
Looking into Chatur’s and Simar’s minds, we come up with the following pay-offs. Just one assumption we have to make. Since both are very lethargic by nature and considering the humidity and heat of the city, both Chatur and Simar regards putting in more efforts to be the most undesirable scenario, with the least payoff to both. Accordingly we have set the bottom right cell (which is the High, High scenario) to the least Pay-offs for both the employees (viz. 10 each: First value is for Chatur and the Second signifies Simar’s pay-off). Now consider the top left cell. If both Simar and Chatur applied less effort, naturally Chatur would win the race by sheer measure of competencies. We hence set the pay-offs accordingly. Chatur will have, say 40. Here Chatur is applying less effort or giving less time and still winning; the best scenario in his case. Simar, on the other hand gets less (viz. 30) but derives a little more utility from the fact that he is at least expending less effort. The only time when Simar can beat Chatur is when he applies more effort in work and Chatur works less. Hence this will yield the best pay-off for Simar (viz. 40) and for Chatur it is 20. The bottom left cell pay-offs are filled in acordingly. Chatur wins but because he expends more effort, he derives the second best utility (viz. 30) and Simar gets 20. Once this is done we look into the dominant strategy of Chatur. When Simar puts in less effort Chatur has more pay-off by putting in less effort. Again when Simar puts in more effort, Chatur again has higher pay-off by putting in less effort. Thus it is clear that the dominant strategy of Chatur is putting in less effort. The problem is Simar can easily apprehend this and hence choose to apply more effort to his advantage and win the game. This is exactly what happened. Point to be noted here is that we looked this from the point of view of a simultaneous game. Each player decides simultaneously with no idea of the opponent’s decision.
The Winning Move: The Clever Chatur
Chatur turns the simultaneous game into a sequential game in the year-end appraisal
Chatur is not the person to be bogged down in anyway. He is game for greater politics too. Having realized the essence of corporate politics, he decides to use economics of strategy to give him the upper hand over Simar. He wants to use signalling. Contrary to popular belief that keeping one’s options open is always preferable, Chatur understood that in the realms of game theory his lack of freedom will have strategic value. He can actually change his competitor’s (in this case Simar’s) expectation about his future responses. We will see this shortly.
According to plan, this time round Chatur decides to declare beforehand that he is going to apply a lot of time and effort in the project. He declares this in many subtle ways so that the signal is clear to Simar. Now, let us look into the figure below to understand how the game of decision making changes accordingly, due to this strategic step.
Clearly now, we will be looking only at the upper half of the decision tree because Chatur has already made public his decision to put in more time. Being in the same project and being a rational human being, Simar now weighs his options. He finds that if Chatur is really putting in more efforts then there is actually no point in his putting in more time and effort as well (as the pay-off matrix suggests that in such a case each will end up with their worst pay-offs). So the only option for Simar is to put in less time (because he is going to lose anyway) and maximize his pay-off from 10 to 20.
However, the scenario for Chatur changes completely to his advantage (surprisingly so). His pay-off which was earlier just a paltry 20 has now increased to 30. Now he wins the race and commensurate with his high competencies, he is happy with the results of the year-end appraisal. The unconditional decaration of his choice brings to Chatur this advantage. Basically the moral of the story is that in order to behave in a strategic way, one should never follow his or her dominant or equilibrium strategy because people and your competitors expect that anyway.
But there is a final twist and here lies the beauty of strategic game theory as a domain. It leaves room for speculation and cogitation. What is the guarantee that Simar would believe in Chatur’s declaration. If he does not, both end up paying the price for it, by getting the worst pay-offs possible. So it is in Chatur’s best interest that he takes measures to improve his credibility, else his strategic step will not yield the desired results. On the contrary, it might actually backfire. He can make this declaration credible by taking a number of steps that signals so. For example, he can go for some relevant certification courses that might help the project. This signals to Simar that Chatur is indeed willing to put in more effort.
The above is a very simplistic example but such strategies have found great applications in modelling how organizations behave and how a player in a market can deter the entry of a competitor by use of signalling or by turning a simultaneous move game into a sequential game and making the first move.
This article has been authored by Sreedipto Bhattacharyya from XLRI Jamshedpur
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