Game theory and HR professionals.

HR managers are familiar with various games played by line function heads. Most common ones are “I need resource, else delivery/sales will suffer” , ” Match offer I have got from competition, else I am resigning” , ” We have to promote him, else he will quit”, ” Change HR policy for my department, else face dissatisfaction ( I will then blame HR for dissatisfaction!)” etc.

While line managers don’t think beyond impact of employee on their project/function, HR has to take organisational level view esp. what impact these decisions will have on other employees. If you promote undeserving candidate you face dissatisfaction of other employees, if you don’t, then candidate quits and departmental head is upset with you (besides you have to find replacement- ASAP.)

HR can explore Game theory to resolve such conflicts or dilemmas. Game theory is not just statistician’s fantasy, it has many applications esp. in politics, and organisation is hotbed of politics- with HR usually at receiving end.

Bruce Bueno de Mesquita is a political scientist who has founded a company, Mesquita & Roundell that specializes in making political and foreign-policy forecasts ex. New York Times published an article entitled “Can Game Theory Predict When Iran Will Get the Bomb?” on his unique ability to combine political development with game theory. In fact his organisation does lot of work for CIA!

HR and line functions are perpetually in conflict. Conflict and selfishness breeds mistrust, resulting in inefficiency. Game theory can highlight importance of collaboration, which maximizes output for all.

prisoner dilemma

HR can design games or use popular games like Prisoner’s dilemma, Stag hunt, Chicken etc. and cross functional teams should be asked to solve it by designing payoff matrix and using various techniques like dominated strategy, saddle point, Nash equilibrium, linear programming etc. to arrive at an optimal solution.

A bit about Nash equilibrium. It is named after John Forbes Nash, an American mathematician who overcame mental illness to win Nobel Prize in 1994 for his contribution to game theory. Sylvia Nasar wrote his biography- A Beautiful Mind. A movie with same name was made based on her novel, with Russell Crowe playing role of John Nash.
hare and stag


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