How to motivate teams using Game Theory as a Rule of Thumb
Motivation has numerous benefits to team dynamics, including increased productivity, employee retention, increased engagement, and improved overall performance.
But I feel that the most popular and heavily publicized approaches and methods rely heavily on soft skills for achieving motivation. While there’s nothing wrong with soft skills, as an analytical person, I like having tools, frameworks, and concrete methods to get things done.
If you’re like me, I’m too busy and simply don’t have the time to wait for their soft skills to be polished before putting them to good use. That is why I like converting analytical frameworks into heuristics and methods that can be quickly used in everyday situations. The methods and examples I lay out herein worked for me. I hope you’ll find them as a good replacement for soft skills to motivate others.
Theory of Incentives
The theory of incentives is one of the key theories of motivation. It suggests that behavior is motivated by the desire to reinforce incentives, so we are pulled into action by outside incentives. According to this view, people gravitate towards behaviors that offer positive incentives and move away from behaviors associated with negative incentives. In other words, differences in behavior, from one person to another or from one situation to another, can be traced back to available incentives and the value people place on them. In the methods discussed below, we will adopt Game Theory as the guiding principle for designing incentives that can lead to motivation or other desired outcomes.
Game Theory is widely adopted in strategic decision-making. It has been used to study a variety of human and animal behaviors, and its applications span beyond business and include economy, psychology, and even biology. Game Theory can also be adopted in designing more rigorous incentive structures that can, among others, motivate people. Since my focus here is limited to methods designed to motivate people to act a certain way, I will not be going into classical Game Theory, such as solving for Nash equilibrium. Instead, I’ll focus mainly on the interdependence between adaptive agents and how Game Theory can be applied to study the dynamics of cooperation and competition that emerge from this relationship.
In some business applications, Game Theory is used to design both customer-related initiatives and strategic initiatives against competing initiatives, such as pricing mechanisms. Game Theory helps reveal possible areas of conflict, competition, and cooperation and why these phenomena may arise. Also, Game Theory provides us with possible ways of altering “games” to realize new outcomes. Since my focus here is on influencing employee behavior, I’ll limit the discussion to the four types of games discussed below.
In this context, Game Theory works by considering interactions within teams by team members as games. A game tries to capture the dynamic of autonomous agents (employees or team members) and how their goals actively contribute to a joint outcome. A game has three major elements: players, strategies, and payoffs. A player is a decision-maker, and a strategy is a decision specification for possible situations in which the player may find themselves. Finally, a payoff is either a reward or a loss that players experience when following their respective strategies.
Games are played over some mutually desired payoffs expressed in terms of resource currency. The resource is whatever is of value to the people in the organization (i.e., the agents in the game being played). Let’s examine four scenarios and applications where the key consideration shapes how the overall game plays out. The outcome is driven by whether the total value (i.e., payoff) distributed to all agents remains constant irrespective of their actions or fluctuates based on player cooperation.
Symmetry can be adopted when designing incentives that promote teamwork and cooperation within a group, a unit, or an organization. Symmetry reveals how games can be asymmetrical, meaning payoffs to individuals for different possible actions may not be the same. If the players’ identities can be changed without changing the payoff of the strategies, then a game is symmetrical. Many of the commonly studied 2×2 games are symmetrical. Moreover, games of coordination are typically symmetrical. This is when people choose which side of the road to drive on. Assume that two drivers meet on a narrow dirt road. Both have to swerve to avoid a head-on collision. They have to choose the way that will make them pass each other without colliding. Successful passing is represented by a payoff of 10, and a collision is represented by a payoff of 0. Therefore, the payoff to each player is symmetrical.
Constant-sum of zero-sum games
Constant-sum games are games in which the sum of the players’ payoffs adds up to the same number. This makes for games of pure competition: what one gains, the other loses. There is only one winner. This is very common in sports games with strict competition and no cooperation (e.g., basketball). Another example would be poker because the combined wealth of the players remains the same, but their distributed wealth is affected by who is winning or losing. Zero-sum games are a special case of constant-sum games, as players’ choices can neither increase nor decrease available resources. In zero-sum games, the total benefit of players for any combination of strategies always amounts to zero. This is because the team member’s payoff relationship is negatively correlated, otherwise known as negative interdependence. In such cases, individual team members can only achieve their goals via the failure of other team members, which drives competition. For example, sales teams may structure incentives to drive competitiveness via a winner-takes-all leaderboard payoff.
Non-constant or non-zero-sum games
Here, the payoffs depend on the cooperation among team members. For example, when team members cooperate, they could create more value than if team members were to work separately. If there’s some conflict that prevents team members from working together, the payoffs would be negative. If you create a situation where team members can share common goals and perceive cooperation as individually and collectively beneficial, this would create incentives for team members to work together. This concept helps us to envision the benefits of cooperation and incentives alignment within teams as well as across different and independent teams or employees.
Cooperative or non-zero-sum games are ones in which cooperation among players has the same payoff, and every player either wins or loses. A good example is when cooperation is achieved through peer-to-peer interaction and feedback mechanisms. The objective of this strategy is similar to that of non-zero-sum games. However, this strategy can also work top-down by implementing a 360-feedback mechanism to help promote team communication and open feedback. It will also force team leaders to consider the team members’ best interests, as negative feedback can affect payoffs.
It’s important to track performance targets in order to monitor how each initiative or game strategy impacts progress towards goals and objectives. However, combining games with other incentive tools and strategic initiatives is best practice to establish a holistic approach for overall performance improvements.