Accessible text version. Each heading below is one slide, in order.
LER 565, Week 6: Strategic Moves for Competitive Advantage in HR. Instructor: Ryan Lamare.
Two challenges to the clean game-theory model, shown as a before-and-after. Last week's challenge was information: one side knows more than the other, drawn here as one solid figure beside a hollow outline figure with a question mark. This week's challenge is rationality: real people do not perfectly optimize, drawn as a figure with a speech bubble full of confused symbols. Our response is the strategic move — a commitment, threat, or promise that changes the game and shifts the outcome your way; the catch is credibility, since it works only if others believe you will follow through. We carry the logic into HR and then turn it inward, as pre-commitment against our own future self.
Equilibrium assumes rational, no-regrets players, yet we regret our choices all the time. Save-more-tomorrow retirement plans let today's self auto-enrol so a weak-willed future self cannot opt out of saving. The real game is the present self against the future self, two players who never quite meet. Rather than accept our irrationality, we make a strategic move and change the game. Related media: Freakonomics, 'Save Me From Myself', on commitment devices for the self you cannot trust.
A strategic move is a two-stage process: first you announce the move, then you actually carry it out. Stage two is credibility, the 'art' of strategy and where most moves fail. The move must be observable and irreversible, or at least appear so. Unconditional moves are commitments; conditional moves are threats and promises. In effect you say, 'in the game to follow, I will make move X', changing the order of play or limiting your own options.
Recall from Week 4 that the game of chicken has two pure-strategy equilibria; whoever swerves is the loser. A commitment can break the symmetry and force the outcome you want. If Dean visibly throws his steering wheel out of the window, he can no longer swerve. James now faces a one-row game, and his only sane reply is to swerve.
A payoff matrix for the game of chicken. The row player is Dean (Player A, teal); the column player is James (Player B, terracotta). Each cell is (Dean, James). If both swerve, (0, 0). If Dean swerves and James goes straight, (minus 10, plus 10). If Dean goes straight and James swerves, (plus 10, minus 10). If both go straight, (minus 100, minus 100). When Dean throws out his wheel he commits to Straight; James's best reply is Swerve, so the game settles at (plus 10, minus 10), the ringed cell.
A nightly game: the resolute Night Self (Player A, teal) against the weak-willed Morning Self (Player B, terracotta). The Morning Self moves second and usually wins by hitting snooze. But the Night Self can change the game by limiting the Morning Self's options. Put the alarm across the room, and getting up becomes the only way out. Related media: Clocky, the alarm that rolls off the nightstand and makes the morning self chase it.
A payoff matrix for the alarm-clock game. The row player is the Night Self (Player A, teal); the column player is the Morning Self (Player B, terracotta). Each cell is (Night Self, Morning Self). With no alarm: if the Morning Self stays in bed, (0, 10); if it gets up, (10, 0). With the alarm set: if it stays in bed, (minus 2, minus 5); if it gets up, (8, minus 1). Commit to Set Alarm and the Morning Self's best reply flips to Get Up: (8, minus 1), the ringed cell.
Conditional moves make you the second mover, responding by a rule fixed in advance. A threat says, 'unless you do what I want, I respond in a way that hurts you.' A promise says, 'if you do what I want, I respond in a way that helps you.' Price-cutting is a prisoner's dilemma; a 'meet the competition' clause holds prices up. In HR the logic is everywhere: discipline is a threat, incentive pay is a promise.
A reward becomes credible once it is a track record: a year-end bonus that always arrives makes 'sell X, get a bonus' believable. For new or one-off promises, structure does the work: deferred equity, back-loaded pay, and clawbacks bind the firm. A threat is costless if it works, but it collapses the moment it is seen as a bluff. And vague targets backfire: Soviet quotas set by weight or count produced heavy, useless nails rather than value.
Schelling's insight: limiting your own options can strengthen your hand. Two routes to credibility. Reputation, built in repeated games, cuts both ways: Bush's 'read my lips' pledge helped win 1988, then the broken promise sank him. Irreversibility bites only if it is severe and seen, as when Cortes scuttled his ships. Turned inward, this is pre-commitment, like Ulysses tied to the mast (Strotz, Elster). Related media: Bush's 'read my lips' pledge, and Clinton's 1992 ad on the broken promise.
Design the context; don't just inform. Two findings shown as Isotype pictogram rows, each icon worth ten percent against a hundred-percent baseline marked by a vertical line. Putting M&Ms in packets cut the serving by 58 percent, shown as four solid candies of ten with the rest faded away. Making it the 'Vegetable of the Day' raised the number of people who tried it by 74 percent, shown as the ten baseline ears of corn plus seven more past the line. Together they illustrate the 4 Ps: Process, Persuasion, Possibilities, and Person.
A strategic move changes the game, by commitment, threat, or promise, and lives on credibility. The most powerful moves take your own options away; turned inward, that is pre-commitment. But commitment can overshoot. Bind yourself against temptation, but do not cling past the evidence: that is just sunk cost and escalation, throwing good money after bad. Put the whole course together, and you can be a master HR strategist.