Human Resources Management and Game Theory

Introduction

Human resources management is not being recognized as an increasingly important component of firms. This is mainly due to the fact that many firms are getting increasingly larger and more complex due to factors like globalization. But many theorists are of the opinion that human resources should not just remain as an administrative function. This area should be viewed as a strategy that fits with the overall strategies of the firm. (Krishnan & Sing, 3). Citing other researchers, the authors have said that firms can increase their profits by adopting strategic human resources development practices. It is intended to apply game theory to strategic HRM and also see how firms are defined with reference to different perspectives.

Game Theory

Game Theory deals with actions of all humans in a particular field that are aimed at maximizing benefits to self and also the outcomes which will be dependent on the actions of all the others in that field. With reference to a paper titled “The Right Game: Use Game Theory to Shape Strategy” by Adam M Brandenburger and Barry J Nalebuff, an attempt is made to apply game theory to strategic HRM. The paper says that players, added value, rules, tactics, and scope are the five aspects of game theory and are commonly known as PARTS. The actions mentioned above are called games in the theory.

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Players

The main players with reference to human resources would be the management and the employees. If there is a union they too can be included. The management would act to maximize profits and employees and unions would try to increase wages and conditions. These are their basic needs. If the strategy of all three is in tune, then maximum benefit can be had for the management and the workers (unions can also benefit to a certain extent). Individual players can be changed or replaced depending on the actions of the concerned parties.

Added value

This refers to the contribution by the players. Like players, value can also change depending on the circumstances. For example, management can provide added values like paid leave, vacation benefits, and bonuses for workers. Likewise, workers can work harder and earn more money for the firm as well as for themselves.

Rules

Most firms will have fixed rules and regulations regarding work. There will also be government regulations regarding employment. The management can change their rules (within government regulations) for mutual benefit. There will be also the informal organization which will have its own unwritten rules.

Perceptions

This refers to how the players see themselves, others, aims, and goals, the job, the environment, etc. If these perceptions are in tune with each other it is good for everyone concerned. Sometimes, employees may perceive their company to be poor payers forcing them to work long hours. Likewise, management may see workers as someone to exploit. These are examples of negative perceptions. It would be the duty of the management to see that the workers have a good perception of their employer.

Tactics

These are the planning and the steps taken by the players for maximizing benefits to themselves. For example, employers may take a threatening tactic to make employees work hard. Another cause may be workers preferring to go slow on work as a mark of protest.

Scope

This refers to the size of the views taken by the company. The players are at liberty to expand, bring down or change their scope. For example, the management may expand their scope by employing more workers as a part of expansion strategies and also increase their pay.

Definitions

With regard to strategy in financial markets and game theory, the definition would be in tune with the general definition of the term. A general definition would be ‘the persons who own an organization’ or explaining that it would be an organization formed for making a profit. With regard to sustainable advantage, the definition would be broader and will include HR as well. This is because employees are also (scarce) resources of the firm and they have to be sustained for survival and growth. So, the definition of the first two is no different from traditional definitions. With regard to sustainable advantage, the definition is broader and hence complementary to the traditional definition.

Works Cited

Krishnan, Sandeep., and Sing, Manjari. Strategic Human Resource Management: Three-Stage Process and Influencing Organizational Factors. 2008. Web.

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