Carnegie Mellon University

Management Game

Management Game: More Difficult than Chess, and More Fun to Watch


"Unstructred problem-solvers are visionaries, not minions."

board of directors So says David Lamont, associate teaching professor of business strategy, who aims to help Tepper School of Business students become those visionaries. Lamont is director of Management Game, a computer-based business strategy simulation used to prepare MBA students for success in today's international business environment.

One of the biggest challenges faced by students in any discipline is learning how to translate the concepts covered in the classroom to real-world situations. Carnegie Mellon was founded with that principle in mind, and it continues to guide our academic pursuits. That commitment has established Tepper as one of the world's best business schools—in 2007, the MBA program was ranked #3 in the U.S. by The Wall Street Journal. The distinction is due in no small part to Management Game, the first such program offered at a business school; today it is widely copied. 

 

The Objective

The purpose of the game is to mimic the real-world experience of negotiation, as well as team and financial management across regional, national, cultural, and social borders. It acts as an integration mechanism across the MBA program by bridging the segmented knowledge of all courses to make students better at solving cross-functional, dynamic, and unstructured problems.

The final element is the most crucial when entering the business world—problems are rarely unilateral and solutions rely on a combination of expertise and intuition. One of the underlying goals of the course, then, is to teach students to become less concerned with short-term objectives and to try to see the bigger picture. It's those students who become the visionaries Lamont hopes to create.

 
The Rules of Play

To play the game, 80 teams are divided into "worlds" of five teams each that compete against each other in six international markets—Japan, China, Mexico, United Kingdom, Germany, and the United States. The teams are comprised of Carnegie Mellon students and other students at top universities. The non-Carnegie Mellon students are selected from places that are as different as possible from the American management style—Japan, China, Russia, Ukraine, and Chile—to best represent a real-world experience.

To begin, students vote for presidential nominees, who then draft team members according to their perceived strengths. The players are elected to senior management positions within the company and asked to determine an operating strategy; each player is expected to take ownership of some aspect of the business—such as research and development or marketing—and to coordinate his or her activities with the other team members. The team's structure is meant to teach student how to negotiate roles and responsibilities, organize communication, and integrate talent.

Each year, the companies manufacture and sell wristwatches. Several determining factors make watches a logical choice: everyone is familiar with the product, almost no students have had experience in the industry, and there is no dominant or obvious market strategy. The commodity is basically a blank slate in terms of marketing and manufacturing—and because no one has worked for a watch manufacturer, there are no biases being brought to the table.

Teams are allocated two factories in different countries and must choose to make either one or two products—Product 1 is price-sensitive, Product 2 is premium. Teams may choose to make only one product if they wish but are restricted to one product per factory. Although manufacturing occurs in two places, the products are marketed in six international locales, which mirror their real-world counterparts in terms of market demand, cost structure, growth rates, and other macroeconomic parameters. Based on five years of historical, economic, and environmental data, the teams form strategic judgments on how to best conduct business. Critical decisions are made on everything from production capacity and location to marketing dollars spent to cash flow operations.

 
The Board (of Directors)

As with any business environment, there's a boss. In Management Game, that boss is a group of external professionals who serve as a board of directors to each team and with whom the students meet three times during the semester to present strategies and supportive arguments. With the goal of increasing shareholder value, the students determine long-term company objectives and conduct market analysis.

Because the exercise is ultimately meant to be a learning process, the board is instructed to offer guidance while maintaining control over substantial tactical decisions, but also to let teams make their own mistakes. The amount of exercised control is subjective and is based on company performance—those who perform well are generally given more leeway in making upper-level decisions. 

According to Colleen Frank, an independent consultant who has served as board chair five times, "It's extremely rewarding to see teams improve as a result of our feedback." Ultimately, though, she believes that the greatest benefit for students is the opportunity for them to present and defend their own work and prove their strategy, which combines and tests their analytic expertise with executive requirements.

The board members are largely alumni and their colleagues; they are real people who were former students but who now hold professional positions—the types of positions that the players will be applying for after graduation. The five-member board represents a cross-section of the communities where each team is located and its members are rarely from the same company. Mostly, they are mid-level managers who donate their personal time and constructive criticism.

Serving as a board member is rewarding for the volunteers, many of whom choose to participate year after year. Aside from a break in their daily routines and being in contact with current students, the directors gain valuable insight into the thought processes of their supervisors. Assuming an executive role gives them a clearer owner-perspective, something that they can translate to their own presentations.

In addition to three board meetings, the teams present marketing plans to marketing executives, buy and sell shares of their simulated company in a real-time stock market, and negotiate a labor agreement with actual union representatives. Although each task represents a procedure the players will likely encounter after graduation, none is more important than the board meetings.  


The Strategy

"It's a bit like trying to drink from a fire hose while standing in a time and energy vortex," says Lamont of the fast-paced workload, which is perhaps the toughest obstacle for students and tests their time and energy management skills.

The applied-strategy game spans twelve periods representing a cycle of up to three years. In actual time, the course runs for eight weeks, meaning that one year passes in 8-10 class calendar days.

Complicating time management is the ambiguous structure of the course. Although players are given background information on the company and the simulated market, there's no clear path to follow—decisions must be made quickly and independently. Whereas board members offer invaluable advice for high-level strategic decisions, they are instructed to take a hands-off approach when it comes to day-to-day operations.

Lamont contends that students frequently complain about the workload, but is quick to add that those who do also frequently return to campus to thank him. Of all required courses, he recounts, they feel Management Game was the most accurate representation of what to expect in a job. Lamont facetiously adds that he doesn't mind their short-term pain for long-term gain.

 
The Winner

Results of the game are determined by information input into a computer program that tracks a multitude of variables such as pricing, shipping, marketing, operations, and finance. The goal is simple: to increase shareholder value. Companies whose stock prices soar win the game. Ultimately students are scored on how well their company performs against competitors in their worlds, their internal group dynamic, and the evaluations of the board.

An integral assessment of team execution is the simulated stock market, an independent and valid means of tracking company performance. Starting with a $1 million endowment, players invest in teams from other worlds (to eschew conflicts of interest) according to their past and projected performance. Because the stock's bid price and asking price will fluctuate according to performance, the bid/ask model ensures that prices correlate to value in the long run.

  
Management Game: Past and Future

Instituted in 1958, Management Game started as an executive training tool sponsored by Proctor & Gamble as a way to teach managers how to sell powdered soap. That model was used until 1986 when it was updated to meet the criteria required of global managers. The redesigned game cut down 300 tactical decisions to about 85 strategic decisions to better reflect the global marketplace and to better prepare students to become effective problem solvers, not just managers who were good at completing a single task.

Future plans for the game include distributed teams—teams with members in different geographical locations—to further mimic global business culture. For example, students in Pittsburgh could be partnered with students in Connecticut, California, or even Russia. Also in the works are plans to involve Carnegie Mellon's Qatar campus. Management Game will be the first course to integrate students in Qatar and Pittsburgh in the same class and will extend the university's mission to transcend traditional academic barriers.

For companies who have a problem in a single area, as did Proctor & Gamble, Tepper School can help. Through their executive education program, the school will custom design a week-long course to train managers in a specific skill set. Additionally, the school offers flextime MBA programs, part-time or distance learning, that allow professionals to maintain their gainful employment while fulfilling the degree requirements.

Management Game's distributed, asynchronous course-style is an effective use of technology in education, especially communication technology—a Carnegie Mellon strong suit. Students learn how to negotiate across time zones and lectures are available via webcast, but it’s the simulation's focus on human interaction that creates a framework of opportunities for people to learn from other people.

Beyond its educational value, the course makes an excellent laboratory because of the large number of students who participate each year, effectually creating a data pool sufficient for studying the decision-making process in small group interaction.

--Douglas Phillips