In which the Times answers some questions…
I got a reply this week from the Times, explaining what appeared to be some anomalies in the scoring. It seems that there is a “recap” score which changes round by round as well as the scores we get for the balanced score card each round. If I understand it aright, the balanced score card assesses your decisions horizontally across a single year, and the recap assesses them based on outcomes vertically across a number of years. The recap score would account for the discrepancies in the published totals. The wheels of the Times may grind slow, but they are finally grinding smooth enough for me.
.. and I don’t!
No comments on how I’ve done in Round 6 – I am in another part of the forest on Monday evening and so this is a post that I prepared earlier. Normal service will be resumed in Round 7.
Instead I’ve asked others what they think:
As I mentioned last week, I thought it high time there were other voices here, and some players were kind enough to reply to questions I asked about the game.
Most of my respondents work in business one way or another, one mainly in small businesses, one clearly in very large ones. Interestingly, one respondent has no direct experience of business at all, being an Economist with a background in Academic Research.
All of them are playing alone, though one said: ... I have tried to involve a couple of colleagues who have a degree or one who is currently doing their CIMA exams but none have really shown interest in terms of delivering help, but what the heck, being a CEO is generally a lonely place in real life so that isn’t too bad an experience, is it?
Here are my questions and some of their answers:
Why did you sign up to play Fantasy CEO? What do you hope to get out of the game?
A couple of those replying wanted to get an insight into parts of a business which they wouldn’t otherwise see, in particular into finance and into the complexities of how large companies work. But that was not the only reason:
I was curious to see how this game would try to replicate reality…
I have always fancied that I would make a good CEO and wanted to prove to myself that I could do this …. On a more serious note, I hoped to do very well at the game and use that to help boost my credibility as an independent provider of ‘C’ level consulting services …
I … just fancied having a go; I have a business degree [and] … I just wanted to see if I could still ‘hack-it’. … I just enjoy the participation, the intellectual exercise.
I love challenges and am keen to test yself all the time, well not the prize money (given progress so far) 🙂 But an insight into this type of training and how useful it is.
Is it what you expected? What are you getting out of it?
… I am now reaching the stage where I will have to push my learning to the next level by actively researching the balanced scorecard areas I am weak on.
On the one hand, it exceeds my expectations. I love the competitive side of it and am surprised by how much I have been looking forward to 5pm on a Monday when the round results are published. … On the other hand, now in Round 5, I am finding the competition a little artificial.
Yes in that it enables us to manage the model, albeit in a relatively simplistic manner. … For me it challenges my analytic abilities; there are nuances in each of the areas.
Overall it is what I expected but I would like to put more time into it to get more out of it. So far getting what I hoped out of it as well as some frustration.
A couple of the correspondents are as interested – or more interested – in the game as a simulation as they are in what it is simulating – the equivalent of wanting to understand how flight simulators work by poking around the video screens and checking how the platform tilts and rocks:
… obviously the game creators keep lots of variables hidden from us (I suppose with the idea of a proper replication of the market place). In this order of ideas, these variables in the end will influence the outcome: this is what I call luck. … … my mind is not so much on the market as it is on the psychology of the game creators … the issue here is that rules are rules and therefore independent of the uncertainties that really occur out there in the real world. Therefore there could be some predictability somehow. … I guess you can spend endless hours trying to work out predictive ratios and all the other paraphernalia but in my view it’s still down to the creators market psychology how things occur…
I remain unclear (yes we have all speculated, but it would be good to get something definitive from Timesonline or the game suppliers) of how the computer-generated competitors are programmed in order to keep the playing field even. eg. are all the decisions pre-determined, or do they respond to what I (as Andrews) decide to do? At this stage of the game, I am finding that I am so far ahead of the other players that they must have all been pre-programmed, which makes the game a little disappointing as it progresses.
How much time do you spend on it each week?
This is where I felt very stupid; I spend a good 4-6 hours on the damn thing each week, which may explain some of my frustrations. In comparison, after the first round, my respondents have been much swifter, spending 1 or 2 hours each week.
How do you make your decisions? Has your method changed as the rounds have progressed?
I usually take a look at the results right after they’re online at around 6pm every Monday. Within half an hour I’ve made a first assessment of the situation and of how to improve it in accordance with my strategy. However I let it rest for the week whilst pondering about my first impressions usually while in the shower. Then, on Sunday evening or Monday morning I implement my decisions and upload them.
Deciding on a strategy was surprisingly easy and surprisingly isn’t one suggested by the game tutorials. Initially my decisions were based on the tutorials, the last two rounds I have based my decisions heavily on the balanced scorecard predicted in the software.
I had a strategy and was sticking to it, then became obsessed with the scorecard in one round, disaster, I have gone back to my original strategy again, hopefully I can make up for lost ground.
Decision making has changed as time as gone on. Beginning is very much looking at strategy now moving into more execution and tactical approach for end of game.
… I was determined to try and hold the selling price and contributions high because I once did a sim where there were teams competing directly against each other and the tendency was for each team to discount the price – this meant that the winning team actually made less of a loss, not very satisfactory at all. I have now become very aware of the Balanced Scoresheet and that has altered my approach. … I have now got the numbers out into an excel sheet and analysing the market trend to the nth degree.
The interesting thing as well is at what point do we abandon any attempt at laying down a solid foundation for future rounds: i.e. will it matter that we just go gung-ho in rounds 7 and 8?
One correspondent gave a very full step-by-step answer. First they analyse the competition from the Fast Track reports, then they predict how many units of each product they are likely to sell. They loop round the production and marketing decisions until they are satisfied, and then look at R&D and capacity decisions for future rounds. For this correspondent, finance “is just a matter of working out HOW to finance what I have already decided to do”, though they admitted “In the early rounds, my cash flow was always hugely negative [but] I never changed my mind about doing something for fear of debt or whatever.”
Have the scores you are getting changed significantly over the course of the game so far?
My scores have improved, especially as my finance decisions have got better.
My scores steadily improved over the first few rounds. I am now finding it harder to improve them.
Not really, dreadfully average, except of course for the scorecard round fiasco 😐
42, 44, 46, 60 so probably not. Just solid around the same area. Like real life bad decisions come back to haunt.
Are you enjoying it?
Yes I am enjoying it, especially now the times have sorted out their league table.
Absolutely loving it.
Yes most definitely.
Yes although frustrated as I would like to commit more time to evaluate my results before next round of decisions.
Are there any other comments would you like to make about the game?
Comments clustered around the lack of a forum for players to compare notes, problems with the scoring and perceived failings in the reporting.
TRANSPARENCY in the scoring system!!!!!!?
I wish there was a forum where people could swap ideas about the game. Even a bit of banter between closely scored rivals would add to the game… but that wouldn’t really be in the spirit of open competition, or would it?
I have to comment on the running of the game. As others have commented, the Helpline are fantastic. Unfortunately the same cannot be said for whoever is responsible for the project overall. Some specific comments:
1. We are in Round 5 and the results tables are still not correct! …
2. The reporting has been very poor and lacking in insight. Times have really messed up here. They should have had a reporter playing the game (as you have done) and then commenting. To have someone gloss over the numbers and make random comments has simply exposed their lack of insight…
Just that the Times could have been a bit more pro-active in reporting on it; not sure what they wanted or have got out of the deal.
Good game. Obviously about fun and learning but it is easy to forget that and move into a more competitive mode. Ideally I would like to spend 6-8 hrs per week on it but do not have the time. I think it gives a taste of the breadth of the decision making that is required in running a business.
I’d like to thank those who took the time to answer my questions.
f you are playing the game and fancy answering the questions, or if I’ve quoted you and you fancy expanding on your answer, then please use the comments box. That’s what it’s for!
I’m away until Wednesday or Thursday, and will be frantically working on Round 7 when I get back, so you can have a free for all here while I’m away. 🙂
I am impressed to see such positive feedback from the players.
If an entire business could really be down to a few compunded decisions I think there would be far more CEO’s, overall it definatly is a great teaching tool. Players strategies and results differ wildly – which shows there is a lot of room for us all to learn.
I was spending more time on this than I should have to be sure.
$135 million in cumulative profits; average sales of $181 million per round; average market share of at least 22 per cent per round; an average customer score of 31; a final market capitalisation of 30 per cent; an average emergency loan of zero (having an average loan of more than 1 per cent of the company’s value will mean no points for this section of the recap score); have generated average sales of $271,000 per employee per round; have assets valued at an average of $253,000 per employee per round; and have a cumulative profit of $237,000 per employee!!!!!!!
Anyway, I will have to wonder what might have been 😦
Sob Sob, I’m out, was away nover last w/e and didn’t make it back to the land of internet conneciveness until it was too late to submit.
Good luck to all in the remaining rounds, especially Aphra, go girl 🙂
As the gap got wider -between the leaders and the rest of us- I think the game lost momentum. This reflects in both, my attitude towards analysing the latest results and implementing new decisions; and in the fewer comments on this blog.
Interestingly there are two outcomes worth pondering about:
Firstly, What can we say about industry concentration (monopoly or oligopoly)? Note that across players we’re ONLY related by the scores comparison. Therefore if this apathetic attitude was indeed replicated in real life, it would certainly be the product of psychological behaviour not of economic decisions.
And secondly, Do we really adopt a proper business like frame of mind when we know before hand that there is an end in sight (i.e. the 8th round)? I, for one, have been extremely reckless throughout, which showed in yet another visit to Big AL.
Dar. Still lots to go at in the final rounds; like I said last time it can’t just be about the ten grand, can it???
It was always going to be difficult in the last couple of rounds.
You make an interesting point about the industry. There are a lot of products in the high-tec sector of my game. Given the market dominance taking place for Andrews I would expect to see some market consolidation starting to take place which, if the sim was to run for another eight rounds, would surely be built into the model??
EL. My experience is that the corporate world is full of wanna be CEO’s (never a scarcity!!), of all functional shapes and sizes some suitably qualified by education, others good entepreneurs or political players etc. In today’s business environment success and failure appear to be so well rewarded – but that viewpoint is perhaps a little too cynical?!
Again there is research in existence that generalises the day-to-day activities of CEO’s in keeping the organisation together.
Essentially they are information ‘disseminators’. They have to have a broad understanding of their organisation but aren’t they heavily dependant upon their functional experts for inputs into their decisions (just like the sim)? That is why when one leaves the other senior execs should generally review their own positions when the new one arrives!!
One of the problems that I think that they face, particularly in large organisations, is being able to alter course quickly; like trying to steer a liner.
But what has this to do with Fantasy CEO? Well that is what appears to be happening to me because, having introduced my top of the range product last year with an automated product line, I find that to make alterations to the Performance or Size takes me halfway into next (Year 8). Should I do it or is it easier to set up another product or forget it all together and run with what I have? Watch this space.
In the next to final analysis, though, I still think that it is a really clever and useful simulation!!
I think the winning criteria for the game should be share price, what is the point in scoring high points on the scorecard if it is not reflected in superior rewards to the main stakeholders i.e the long-term shareholders.
My personal target is to finish with the top share price, if I could achieve that I would be fairly satisfied.
Thanks for the game info Aphra, I would not have known about the leader board but for your blog. The Times coverage and info were very poor but at least they provided a link to your web site. Once again thanks.
Ron. If this game were a proper replication of the real world I’m afraid the answer to your comment would be YES!!. It is/was all about the 10 grand!!
However, it can never be a proper replication of the real world. Most people in the game, if we take it from the answers to Aphra’s questionnaire, were in it to “learn” something: Hardly the reason people go into top level business and/or are recruited into top level management. Whether we like it or not, the world of business it’s about making money. Which is also relevant to Steve’s comment on which firm-performance indicator(s) should be the relevant one .
The issue, as research in the area found (long ago), is that of conflicting interests. Those of managers (agents in the literature) usually diverge from those of the stakeholders’.
Long ago it was shown that managers might deliberately pass up on profitable projects and rather would use spare cash in nice offices, planes, etc. After this “discovery” share options became the norm in order to align management and shareholders interests. To no avail, though; another well known model showed the intricate ways that managers resort to in order to manipulate share price to the detriment of the long term prospects of the firm -so the value of the options would rise. Again, the solution (long periods in which options were not allowed to be cashed) was overcome by managers and so on..
To cut a long story short, the conflict between managers and shareholders is intrinsic to the corporation. Not surprisingly the new fad (solution) is a soup of indicators as the ones in “the balance scorecard”. Would these finally achieve said alignment of interests?
I doubt it. But might minimize the conflict which is good enough.
Looking at the results of the current week it would appear that the ‘right’ people – defined by either profits generated or high share price are in the top ten and this appears also to correlate with a high balanced scorecard.
The person who could probably feel most aggrieved at this point in time is in position 3 and leads on profit and share price. Personally I have no problem with missing out on the 10k, obviously not skilled enough in this game but I still know I can run a company.
Agree entirely with your writings about the conflict between managers and stakeholders and, as I noted in one of my earlier posts, I have a deep distrust of ratio management having seen the immense damage it did when BTR ruled the conglomerate roost.
Anyway back to the good old standby ‘Maximise shareholder wealth’. Make as much money whilst operating in an imperfect market for as long as the wind is in the sails!!
In fact you are probably aware that the FTSE to-day bears little relationship to the one 40 years ago and that probably does enough to de-bunk a lot of management research about taking the ‘long-view’!!
As for unlikely CEO’s – study what John Harvey-Jones did with ICI after he was appointed as a ‘last-resort’.
Good luck on the final two rounds and don’t give up hope!!
I’m not doing as well as some in this game but I have to say that the balanced scorecard is widely considered a good way to measure company health. This is not actually management by ratios (although some ratios do have a bearing on the scoring) and it is important to bear in mind that a balanced scorecard is usually constructed by a company in line with its goals and objectives – it is not an externally prescribed set of parameters.
If the ranking were based on profit related measures the goals of the company would be too short-termist which has certain implications related to investment and long term viability. If it were ranked on market share related measures alone the slant would be too long-termist so it is necessary to have a balance of measures with which to score performance. In real firms these scorecards will often include measures related to employee and capital development etc to ensure that investment is made where it is needed with regard to the long term viability of the organisation while at the same time ensuring that the company is a viable investment in the short term. You are right with regard to manager/shareholder conflict and it is usually related to instant returns (shareholder short-term view) and growth (manager long-term view). Many people debate which is best and US companies are usually smaller giving higher returns in the short term but never growing to be huge where Japanese companies look longer term using loans rather than shares and make up most of the largest companies in the world.
And that is the key to this simulation: not all factors which are found in a manufacturing company exist here but it does give a good range of factors to work with and shows how various factors interract to produce a balanced company with a future.
As for learning, it’s a simulation used by universities. Yes it would be good to win 10k but yes it is for learning!
AE– in the literature the conflict does not arise from managers associating their decision to the long term. On the contrary, they’re extremely shortsighted (i.e., all they care about is their current prestige, standard of life, pension fund, comforts and so on.) I suspect the reason being that they know they can be sacked at any time.
Shareholders, on the other hand, are suppose to associate their returns with both the present (dividends) and the future (capital growth).
The above is just a minor note on how the literature deals with the subject. Back to our exercise, what I think is quite intriguing -and it shows here- it’s another conflict. That between practitioners and researchers. If the old saying “those who can’t do, teach” is right, we’re all wasting a lot of time.
This question of who should benefit from how a corporation is run is compelling. Friedman’s ruthless view that the managers are just agents for the owners has an awful logic to it. Corporate Social Responsibility and Ethical Business is hot stuff right now, so of course we like it when big businesses pay more for green electricity, sponsor opera and send volunteers to help third world charities. Friedman is particularly vitriolic about this kind of behaviour, he describes it as illicit taxation. But customers and the public in general are flexing their muscles and more and more corporations and responding.
I’ve been considering the nature of corporate ownership for some time. I think there’s an argument that shareholders are in fact just another class of customer – they buy something to obtain a benefit. A corporation’s direct customers buy the product or service. Its bond-holders buy an income. Its shareholders, I’d argue, buy the chance of an income and capital gain. The role, and how most people behave in it, is far closer to that of a customer than an owner.
Once a business passes a certain point, it’s no longer tenable to argue that it can be owned in the way that a chair or a house or a dog can be owned. The obvious question to start with, is where is that point on the growth path from two blokes and a garage to, say, Google or Boeing? This takes us in all sorts of un-American directions, of course, such as asking “what is ownership?” and “does it confer duties as well as rights?” If one challenges the idea of ownership too much, the fabric unravels and one can end up with communism. Or becoming a vegetarian. Or supporting social medicine. Or buying organic veg. No wonder Friedman didn’t like the idea.
What I haven’t figured out yet is where Private Equity fits into this argument of mine. Private Equity houses are considerably more active and prescriptive as owners than the holders of public stock (shareholders) and they don’t have the easy-buy, easy-sell relationship with the company that shareholders do. Most Private Equity houses do get involved in the management of the companies they buy, which is another way that they differ from shareholders. So Private Equity houses take responsibility (though whether they act responsibly is another matter, of course).
I think this leads me to the idea that ownership is akin to stewardship, conferring responsibilities and then it is not too hard to make the leap that some of those responsibilities involve treating the company’s other stakeholders ethically.
I’m fascinated by the discussions these posts have prompted. Keep ’em coming.
Dar – ‘The literature’ is rather a broad statement and suggests there is agreement among thinkers about the reasons for conflict. There isn’t and I can certainly point you to prominant business thinkers, such as Needle, who believe as I do.
There is general belief however that financing a company with shares forces short-term actions by management because looking for long term gains usually means that share prices will fall in the short term allowing takeovers. Again, this can possibly be verified by looking at different economic systems around the world and seeing that in Germany and Japan the outlook of managers is longer term because their financial base is more stable. I.e. they don’t just care about personal short-term gains.
You have produced a very good analysis.
My slant, for what it is worth is as follows:
One of the advantages of the public corporation is that by virtue of our pension funds, most of are involved in the ownership thereof.
If managed correctly they should have been / be the most democratic of economic institutions. However, either the shareholders (the institutions – our representatives?) then started to apply short-term horizons which give rise to the problems outlined in the threads above or the managers started to behave as detailed by DAR.
Like you, I also question what private equity companies bring to the business party.
My understanding is that some of the finance of these companies are from institutions that will have invested in public corporations. I would imagine that it allows them to add to and balance their investment / risk profiles.
What appears to be happening is a return to owners having a more ‘hands-on’ control of the business through having closely vetted entepreneurs / managers at the helm of the business who in turn have their own investment at risk.
My concern are the traditional ones:
a. Are these people the next generation of asset strippers (The first generation did a lot of corporate damage)?
b. Do we as a society prefer business to be done ‘behind closed doors’ rather than through the transparency of PLC’s?
c. Will there still be an eventual separation between owner and managerial control because in the final analysis that may be the best way of running a business?
Two things that shocked me recently: firstly the number of publicly quoted companies which still have a degree of management by family members, and secondly how extremely successful they are.
The Insead Knowledgecast #15 says that “family businesses are the most prevalent … and the most highly performing forms of organisation” – citing Anderson and Reeb in the Journal of Finance who looked at the S&P 500 – 1/3rd of which are controlled by families. The family businesses out-perform the others both in terms of stock price and profitability.
The podcast is here:
The article, which I’ve not read, is here:
The moral of the story of course is that managing for long-term success and managing for short-term success produce very different results, and that families manage for success across the generations, rather than the next 90 days.
Even so, it surprised me.
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