Dealing with conflict

Most finance managers do not work in a war zone and are not in physical danger. Most of us have colleagues who are friendly and supportive. And yet there can be rivalry, competition and maybe even resentment and anger.

Much of the conflict experienced by people in finance is commercial. We deal with competitors offering new products or changing their prices, we negotiate with customers and suppliers over prices and terms, and play cat-and mouse with reluctant debtors and impatient creditors.

Within our own organisations we tussle with other departments, compete for promotion with rivals, negotiate pay and deadlines with employees and our bosses, sometimes struggle to get the whole truth from people, and always must be wary of fraud and theft.

Introduce a new policy to reduce dodgy expense claims and some people will immediately work out how to game it. Settle budgets and targets after weeks of wrangling and the conflict moves on to manipulating the targets and arguing over variances. Put in place a new tool to evaluate the risk of projects and some people will cheat it and continue as recklessly as before.

No wonder work is sometimes stressful, even on days where not much gets done. Can one of the best known military thinking techniques help us?

The origins of modern wargaming almost certainly lie in abstract board games such as chess. According to Matthew Caffrey’s detailed history On Wargaming, around the end of the 18th century games based loosely on chess but much more realistic to warfare at the time were developed in Europe. Then in 1811, spurred by the threat of Napoleon, Baron Leopold von Reisswitz of Prussia invented a game that dropped the turn-taking characteristic of chess to simulate warfare more realistically.

His ‘board’ was a large table with damp sand used to create varied terrain. Coloured blocks represented units of soldiers in scale size. Players gave their orders to an umpire who moved the pieces and computed the results according to a detailed book of rules.

The princes of Prussia were impressed and asked him to present his game to King Friedrich Wilhelm III. There cannot have been much urgency because von Reisswitz laboured for a year to replace his wet sand with elegant ceramic tiles and build a smart cabinet to hold the pieces. The King was delighted but it remained what these games had always been – an educational toy for royalty.

Von Reisswitz’s son, Georg, became an officer in the Prussian army and thought that his father’s game might be used by more officers. In 1824 he adapted the expensive table to use the newly created paper topographic maps and replaced the regimental colours with blue for the home team and red for the away team. These colours are still used today, often with a white team added to umpire and manage the game.

The game became mandatory for officers but many resented spending time on this slow, difficult game and it was unpopular, even though it remained part of the Prussian approach. In 1837, General Helmuth von Moltke, chief of staff of the Prussian Army, introduced several clever innovations to increase the use and effectiveness of wargaming (for example, you had to umpire a game to be considered for education as a senior officer).

Moltke also began to use the games for more than just training. He used them to devise defensive battle plans for particular areas of land. These games gradually spread to other European countries and to the US.

Modern wargames – more often called military simulations – now range from simple, abstract games to military exercises involving soldiers on real terrain. Some games are partly computerised, and there are even simulations where all players are artificial intelligence programs.

One particularly interesting development is the hypergame. This is an extension of game theory (a theoretical perspective on competitive games) that makes explicit the uncertainties of the participants. The opposing forces are not sure what the true situation is and the alternative truths are shown explicitly in the hypergame.

Its many practitioners believe that wargaming is a good use of time. Empirical research showing this is lacking for large scale, real world applications because it is too hard to separate the effect of wargaming from everything else, but there has been research on more everyday situations.

A series of studies by Armstrong between 1987 and 2002 looked at whether two people roleplaying opposing roles are better at predicting the outcomes of business conflicts than two people sitting together and given no specific instructions for how to make their prediction. In all these tests the wargaming role-play gave far more successful predictions.

Rackham and Carlisle back in 1978 recorded the behaviour of good and average negotiators to identify the differences. They found many, both during negotiations and during preparations.

Two points are particularly relevant to thinking about the opponent’s point of view. First, average negotiators considered 2.6 options per negotiable issue while experts considered 5.1. The researchers had the impression that the experts were especially more likely to consider options that might be raised by the other side. Second, average negotiators tended to plan their approach as a sequence of issues they wished to raise, as if the other side would surely comply. Expert negotiators were much less likely to do this and tended to plan around issues individually so that the order in which the issues were tackled would not matter.

So, there is some evidence that wargaming, or at least thinking carefully about a situation from the point of view of an opponent, is useful in some common business situations. The exact psychological mechanisms are not well understood but it seems to be more than just a ritual that gets people to spend some time thinking.

It is reasonable to expect that people who participate in wargames benefit more than those who do not because only participants get the full training and mental preparation effects. But these benefits will fade over time as people forget what they learned. This implies that wargaming will be most beneficial for short-term tasks that will involve the participants. Wargaming is a way to mentally prepare for an imminent conflict.

The traditional focus of business wargaming is on longer-term issues such as market evolution. This is probably because consultants do most of the writing on this topic and their market is top management and their big picture concerns. Below this are countless opportunities for quick and dirty wargaming for everyday conflicts that do not involve management consultants.

In the simplest application there is just you, at your desk or on a train, trying to get ready for a difficult meeting. You cannot set up a conference room, have three teams, or fire up a computerised simulation.

What you can do is ask yourself some questions about the opponents:

• What do they usually do?
• Why do they do what they usually do?
• Especially, what are they responding to?
• What is their situation this time?
• What do they know?
• What alternative understandings might they have of the situation?
• What might they do this time?
• What can I do to influence what happens?
• How can I keep them unsure and so stop them from acting?
• How can I discourage them from using the tactics I fear?
• How can I respond if they use any of the tactics I fear?

Take a moment to imagine things from their perspective. An effect dubbed the Fundamental Attribution Error is our tendency to think that we act the way we do because of our situation while others act the way they do because of the people they are. Make an effort to see the circumstances they see and think they are responding to.

If you are unsure of how they see things, take an idea from hypergame theory and consider each of the most likely possibilities. “If my opponents think X then what might they do?” “If my opponents think Y, what might they do?” And so on.

If you have a bit more time and somebody to share the work with, you could ask them to take the role of an opponent and write about how they would make their moves. You could structure a conversation along these lines, or go for a more elaborate role-playing exercise.

Key elements are to (1) confront people with the situation as seen by the opponents and (2) motivate people to find problems with a plan they may have helped to devise but now are required to attack.

The long history of military wargaming and its use in high-level business simulations perhaps create the impression that wargaming does not have everyday applications for finance managers. However, the mental preparation benefits and some intriguing research suggest that in fact it is everyday situations where wargaming, in a simple form, is more often useful.

Mentally putting yourself in the position of someone else is often a good thing to do, and this is true even when that person is an opponent.

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• Dealing with conflict
  Business & Management Magazine, Issue 278, October 2019

The ICAEW Library & Information Service provides full text access to leading business, finance and management journals. Further reading on wargaming techniques in business is available through the articles below.