Profits: The False Prophet

Abstract

Historically, the profits generated during the course of play by companies in a business simulation have been used as a surrogate measure for the managerial ability of the team members. The author suggests that this view has severely limited the scope and design of business simulations. Better measures of managerial ability would be gained by measuring and analyzing errors in forecasting over a wide variety of events. The ability to operate within budget constraints and the ability to allocate limited resources among almost limitless needs are also indicators of managerial ability. Assigning specific responsibilities to each individual on a team and then evaluating that individual’s effort, allows a grade or performance rating to be assigned to each member of the team. Measuring profit performance requires the limitation that all firms must start as equals. Without this imposing limitation a much richer simulation environment could be established.