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Playing to Learn

Playing to Learn

By BizEd Staff

Photo by Joanne Lee
Leavey School professor Hersh Shefrin uses a self-created simulation to help students improve their decision-making skills.

As game-based learning becomes more common in business education, a behavioral finance professor at Santa Clara University’s Leavey School of Business in California has long been, well, ahead of the game. For more than a decade, Hersh Shefrin, has been using Envirostuff, a game he created to teach students the benefits of open book management (OBM). According to OBM theory, privately owned businesses that disclose most of their financial records to employees enable those employees to make better decisions, earn more profits, and achieve higher performance.

Shefrin spends the first half of his ten-week finance course introducing 25 students—mostly juniors and seniors—to OBM principles and preparing them to play the simulation. For the second half, student teams run simulated clean-tech startups in Silicon Valley within the Envirostuff framework. Each Sunday at 11:59 p.m., the teams submit bids against each other to win potential customers. They learn the outcome of their bids the next day and spend the following week preparing for their next bid. Team members conduct financial analyses, make budgets, choose employee incentives, and share information across departments using OBM techniques.

The simulation introduces unexpected changes—such as an increase in the price of raw materials—that force each team to make adjustments. “When students first start playing, their intuition tells them that their companies should take the biggest share of the market. When a team wins the most market share in that first week, there are a lot of high-fives,” Shefrin says. “But what’s really important is that students maximize the long-term value of their companies. If they learn to apply open book techniques, chances are they’ll do fine in competitive environments because they’ll make smart decisions regardless of what anybody else does. Those who say, ‘I’m smart enough, I’ll rely on my intuition’ are the ones who get in trouble.”

Shefrin designed his game in 1992 after reading The Great Game of Business by Jack Stack, CEO of SRC Holdings, a consulting and holdings firm in Springfield, Missouri. Stack emphasizes the importance of experiencing business concepts emotionally, not just learning about them intellectually. “I created Envirostuff so that students could experience the challenges presented by human psychology,” says Shefrin.

Shefrin considered creating a fancier interface for the game, but decided to keep it in Excel on the advice of one of SRC’s game developers. “I want my students to know how to build an analysis using spreadsheets, so Excel works great,” he says. He compares in-class simulations such as Envirostuff to the training pilots receive in flight simulators before taking control of a real cockpit—and he views them as essential teaching tools, especially in courses where decision making is key.

“Game playing is powerful because it forces people to make decisions when they are emotionally aroused, which is much different than when they’re making intellectual assessments,” Shefrin says. “Past students will email me months and even years later to tell me how useful the lessons they learned in Envirostuff have been to them in their professional lives.”
 

This article first appeared in BizEd.

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