Psychology of Outsourcing, Part 2: Eric Berne and the Games People—and Companies!—Play

Last time I kicked-off what I think will be an enlightening series on the “psychology of outsourcing” based on the work of modern psychological thinkers and how their theories and analyses—which mainly apply to personal and social interactions—also contain definite lessons for the business world.

More than 50 years ago Eric Berne’s classic and powerful work on Transactional Analysis, social relationships and the “games people play” touched-off an entire school of thought and analysis on how people relate—and don’t relate—to each other.

More than five million copies later Berne’s classic Games People Play: The Basic Handbook of Transactional Analysis is widely recognized as the most original and influential popular psychology book of our time.

It is based on two notions, first that we have three parts (parent, adult and child) or “ego-states” to our personality, and secondly that these converse with one another in “’transactions” (hence TA).

Berne talks about parents as controlling or nurturing towards their children, who then can adapt, explore or rebel. When people communicate, each exchange is a transaction. Many games—and conflicts—can result from these dynamics.

There’s much more in Berne’s analysis than is possible to explore in this space, but his ideas, it seems to me, are directly translatable to the unhealthy business and outsourcing relationships that often develop, as illustrated in the 10 common ailments that disrupt or derail outsource deals.

Berne says that games are ritualistic transactions or behavior patterns between individuals that can indicate hidden feelings, purposes or emotions. One example of this notion from the ailments is the Activity Trap: Under a transaction-based model, the service provider is paid for every transaction—regardless of whether or not it is needed. The more transactions performed, the more money for the outsource provider. The outsource provider has no incentive to reduce the number of non-value-added transactions, because a reduction of transactions would result in a reduction of revenue. Instead of collaborating through incentives, trust and flexibility for the best outcome as in a Vested Outsourcing model, the company and service provider work at cross-purposes.

I also believe there’s a correlation between Berne’s “games people play” and John Nash’s work on Game Theory, i.e., the best result comes from everyone in a group doing what’s best for themselves and the group.

Nash introduced the distinction between cooperative games, in which binding agreements can be made, and non-cooperative games, where binding agreements are not always feasible, demonstrating that companies that work together—and play nice!—will discover that the sum of the parts are better when combined effectively for the win-win than if they work at cross-purposes.

Berne famously said, “A loser doesn’t know what he’ll do if he loses, but talks about what he’ll do if he wins, and a winner doesn’t talk about what he’ll do if he wins, but knows what he’ll do if he loses.”  Wise words indeed. Too many people and companies shy away from risk to their ultimate detriment by playing not to lose.

While Berne’s focus was on human interactions, given the Supreme Court’s recent controversial ruling that corporations are people, linking his ideas to the business world is perhaps not all that outlandish. Whether you agree with the court’s logic or not it strikes me that many corporations probably could benefit from a few sessions on the couch to re-think and re-vamp their mindsets regarding their transactions, competition, winning and their relationships with their employees and service providers.

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