In my experience, there are only two kinds of GMs: the really good ones who carry the characters through an interesting story, and the crappy ones who get off on power trips and are far too pleased by the sound of their own voice. I have seen no in-between on this. So as a service to the roleplaying community, here are my personal philosophies on what separates a good GM from the bad ones.
Those who are paying attention will notice many of these qualities are inter-dependent, which is probably why there's such a dichotomy between good and bad GMs. If you GM, read the stuff below and see how you fit in...honestly.
One of the first sure signs of a bad GM is he forces you to behave in accordance with his story, regardless of how your character would think or act. Granted, part of roleplaying involves some nudging in a general direction, and there are game rules that should be followed. But a good GM uses rules and nudging to guide characters through a story as the players see fit, and not the other way around. The GM is there to play the monsters and NPCs, to set the stage, and to fill in the gaps when characters take unexpected turns. The GMs role should not be to dictate.
Don't just plop your players into an environment and tell them to go, unless you're intending to have a plain old hack-and-slash dungeon crawl. Make the game interesting by setting atmosphere. Create or use a world with people/creatures, a history, and a future. Campaigns should have an impetus and a foreseeable conclusion, even if further campaigns will be built on it. Use cause-and-effect chains to establish consistency and motivation.
If the GM is going to truly act as a guide and not a dictator, this means allowing characters to play out interactions uninterrupted, unless the interruption is story-driven. For example, if some characters are having a conversation over dinner in a peaceful pub, there is probably no reason for the GM to interrupt. If, however, they're having a conversation in a dungeon with lots of monsters lurking around, the GM could rightfully interrupt to say that a monster is attacking, having heard the players' conversation.
GMs that like to hear themselves speak, that are on a power trip, and that always need to be the centre of attention are very bad about this. Interaction between characters excludes the GM for the most part, and too many GMs feel the need to butt in to "move the story along" instead of recognizing that part of the story is unfolding before their eyes. Sure, if a game is truly stalling, it's the GM's job to move it along. But character interaction is a huge part of the fun of roleplaying, and GMs that don't allow it may as well just read a book to the players and roll some dice every once in awhile for kicks.
It's one thing to lead unwary characters into a trap; it's quite another to goad players into sending characters into a stupid situation. If for some reason the GM wants the characters to do something risky, she should be fair and let the players know there's a reason for what's happening. For example, the party may be assigned to a quest that sounds dangerous, and some characters might well just prefer to stay home, if that's in their personalities. Obviously, the players of such characters would effectively be out of the game if this happens. It's up to the GM to say that this quest is the next adventure and request that the players suspend a bit of their apprehension to go on the quest. A really good GM lets other characters convince the recalcitrant characters to come along.
If a player really doesn't want to go on the quest, the GM should find out why. Does the quest seem stupidly risky? Has something been poorly explained? Has the quest been poorly conceived such that the given character would never, ever participate? For example, GMs should not try to get extremely good-aligned clerics to go on a grave-robbing expedition without a significantly just cause, or expect some dirty thieves to go on a dangerous quest where the payout is minimal. If the GM really wants to run a campaign that conflicts with characters in the party, the GM should give plenty of advance warning to the players so they can either adjust their characters in a natural fashion, or create new ones.
Of course, a GM who forces adventures on players who don't want to play those adventures is pretty much guaranteed to be a bad GM, and unpopular amongst the players.
Part of giving fair warning also means letting players who stumble on a future storyline know that they'll be mincemeat if they take on that challenge now. Guide them elsewhere if you can.
Good GMs are not abusive to the players. This means not designing quests that will upset players, such as incorporating usually-inappropriate elements like rape just to make the players uncomfortable. It also means being polite and respectful to the players in general, as you ought to be without having to be told.
You shouldn't abuse the characters either. The worst GM I ever had would have us spend hours creating first-level characters, just so he could throw impossible monsters at us. We were the equivalent of teenagers with guns that we didn't know how to use going up against the big monster from the Alien movies. He thought it was endlessly funny when we died.
Good GMs obviously don't do this. There's nothing wrong in taking some glee in setting up some dastardly challenges, using nasty monsters, etc. But when the GM subsequently enjoys torturing players and characters for no good reason, I guarantee the players are not having fun. Which leads to the next point...
A good GM would never put low-level characters up against high-level monsters. On the other hand, good GMs provide a challenge for the characters. It's okay to use a super-powerful monster if the GM plans to guide the group to a way of getting the monster that doesn't involve direct combat.
Likewise, sending 500 low-level monsters against your party is a bad idea, especially for low-level characters. While they may squash the first few, it doesn't take that many hits to kill a first-level character in most systems, and once the first few players are down, the whole party is in trouble.
The problem with the 500-monster approach is that it leaves little from for flexibility. If the party is up against a nasty creature that the GM has underestimated, the GM can have it flee (if this is reasonable), can fudge a roll to make sure the characters don't get annihilated, etc. That's hard to do when there are still 450 of them left.
It is always better to err on the side of players living and having a massive triumph than vice versa. You don't want to make it so easy that it's boring, but for pete's sake, don't set out to squash your players. They don't like that.
Sometimes it's necessary to find a way to get players into a certain situation or place, and it can be really hard to come up with something convincing. Inevitably, picky players will ask, "Well why doesn't X just happen?" At some point, every GM will have to deal with an awkward bridge between story elements. The best thing to do when players are skeptical is to admit that you're trying to get them to a certain point for a reason. If the players are really balking, ask them seriously if they have a better idea. If they do, consider it seriously. If they don't, then hopefully they'll be mature enough to go along with the awkward bit.
Of course, good GMs minimize those awkward bits, and keep them as brief as possible.
Sure, dungeon crawls can be exciting for awhile, especially if there are lots of twists and traps and challenges. But games that go walk a bit, kill stuff, walk a bit, kill stuff, etc. are really boring to all but the most juvenile players. If your group is really juvenile and that's all they want, then fine. But if your group has any intellect, sophistication, and dynamic, they'll want more.
A good GM doesn't just resort to placing a few traps to raise the bar. There are a myriad of devices that can make a story deeper than the basic dungeon crawl. Puzzles and riddles can be fun, if reasonable. GMs who are inexperienced in setting puzzles and riddles should seek out sources for their intellectual mindtraps, though, because making up your own that are both challenging and possible can be difficult if you don't know what goes into a good puzzle.
Plot devices that work well in stories can also be used in campaigns to add flavour. Shifting allegiances, people/monsters turning out to be something than what they originally seemed, and other basic soap-opera type drivers can turn a dull hack-and-slash into a really neat story. Some GMs will be naturally better at this than others; those who are good storytellers or authors obviously have an edge over those who are uncreative. Good GMs gauge how the story is doing by player reactions: if the players are always predicting plot devices, if they're constantly rolling their eyes and sighing, or if they're perpetually confused, chances are there's a problem with the story.
Making a game interesting doesn't mean filling it with unrealistic crap. Sure, the innocent maiden they rescued could turn out to be a nasty monster in disguise, but there ought to have been some signs of this, even if subtle ones.
As part of setting a campaign appropriate for the level of the characters, a good GM won't throw in god-like events, items, and monsters amongst low-level characters, or expect high-level characters to be impressed by minor events, items, and monsters. If you want to run a campaign with lots of wildly fantastical stuff going on, start the characters at a higher level. Keep in mind that low-level characters are supposed to be new to this whole adventuring thing; throwing insane levels of crap at them would overwhelm them, even if it doesn't overwhelm experienced players.
If magic is rare in your fantasy world, don't have wizards dotting the landscape like daisies in an effort to make the game "interesting." That's not interesting; that's an obviously lame attempt to be interesting by someone who lacks sufficient creativity to be truly interesting. Likewise, if magic is common in your world, having the farmer units panic when they see it and attack the party as a result is also stupid.
Remember that rare items are, in fact, rare. Having resurrection rods, power stones and bags of holding available at the corner store of an otherwise low-magic world might seem like nice gifts to the players, but they aren't; they're just a sad means of an uncreative GM trying to buy player favour. It might work with juvenile players, but again, sophisticated players are happier to earn neat goodies rather than have them dropped in from the heavens. Which leads to the next point...
This is a literary device that translates to "gods in the machine." It comes from ancient plays where the story would reach an impossible point, and then the gods would come down from on high to rescue all of the players.
Imagine you were watching a movie that had a deep, involved plot, lots of danger, lots of risk, and just at the point when it was the most tense and the characters really had to do something cool to get out of it, *poof*, a god-like being comes along, saves the day, and then buggers off. Would that make you think, "Yay! I'm so glad the movie turned out that way!" or would you be pissed off at such a lame way out of a tight situation?
While it is one thing for a good GM to avoid killing players, and perhaps fudge things here and there if they've underestimated a situation and the players end up in trouble, it's quite another to have super-powerful "friends" show up for no reason. Whether this is a sudden appearance by a literal god, a superhero, or even just a convenient friend, this is a story element to avoid unless you're doing it in a satirical fashion (and true satire is hard to pull off, so don't bother trying unless you're a very skilled writer/storyteller).
Now, if a player calls on a divine being (like a cleric summoning a god, assuming they have this power), that's different. GMs should reasonably limit this kind of thing in overzealous players, but assuming you have a mature playing group, you can rely on players to self-moderate in such things.
In general, leave the encounters with god-like beings to introductions or conclusions of adventures (i.e. a god sends the players on a quest, or the final monster to destroy is somehow god-like), if you include them at all. As with the previous point of keeping rare items rare, only make divine interventions a regular occurrence if they would be in the world at large. If it is normal for the King to converse with adventurers, go ahead and have him talk to the players personally in sending them on a quest. If Kings in your world have staff that would normally perform that function, use the staff to do so unless there's a really good reason the King wants to be personally involved.
The problem with a good, complicated, twisting, involved storyline is that it can often confuse players if they're not immersed in it regularly. If your group doesn't play your game regularly enough, or if you've introduced a lot of NPCs at one time, help out your players by printing off a cast list for them. If the adventure involves a lot of overlaying causes and effects, give them each a summary of the stuff that ought to be common knowledge to the character, but is hard to keep track of for the player. Make sure everyone can see the map if it's necessary to understand where things are.
It is unfair for a GM to give players too much to digest and then turn around and penalize them for not knowing. For example, if you've rhymed off a list of notable nobles in the town and then immerse the characters in a cocktail party, it would be unfair to have NPCs chastise a character for not knowing who so-and-so is just because the player is having trouble keeping track. Now, if you've provided the players with cast lists and so on and they're still not paying attention, then it might be fair to penalize them.
As already mentioned, GMs should be flexible insofar as adjusting adventures to the levels of characters. Fudging now and then in order to promote good gaming is okay, so long as you're not doing it to the point that it's obvious and intrusive (as covered in the deus ex machina section).
Another aspect of flexibility is allowing players to backtrack in time when something has been confused. Now, this doesn't mean letting them backtrack to get an item that they ought to have brought with them. It means if there has been a misunderstanding that is revealed at a point where it would have changed character behaviour, the GM should honour a reasonable request to backtrack to amend the problem. This is especially true when the misunderstanding is the GM's fault; if you have not properly communicated something, you owe it to your players to allow the situation to be fixed in a fair manner. Telling players it's too bad and too late is draconian. Sure, it might be strictly realistic, but it's also going to ensure the players are unhappy, and what's the point of playing a game where no one is happy?
Telling players to go do something "just because" is not going to win you GM of the Year award from anyone. You can use mystery and even misdirection to get characters into a situation, but you as the GM should know darned well where you're guiding the characters to. Random dungeon crawls with no purpose become boring in short order.
If you really don't want to reveal the true reasons behind a quest, that's fine, and could even be an interesting story element. But take the time to cover it with something else; be it an outright lie by the NPC who sets the quest, a sideline quest that dumps the characters into the true quest, or whatever. Don't just tell players they have a feeling they ought to do something unless you're going to back up that feeling with a genuine cause soon after; it's unrealistic to expect that characters will plunge themselves headlong into an adventure just because they had a feeling that they should have. Only a very silly person would put themselves in danger due to a mere inclination.
By having an idea of where the next adventures are coming from, you can better weave a complex but coherent storyline. A good GM is flexible insofar as making sure the future can be changed if necessary, and planning futures that are general enough that they can come about no matter what players do in the present. Events not directly tied to player actions can help; for example, plan an assassination to occur regardless of where the players are at a given time and let them deal with it accordingly, but know that the result of the assassination will be the rise of an evil lord who will try to thwart the quest. If the characters have dilly-dallied too much, this change in events will mean more and different challenges throughout the quest. If the characters have been efficient, the lord might be too late and have to resort to a more drastic, desperate attempt to thwart them. The essential storyline remains, but has been flexibly changed to match the way the campaign has actually been played.
A great way to knit together successive quests (not to mention catch which players are really paying attention) is to lay down bits of foreshadowing of future game elements in benign settings. If the characters are in a pub and are listening to conversations around them, toss in some vague details from a future campaign. Maybe the characters hear a surly group of rough-looking types discussing how much they really hate the ruling lord, because way down the road you're planning to have him assassinated. Maybe they overhear a juicy rumour that turns out to be an important fact a long time from now.
Don't make these foreshadowed tidbits obvious, or you'll diminish their eventual impact. On the other hand, don't make them so subtle as to be too cryptic or meaningless to be remembered. Again, this is one of those things that GMs who are good storytellers and writers will be naturally much better at then their less skilled counterparts. If you're handing out hints left and right in a complete *nudge*nudge* fashion, it ceases to be an interesting plot point and instead becomes trite and obvious.
It genuinely sucks to be in a group where the GM obviously likes some players more than others and acts accordingly, especially if you're not one of the pets. Even being a pet can be boring if you're always the one to get the nice goodies handed over by divine influences.
A good GM treats all players fairly. That does not mean he suspends rules in order to be popular. Part of fairness includes the levying of punishments where necessary. If a character does something utterly stupid, a fair GM might give a warning that it was stupid and allow the player to backtrack. If the player insists on the behaviour, fair consequences should result. The consequences should match the incident and the game world; don't have a player executed for being flippant to royalty unless the royalty are bloodthirsty and vengeful.
Likewise, if a player is acting like a jerk, it's up to the GM to be the arbiter and settle the situation. If this means putting an errant player in their place, this should be done (in a polite but firm manner, of course) because it is unfair to the other players to allow an unpleasant situation to continue endlessly. A good GM is not draconian or a control freak, but will tell a player to back off if they are harassing another player.
It can be very difficult to get in the middle of a real argument between players (not a character argument as part of roleplaying, but a genuine conflict in the game room). No one wants to pick sides or make anyone feel bad. A good GM senses conflict early (because they're paying attention to the players) and works to minimize it, and NEVER stokes the flames for kicks. If two players really hate each other and continually act on it, no one in the group will have much fun. It's up to the GM and/or the owner of the place where the game is being played to ask a truly errant player to leave, if needs be. As with all things, such drastic conclusions should be the result of escalated attempts to correct bad situations, not a first step.
Sometimes you run into a player who always has to be the centre of attention. These players will insinuate themselves as a party leader even if doesn't suit their character or if other players don't like it. It's your job as GM to remind players to properly play their characters or change their characters, and to request that blowhards not interrupt or dominate other players in inappropriate ways. If the problem player doesn't cease the behaviour after repeated warnings but the behaviour is not serious enough to throw them out of the group, consider levying experience point penalties. For example, if you have a large group and you're trying to go around the room in an orderly manner and one player keeps yelling for instant attention, dock experience points every time they do it. You might not be popular with that person at that moment, but the other players ought to appreciate your effort to be fair to them.
In gaming, it's better to sacrifice the fun of one player than that of many. Players that can't get along with the rest of the group should pretty much either go away, or be forced to behave. It's just not fair to good players to have them bored or irritated by an immature windbag.
Where it is called for, GMs should turn over decisions to the group for voting. If two players are disagreeing on which turn to take in the maze, the group as a whole should decide how their characters would feel about the question before them and how they would resolve it. If your group is bad about getting off track and players are finding it hard to stay in character, the GM should call for a group-wide vote on a no-tangential-discussions policy instead of just imposing one herself. Democracy generally provokes more adherence to decisions.
As you've probably noticed by now, many of the comments here have depended on the nature of the gaming group. A good GM understands what their group likes and dislikes, how they are likely to react to certain elements, etc. If you're playing with a bunch of people who all really like dungeon crawls and really hate bothering with extraneous story elements, then it's best to cater the game to them. If your crowd is more mixed, be sure to have something that will interest everyone.
Just like good bosses ask for employee feedback in an honest, non-punitive manner, so should good GMs. You cannot be effective if people don't like what you're doing, and if it turns out people do like what you're doing, it can feel great to have positive feedback! Every once in awhile, ask the group if they're enjoying the game, the quest, and their characters. If they're upset about something, work to rectify it in a fair and reasonable manner. You can't please everyone all of the time, but if you make it clear that you take suggestions and opinions seriously, mature players will be more accepting of the times that you cannot grant their wishes.
A good GM is also aware of unspoken or subtle feedback. If players are always distracted, is it because your game isn't holding their interest? If players are sighing and groaning, is it because you're pushing too much tough stuff on them, or because it's same-old same-old? When you can't tell, ask.
Again, this is going to be based on the maturity level of your players. Mature players know how to keep player knowledge and character knowledge separate, so telling them to do so all of the time is likely to earn you ire.
With less mature players, you may need to point out if you feel they are acting on player knowledge. There's no likely reasonable explanation for a first-level adventurer to know how to prepare for a coming attack from a previously unknown monster. If the player starts having the character prepare using knowledge from previous campaigns that the monster can only be killed in a certain way, it's your job as the GM to tell them that the character would not know this.
Some systems allow for special knowledge to come through attributes or skills. If a player is using such an attribute or skill properly and feels that their character would have the player knowledge, be a fair GM and allow it, even if it foils your plans for surprise.
Remember: the point of the game is for players to have fun, not for the GM to grandstand or be a puppet master. Players may have a vision for character development, and a good GM tries to incorporate reasonable elements of that development into the storyline. If you get feedback from a player (and you ought to be asking for it) that they feel like they never get to use a given skill, see if you can find a way to make that skill useful in an upcoming portion of the game. Don't do it just for the sake of doing it and pleasing the player; make it a real part of the story. Consider it a challenge, not a burden or something to just be shoved in somewhere.
If a player wants to gradually shift attitude or alignment, help them do so by providing impetus. Maybe a goody-goody cleric starts to behave differently after witnessing so much terror and turmoil. Maybe a nasty little thief starts to grow a conscience when they've befriended someone who gets hurt by their thievery. Maybe a knight believes in the law, but becomes convinced that a given lord is behaving in an unlawful manner and should be stopped, when earlier the knight wouldn't have even considered a treasonous thought.
A good GM balances between player desires for the character, the set storyline, and realism as contextual to the game world. Don't let a cleric go from good god to evil god just because it's convenient, and certainly don't let such a shift go unpunished by the original church unless that church regularly allows clerics to leave the fold in such a manner.
Think of this as leaving no character behind. It really sucks to be playing a caster or cleric and have nothing to do but bandage up the wounded after every fight, or maybe hurl the occasional magic missile. Players that never get to do anything interesting will quickly become dissatisfied with your game, leading to other problems like distractions and conflicts.
If you're going to run a campaign that has no use for a certain character type, ensure that your players know this before character creation. It's okay to have a dedicated type of story so long as players are into it. You can run an adventure where all of the characters are pirates, but make sure the players know beforehand so they don't waste their time creating paladins.
For general adventuring, make an effort to use the skills and talents available from the party pool. Get a copy of character sheets, and write your adventures or tailor modules to let each character have a means to shine.
Depending on the system, experience points or the equivalent should be given out in a fair and consistent manner. If the system manuals don't specify amounts for various things, make up your own table and stick to it. Fair points doesn't mean giving out lots to be popular; it means being fair on both sides of the scale. If a given player sits around and doesn't do anything despite having plenty of opportunities, don't give them as many points. If you haven't given a certain character the opportunity to do much, don't penalize them.
You may also wish to use experience points as a means of punishment/reward for player behaviour. If your group doesn't like a certain practice (swearing, tangential discussions, letting cell phones ring, etc.), consider using experience point penalties to punish those who stray from a group-decided rule. If you want to reward things like characters helping other characters, good ideas, etc., do so with extra experience points.
Personally, I give a lot of experience point bonuses for players that do good roleplaying. This means I have to make sure that other players don't interrupt them, or it's not fair, so I've threatened to start deducting experience if certain people in my group continue interrupting other players. Starting in my next gaming session, I'll be announcing that deductions will begin.
Many of the points I've made here apply to certain styles of RPGs, and may not apply to others. For example, Dungeons and Dragons is a more suitable system for dungeon crawls than GURPS. GURPS entails a lot of characterization points in the form of disadvantages and advantages that really require the characters to be in contact with plenty of NPCs, which just doesn't happen in a dungeon crawl.
Science fiction games differ from fantasy games in many important ways. Arsenals are bigger, allowing monsters to be meaner because they can more easily be taken out at a distance. Space is a hostile, unforgiving environment even compared to the harshest social conditions in a fantasy setting. A good GM takes these differences into account and tailors adventures accordingly. Sometimes modules from one system can be converted to another, and other times they really just don't suit each other, even if they can be converted on a strict numbers basis.
Overall, if you are getting positive feedback from your players, you're probably a good GM. If players are reluctant to give you feedback, are constantly complaining about the same things, are endlessly distracted, or don't seem to be doing much other than sitting around waiting for their turn to roll the dice, chances are you're failing on several of the points mentioned above.
No one likes to admit to themselves that they haven't been doing something well. However, mature individuals will hopefully recognize the signs of discontent and endeavor to be a better GM. You don't have to be brilliant nearly as much as you have to be patient, responsive, and respectful.
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