Game Theory in Management

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Modelling Business Decisions and their Consequences

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A Not-So-Clear Vision of Project Success

Visualizing the Past, Viewing the Future

Stop! Go! Wait…

Visual Risk Management

“Scotty, I need warp speed in three minutes or we’re all dead!”

A Not-So-Clear Vision of Project Success

I haven’t been to any major project management conferences for a while. It just seems that the vast majority of the papers presented fall into one of three general categories:

·         There are the traditionalists, whose presentations cover the basics of Earned Value or Critical Path Methodologies, but do so in such a way as to pretend that these techniques haven’t been around for generations. Their content is so chock-full of eat-your-peas-style hectoring that participants should receive double PDUs for simply enduring them.

·         Then there’s the Gaussian Curve crowd, mostly pushing some marginally-supported risk management theory, but sometimes schedulers who want to perform some inchoate statistical analysis on the amount of free float in certain phases of a project, blah blah blah, as if injecting massive levels of data elements into their analysis somehow validates their underlying hypotheses (hint: it doesn’t).

·         Finally, there are those whom I wish to review in this post: the participants in a successful project, who wish to relay to the hoi polloi the reasons why their project was so amazing.

The first mistake these people make is to try and conflate the project’s technical success with its managerial success. The two are not necessarily synonymous.  The Sydney Opera House may be a beautiful, one-of-a-kind, instantly recognizable landmark, but its project management was a train wreck. While there’s something about gee-whiz projects that seem to impart to all of their participants the aura of success, the opposite is also true: the Titanic’s launch was actually on-time (although her fitting out was delayed due to late changes in design), though I doubt many White Star Line employees were eager to point out their affiliation with her after 1912.

So, back to the convention centers’ and hotels’ conference rooms. Whenever you see the words “lessons learned” in a given presentation’s title or synopsis, and the project is not a known PM disaster, you’re being sold a bill of goods. Oh, I’m not saying the project being showcased wasn’t cool, or didn’t come in on-time, on-budget. I’m merely suggesting that the presenters will invariably have, shall we say, an interesting way of connecting the weighted milestone dots in such a way as to reflect on their virtue, or skill, or, most perniciously, an adaptation of a relatively unknown aspect of project management that made all the difference in the world, don’t you know.

For example, had ProjectManagement.com been around in 1939, and had held a convention (“What does ‘dot come’ mean?” “Beats me.”) the following could have been on the seminar’s docket:

Wednesday, 9:00, in the King George VI conference room, Project Analyst Naughta Bitatruth will discuss the successes of Nazi Germany’s zeppelin program as a function of superior project team communications. He will also discuss the negative perceptions being attached to the program from the recent Hindenburg incident, including:

·         The advantages of disposing of the hydrogen gas in such a way that it does not re-enter the atmosphere;

·         The additions to the pop culture that have come about due to the zeppelin program, including the introduction of the term “Oh, the humanity!”

Thursday, 12:00 noon, in the Rockefeller conference room, French Executive Advisor Compe’ Letnonsense will present the analysis that shows how superior risk management led to the on-time, on-budget completion of the Panama Canal. Compe’ will cover:

·         Use of the single-tier decision-tree analysis method to virtually eliminate the yellow fever and malaria threats to the project.

·         How, since a Monte Carlo analysis showed that it was a distinct possibility, the original efforts, costing $287,000,000, bankrupting the company and seeing the original PM sentenced to jail, should be viewed as a risk management success!

You’re familiar with the expression, Success has many fathers, while failure is an orphan. Well, success also has many optics.

But only a few of them are clear.

Posted on: September 01, 2014 09:29 PM | Permalink | Comments (0)

Visualizing the Past, Viewing the Future

I find it fascinating how often one of the most basic distinctions in project management information systems is overlooked, or, even worse, blurred into near-meaninglessness. I’m talking about the difference between feedback and feed-forward management information systems (MISs).

For those of you who are (understandably) coming to this topic for the first time, feedback systems report on what has occurred, based on verifiable information. The general ledger is wholly predicated on the feedback concept, as are several other systems. Advantages to feedback systems include:

·         The data is (or ought to be) accurate, with little or no subjectivity present.

·         …and, well, that’s about it.

Here are the drawbacks to feedback systems:

·         Depending on how long it takes to gather the data, process it into information, and get it to the decision-makers, the information may become so dated as to become marginally useful.

·         There’s also the problem of the point of view of those interpreting the data. Dots connected by one manager into some sort of causality loop may strike another as purely coincidental.

Then there’s the feed-forward system. Such systems seek to anticipate the future, such as the use of polls preceding an election. The advantages of such systems include:

·         Obviously, a management information system that can accurately predict the future is pure gold,

·         …leading to its desirability.

These very advantages lead directly to the feed-forward systems’ drawbacks, including:

·         Most such systems depend on subjective data to such an extent that they are little better than reading tea leaves, or other forms of divination.

·         But, since they are so desirable, promoters of unproven techniques are drawn to design them in droves.

Of course, the very nature of experience (and the function of the hippocampus, if you want to get technical) is to assess facts and past events, organize them into some sort of structure, and flip that structure forward, across the Time Now line in order to derive a useful anticipation of how the future will unfold. While this little thought exercise may be part and parcel of carrying on our lives, it tends to fail as a repeatable, teachable tactic in management science. The future simply cannot be quantified, which is why the best managers are the ones who can think on the balls of their feet, adapting to new and unforeseen circumstances with (mostly) appropriate responses. PMs who stick to their plans, even in the face of dramatically changed circumstances, are usually the ones behind the projects that end in failure, if not disaster.

Which brings us back to the types of information systems that PMs like to use to learn about what’s going on in their projects. Both earned value and critical path methodologies have a remarkable capacity for predicting future performance, based on the reliable aspects of feedback systems. EVM and CPM, when set up correctly, are capable of consistently predicting final project costs and durations within ten points, an accuracy rate that can only be dreamed of by purveyors of the general ledger, or risk analysis tools, for that matter. Since they are predicated on observed, quantified past performance, such systems have the advantages of both the feedback and feed-forward types, without their drawbacks, which is probably the main reason why accountants and risk managers tend to have a natural resentment of project controls analyst. I could possibly contribute to the lessening of this resentment, if I would just stop making fun of accountants and risk managers in this blog

Nahhh….

Posted on: August 24, 2014 11:30 PM | Permalink | Comments (0)

Stop! Go! Wait…

I’m totally cool with this month’s ProjectManagement.com theme, that of visual project management. I’m a firm believer that, once the project controls staff has collected the relevant data, processed it into usable information via Earned Value and Critical Path methodologies, they need to deliver that information in not only a timely fashion, but in a format that’s sufficiently intuitive for the decision-makers to use. Let’s face it – for new PMs with little more business acumen than what they accidentally swerved into while they were pursuing their engineering degrees, hitting them with a PERT chart or a Cost Performance Report in Format I in their first project review meeting doesn’t really help them select the most appropriate strategies in pursuing their projects’ objectives.

That having been said, is there an opposite, equally inappropriate extreme? There’s no doubt about it. And Exhibit A has to be the so-called Stop Light Chart.

For most people, a traffic light is a very handy tool for conveying critical information in a short period of time. Red equals stop, green is okay-to-go, and yellow means clear the intersection (unless you’re like the taxi driver who took me from Logan International Airport into downtown Boston, where it means accelerate to the max, even if you are up to ¼ mile from entering the intersection). For professionals who suddenly find themselves in the role of Project Manager (hey, they don’t call it “the accidental profession” for nothin’) without ever having actually taken a management science course, the reduction of critical cost and performance information into one of these three familiar colors on a readily available report is tempting in the extreme. Green indicates good or acceptable performance, yellow means pay attention here, and red is pinned on those projects/tasks that are currently in trouble – easy, right? Well, not so fast…

On what grounds, exactly, are these categories assigned? If you have a task at the reporting level with a positive cost and positive schedule variance, green is clearly called for, as is red for negative-negative. But what if you have a positive cost, negative schedule, but the cost is way positive (>15%), and the schedule is barely negative <5%)? Is that yellow?

Here’s my heartburn: by the time the reporting system is dumbed down to one of three or four colors (blue = completed on-time), all sorts of irrelevant information becomes the basis for color determination. Before you know it, the cost determiner is a comparison of budgets and actual costs, which, of course, is irrelevant to real PMs, but not to amateurs. A chilling trend among many project organizations is to perform schedule “analysis” based on whether or not the responsible PMs believe they will attain their milestones on-time. This, dear readers, is not legitimate project management information. It is polling, masquerading as usable cost and schedule performance data.

One of the most important aspects of successful project management – if not the most important aspect – is the ability to identify what the project’s issues are, and what aren’t. A project manager’s time is limited, and a performance information system that returns false positives, or masks genuine problems in overly generalized and synthesized formats, virtually invites mis-directed energies. Worse, it helps prevent authentic systems from being introduced, since the bogus systems give the appearance of being able to keep the decision-makers apprised of the project’s goings-on.

But, hey, my Boston taxi driver got me to where I was going, apparently without noticing what the traffic signals were telling him (and, seemingly, little information coming in from an accurate visual assessment of the traffic around us), so your project should be okay.

Right?

Posted on: August 17, 2014 11:35 PM | Permalink | Comments (2)

Visual Risk Management

I believe that part of the reason why risk management-types have a hard time getting the management science community at large to actually execute the types of analysis they keep harping on about is that the underlying concepts are not very intuitive. Besides their relentless abasement of the language (e.g., you will search dictionaries of the English Language in vain for the definition of “opportunity” being somehow related to “upside risk”), the risk managers’ attempts to expand the use of Gaussian curves into areas of business analysis where they truly do not belong via eat-your-peas-style hectoring are not conducive to more wide-ranging acceptance. What’s needed is a vehicle for them to reduce the results of their analyses into more intuitive formats, similar to last week’s blog’s discussion of alternate ways of portraying (valid) cost and schedule performance information. I think I may have found this vehicle – the Chernoff Face.

 

Herman Chernoff is an American applied mathematician, currently working at Harvard. He devised a way of conveying information in a graphic format that could be readily understood by a variety of people, with varying degrees of sophistication. This format is called the Chernoff Face. The desired information is compared to a baseline for each of its components; then, when the data deviates from that baseline, the aspects of the face change correspondingly.

Consider the following cartoon face:

 

 

We’ll use this as our baseline. Now, the risk management types categorize risk events as administrative, insurable, technical non-somethingorother, Sagittarius, and only within the last two minutes of a half. Since administrative risks tend to be low-impact, we’ll adjust the face to include smaller diameter eyes, upticked brows, and a bit of a frown, so:

When the risk assessment indicates a low-impact, administrative risk, this pensive-looking Chernoff Face does a much better job of conveying this information quickly and intuitively than some decision-tree alternative listing. However, when a serious threat appears on these guys’ radar screens, a more dramatic look is indicated. For real trouble, we should increase eye diameter, push the brows up at a more severe angle, and do something with the mouth, as in:

 

Aside from little-trouble-big-trouble, though, the risk managers’ main communications have to do with their frustrations with people not listening to them. For those project managers who just don’t get it, in the risk managers’ eyes, this report should do the trick:

Alternately, for those PMs who do understand risk management, and simply eschew it, this style conveys the appropriate sentiment:

…which often leads to the need to figure out how to get at the project’s charge codes anyway, so…

The downside, of course, is that, by conveying risk management data this directly, it goes a long way towards de-mystifying the nature of the analysis when decoupled from the mind-numbing statistical jargon. Well, “downside” from the risk managers’ perspective, anyway…

Posted on: August 10, 2014 08:27 PM | Permalink | Comments (0)

“Scotty, I need warp speed in three minutes or we’re all dead!”

…and if you’re a PMO Director, you will often have less time than that.

In one of my earlier, high-falutin’ gigs, I was making presentations on portfolio cost and schedule performance to some senior-level executives. A canny assistant to one of them took me aside one day, and told me “Listen, Michael, these guys may be masters of the universe, but they have the attention spans of fourth graders. Whatever you put in front of them has to arrest their interest inside of 30 seconds, or they’re checking the view of the butterflies out the window.”

This advice reminded me of my path-not-taken career, in advertising. My parents ran an advertising agency while I was growing up, and they spent time schooling me in the industry (and were somewhat taken aback when, upon attaining my undergraduate degree, I became a site rat at the Air Force Weapons Laboratory, but that’s another story). For print ads, the rule of thumb was that you had no more than 3 seconds to attract the readers’ attention with your headline; and, if you got them that far, no more than an additional 10 seconds for them to grasp the essence of the entire ad.

Does it strike anyone else as odd that many key decisions, from which types of projects to pursue to where to spend the household’s furniture budget, are so often determined by (relatively) snap decisions, or, at least, snap persuasion? I suppose it’s just part of human nature, a part that bodes very well indeed for us Project Management types (finally!).

My regular readers are, by now, used to my carping about the intellectual vacuousness inherent in the asset managers’ (read: accountants’) automatically-accepted meme of having all of the inside information the organization needs with respect to cost, budget, and project performance. But what do they have, really? The general ledger’s two main (only?) outputs are the balance sheet, and the profit-and-loss statement. Funny thing is, only a fraction of the people who use the term “the bottom line is…” really know how to perform an advanced interpretation of the profit-and-loss statement, and even fewer non-bookkeepers can make heads or tails of the balance sheet. These report formats are literally medieval, arriving around the time of Machiavelli (a coincidence?).

Now, that’s not to say that we PM types are incapable of inducing instant MEGO (a P.J. O’Rourke-ism, short for “my eyes glaze over”) by insisting on generating our cost/schedule performance information in the 1960’s era Cost Performance Report, Format I, or, for the uninitiated, the familiar (well, to us, anyway) Gantt Charts. But, once we move away from these staid formats, the sky’s the limit. One of my favorites is the calculated Variance at Completion histogram.

First, calculate the project’s at-completion costs. A simple but surprisingly accurate formula is:

EAC = ACWPcum / % Complete

… where EAC is the estimate at completion, ACWPcum is the cumulative amount of actual costs on the task or project, and % Complete is the estimate of the task’s percent complete. Next, subtract this figure from the budget at completion (BAC), and you have the calculated variance at completion. For the piece de resistance’, arrange these figures in a table in a spreadsheet, and sort on their values, lowest to highest. Use this to set up a histogram – color all of the overruns red, and all of the underruns green. Include this graphic in your next presentation to the executives, and the following will happen:

·         Since it’s a far more intuitive format than anything the accountants have, you will surpass them easily when it comes to conveying critical cost performance information; so, naturally, they will envy you.

·         The PMs of the projects on the far left side of the graphic will be instantly shown to be heading up losing efforts, and by how much. Since they will have normally escaped such scrutiny, they will not appreciate being so exposed.

·         The executives, on the other hand, will greatly appreciate being so graphically alerted to the problem projects within their portfolios, and will love you for it.

However, you need to beam this information into the heads of your organization’s decision-makers quickly, which means the adoption of a more visual venue than you may be used to. Which reminds me – from the movie Star Trek II: The Wrath of Khan, two minutes and fifty seconds after Kirk’s demand quoted in this blog’s title, a bridge officer reports “Captain! The mains are back on-line!” He knows this because he is looking at … a histogram!

Posted on: August 03, 2014 10:20 PM | Permalink | Comments (0)
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"Ambition is like a frog sitting on a Venus Flytrap. The flytrap can bite and bite, but it won't bother the frog because it only has little tiny plant teeth. But some other stuff could happen and it could be like ambition."

- Jack Handey

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