Game Theory in Management

Modelling Business Decisions and their Consequences

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Been There, Done That

Beware False Sustainability

PM versus Sustainability

Technology Is Green

Knowledge Transfer on the Down-Low

Been There, Done That

There’s a very irksome characteristic of the management sciences that involves the re-introduction of established ideas, but with new names. Of course, if those ideas were all that in the first place, they wouldn’t need to be re-packaged and sold to the same people who had either tried them and found them wanting, or else rejected them out of hand in the first place.

Two examples pop to mind. In 1997, Eliyahu Goldratt published The Critical Chain, a novel about a business school professor who presents as a new and insightful tactic the idea that resources assigned to non-critical activities in a Critical Path Methodology (CPM) network can be temporarily re-assigned to the critical ones, and help shorten those activities, thereby compressing the project’s overall duration. Clever, no? The problem is, it’s an old and familiar tactic, better known by pre-1997 practitioners as “crashing the schedule.” It’s not even that novel a tactic. Anyone familiar with Critical Path Methodology would probably recommend it the first time their project’s end-date needed to be moved up.

There are other problems with critical chain (such as the added costs of assigning non-expert personnel to activities that just happened to be on the critical path), but that didn’t stop the novel’s protagonist from winning out in the end (wouldn’t you just know it?). But “critical chain” sounds so much cooler than “crash the schedule,” doesn’t it? “Crashing the schedule” is how those old guys, staring into their slow-phosphor-burning terminals and mumbling about the proper number of start-to-start relationships in the network would put it. “Critical chain” is how young, thin, hip students of young, thin, hip professors would articulate the concept.

It is, however, the same idea, with the same issues as before.

Another example is the “Life Cycle Costing” craze that hit in the 1980s. All of a sudden, estimators and cost baseline creators were being admonished to consider all of the costs a given project would incur, including post-delivery to the customer. The main example I remember from the trade magazines at the time had to do with buildings, and how important it was to take into account their predicted life-cycle energy costs and water consumption over theirs planned existence. The Life Cycle Costing push had the same two problems that critical chain had: the ideas were hardly new, and they were plagued with problems.

First off, the idea that a construction company would fail to take into account the heating and cooling costs of a building prior to selecting its design and materials is just plain goofy, if for no other reason than the accountants would want to know the basis for amortizing its depreciation. Of course the projected future costs of the projects were taken into account – otherwise it would have been impossible in almost all cases to procure funding.

Secondly, it’s really quite impossible to quantify the future of anything, and that includes the end-result of projects. Referring back to our sample building, other than commodities speculators, who believes that energy costs can be accurately priced going in to the future? And, if our building is in California, who would have believed back in, say, 1997, that water prices would spike eighteen years later, and usage controlled by the government? And those are relatively mild fluctuations compared to the chances of the building being consumed by wildfires, or earthquakes. The assertion that a given building’s “life cycle” can be accurately quantified should be considered as sound as the claims of a tarot card reader, who makes similar statements on the predicting of their customers’ “life cycle.”

Which brings us back to April’s theme, sustainability/green project management. When, in the history of business, has completing a project with an excess of wasted resources been considered a good idea? The answer is never. For example, the plastics industry was furthered from an abundance of the compounds left over from the petroleum cracking process. In economic terms, the very existence of leftover resources that even might have an economic use in a different venue is an automatic signal of a missed opportunity.

Don’t get me wrong – “sustainable” or “green” PM is a great idea, but it’s hardly new. I guess the re-branding of long-established concepts is what we have to do to stay young, thin, and hip.

Posted on: April 26, 2015 10:54 PM | Permalink | Comments (0)

Beware False Sustainability

In my blog from last week I pointed out some ways that basic project management techniques are often at odds with the sustainability tactics, at least those documented by Rotary International. After I had posted that piece, nationally syndicated columnist George Will published an article[i] that sharply criticized a major American University whose board of trustees thought it would be a good idea to divest the University’s holdings of oil companies, all in the name of “sustainability.” (I have no idea if Mr. Will is reading my blog postings, but it was a remarkable coincidence.)

So, if a University’s trustees divesting of un-PC corporations in the portfolio is a managerially silly gesture (my words, not his), as Mr. Will maintains (and I agree), then exactly what does constitute legitimate sustainability in the business decisions of a University?  To answer that, let’s look at the business model of a typical American college, albeit at a highly generalized level.

Colleges offer advanced education. To do so, they need several things, including:

·         An adequate facility (is ivy a requirement?)

·         A faculty

·         Certifications and permits from myriad agencies, but, most important of all,

·         Students who are able and willing to pay the asking price of tuition.

To this end, most universities receive funds from sources other than their students’ tuition. The college I attended for my undergraduate work, the University of New Mexico, is a land-grant university, meaning that it was given large tracks of (then-marginally valuable) land at the beginning of its endowment. As Albuquerque grew, and more college-bound people were born in (or came to) New Mexico, this land grew in value, and was used, built-on, leased out, or otherwise leveraged to advance the University’s goals. (As an aside, the fact that UNM is a land-grant university is painfully apparent if one should play their championship golf course. Even their par-3s look like they go on for a country mile.)

Another significant source of a college’s income: donations from former students who have gone out into the workforce and used their degree(s) as a professionally valuable asset. From the University’s point of view, the more valuable the granted degree, the better the odds that the alumni will look their way when it comes time to determine the objects of their charitable dollars. So, what makes a degree valuable?

The same thing that makes any asset valuable – the ability to acquire it at a low price, and receive a substantially better return.  According to Poets and Quants[ii], a Harvard MBA should expect to earn $3.233M over a 20-year period, while a Texas A&M MBA can expect $1.782 over the same time period. However, tuition at Harvard Business School (along with other fees) can easily exceed $120K per semester. At Texas A&M, it’s a third of that. An admittedly very rough comparison yields a delta of $320K for just the graduate program. Harvard’s costs are around 14% of its 20-year yield. Texas A&M’s is only about 9%.

Interestingly, when I did a Google® search on how much a Harvard or Texas A&M MBA should expect to earn, I got a lot of hits. But when I did a similar query on degree programs for majors ending in the word “studies,” I could find no similar evaluations. I’m guessing it’s because comparing the costs of those degrees with their expected return would yield some disappointing data for those programs, meaning that the Universities that have set them up should expect fewer dollars from those alumni. And that, in turn, means that offering programs that fail to produce graduates who are prepared to create wealth is a decision against sustainability, for the University, anyway. Given its business model, the University needs to be economically viable in order to expand facilities, attract top faculty, or lower tuition. Any management decision that pushes against its economic viability is hindering its ability to sustain itself, by definition.

My point? Don’t be sidetracked by spurious claims of “sustainability.” Either the affected business model succeeds to the point that its owning organization can continue into the foreseeable future – literally sustains itself – or it does not. That’s how sustainability is determined in the management realm.

[i] Will, George, “Sustainability Gone Mad on College Campuses,” April 16, 2015.

Posted on: April 20, 2015 08:39 PM | Permalink | Comments (0)

PM versus Sustainability

Yeah, I know this month’s theme is supposed to be about how much project management and sustainability are copacetic. It’s just that, well, in some cases, they’re not, by which I mean the intellectual underpinnings of “sustainability” are occasionally in conflict with some basic elements of project management theory.

The organization Rotary International issued a pamphlet in July of last year[i] listing “six steps to sustainability.” These steps included:

1.      Assess Community Needs

2.      Use local materials

3.      Identify a local funding source

4.      Provide training, education, and outreach

5.      Motivate beneficiaries to take ownership

6.      Monitor and evaluate.

Let’s take these one at a time.

The Assess Community Needs step involves “…conduct(ing) a thorough assessment to identify a community need…”[ii] I can make this step really easy – what service, commodity, or product is in the most demand, or is commanding a comparatively high price? That’s what the free marketplace does: it highlights scarcity with increased prices, just as abundance is signaled through low prices. It really is that simple.

Use local materials. Why? Isn’t the most economically available material indicated for the most efficient project delivery? (I mean, seriously, we PM-types don’t even need to weigh in on this – we should be able to sit back and let the accountants tear into this assertion.) And isn’t the most efficient project delivery the greenest?

Identify a local funding source. Again, why? If I squint really hard, I might be able to see the reason behind assertion #2, that of using local materials. If the prices are the same, then using local vendors increases the monetary multiplier within the community.  It’s a short hop back on to that familiar soap box – its price would reflect that! But, stepping back down, this has nothing to do with funding. Funds are transferred from bank to bank over telephone wires. The days of the armored truck carrying large amounts of cash from city to city are over and done. The savvy project sponsor will access the best source of funding, and that almost always translates to the most efficient – the actual location of the source’s home office (assuming the location is not on the State Department’s list of terrorism-exporting nations) is irrelevant from a PM point of view.

Provide training, education, and outreach. Not unless the project is to set up a college. The pamphlet explains that this step is necessary to “…strengthen beneficiaries’ ability to meet project objectives.”[iii] By blurring the lines between the project team and the project’s beneficiaries, a convenient appeal for grant money is created. Who, now, exactly, is pursuing the project’s scope? Can they be managed? If so, they probably need little additional training. If not, why should project budget be expended towards ends that have nothing to do with accomplishing the scope?

Motivate beneficiaries to take ownership. If the project’s “beneficiaries” do not immediately and willingly “take ownership,” then the entire point of the project is suspect.

Monitor and Evaluate. Finally, a project management-consistent objective! And here is where the PM and Sustainability worlds most closely coincide. Real project managers use earned value and critical path methodologies to monitor their cost and schedule performance. If the project is doing well, then some decisions on the resource management front may be accommodated that serve the sustainability ends without endangering the successful completion of its scope. On the other hand, if the project is behind schedule or over cost, then the project sponsor and/or project manager have a choice, between pursuing the project’s objectives in the most efficient manner possible, regardless of its sustainability rating, or else selecting the most sustainable resources at the potential expense of the successful conclusion of the project.

But at least project management techniques make the evaluation of this trade-off an informed decision.

[i] Rotary International, Six Steps to Sustainability, July 2014, retrieved from, 19:57 MST on 11 April, 2015.

[ii] Ibid.

[iii] Ibid.

Posted on: April 13, 2015 10:01 PM | Permalink | Comments (0)

Technology Is Green

A quick quiz as kicks off its Sustainability/Green PM theme for April:Who is more responsible for saving the whales?

A.    Dorothy and Irving Stowe, (among many) co-founders of Greenpeace,

B.     Maris Sidenstecker, founder of Save the Whales

C.     John D. Rockefeller, founder of Standard Oil

Who has saved more acreage of forests?

A.    Dorothy and Irving Stowe, (among many) co-founders of Greenpeace,

B.     Dave Foreman, founder of Earth First!

C.     Amir Ban, Dov Moran, and Oron Ogdan, inventors of the flash drive

Which power generating facility has killed fewer birds?

A.    The Pantex Wind Farm, near Amarillo, Texas,

B.     Ivanpah Solar Electric Generating System, in California

C.     The Palo Verde Nuclear Generating Station, also in California

If you answered each question with “C,” go to the head of the class.

In the mid-19th Century, whale oil was the best, most economical way of providing light to city streets and homes. However, when Standard Oil began to make kerosene – a cleaner, brighter fuel for lamps – cheaper and more easily available than whale oil, the demand for the latter plummeted.  According to Warren Meyer in Forbes magazine, by 1890 the American whaling fleet had dropped from a peak of 790 vessels to fewer than 200, and was still dropping.[i]

A 16 GB flash drive will hold 3,080,000 pages of documents. One tree will make about 8,333 sheets of paper, meaning that each and every 16GB flash drive holds the equivalent of 369 trees worth of printed documents. It is no exaggeration to say that flash drives, and similar electronic data repository devices, have reduced the demand for paper to the point that the term “paperless office,” once an utterly absurd futuristic concept, is now fairly common.

Ivanpah is killing around one bird every two minutes, and wind farms in general kill around 300,000 birds per year. Palo Verde? The only claimants I could find that asserted that nuclear power kills birds at all had only the most tenuous of causation claims (interspersed with some rather vile name-calling). The answer could easily be zero.

What does each of these examples have in common? The advancement of technology, seeking only to provide goods or services better, faster, cheaper in a free-market environment (pun intended), almost automatically renders its consumers’ surroundings cleaner.

Okay, so what does this have to do with project management? Well, in the management sciences, project management was a significant breakthrough. Previously, the widely-accepted hypotheses in the management sciences came almost exclusively from the asset managers, the purveyors of the general ledger. When some intrepid souls started to look at the best technical approach to delivering specific pieces of scope, on-time and on-budget to an external consumer, a significant leap forward in the overall management sciences was realized. Just as previous methods of collecting, processing, and delivering energy to consumers was revolutionized by technology, so, too, did the most effective way of providing unique projects become the standard. And, like technological advances in the document storage and energy collection industries lead to a cleaner overall environment, so, too, do advances in project management lead to quicker, better, and cheaper project delivery, whether it be on behalf of power generation plants, or information technology efforts.

Want a cleaner planet? Do project management better. (Along those lines, keeping current with blogs certainly can’t hurt.)

Posted on: April 05, 2015 10:08 PM | Permalink | Comments (2)

Knowledge Transfer on the Down-Low

Arthur Conan Doyle’s famous character Sherlock Holmes was known for being able to tease out vital information from people and events he encountered based on the slightest clue, the fastest of interactions. He knew within an instant of meeting Dr. Watson that Watson was an M.D., had served as an officer in the British Army, and had suffered a gunshot wound  (and in which theater), none of which Watson had verbalized.

Are there similar “tells” in the project management profession? I believe there are, but, much like Watson’s frustrations with Holmes’ fascination with and focusing on what would normally present as minutia, these indicators of sub-standard analysis or inadequate management science adherence may strike my readers as trivial, or unworthy of serving as the basis for usable conclusions. I would argue to the contrary, and will go further – if you, my dear readers, are doing any of the following, you might want to seriously consider stopping.

The first tell involves writing skills. From e-mails to variance analysis reports, real PMs will not escape having to, at some point, convey vital information through the written word. One dead giveaway of a writer’s cluelessness is the misspelling of the impersonal  possessive pronoun. Yes, it’s “its.”

When I’m teaching the variance analysis report prep class, I make it a point to take a moment, and write on the white board the word “theirs.” Then, I’ll call on one of the students, ask them to read the word, and ask if it’s misspelled. I do the same with “his,” “hers,” and “ours.” Then I’ll write the word “its.” By this time, everyone sees my point, and will even start to laugh that I’ve gone there.

“You laugh” I begin, “but I can guarantee you that, if I look through ten of your VARs, at least two of you have made this error.” The laughing dies down, and ceases. “Y’all have to understand – this stuff will get a seventh grader’s paper marked down. ‘It’s’ is a contraction, short for ‘it is.’ ‘Its’ is the impersonal possessive pronoun, and, when you mix them up, it betrays a lack of professional awareness or effort.”

The second tell I want to cover: the expression “the proof is in the pudding.” This is idiocy. The saying that is being alluded to is “the proof of the pudding is in the eating,”  One acceptable near-adaptation is, after discussing something that has proven its intrinsic value despite questionable methods to develop it, that the object being discussed is “the proof of the pudding.” But “the proof is in the pudding” is simply dopey. How did the proof get into the pudding? Did somebody put a Venn Diagram into the pudding as it set? And wouldn’t it be difficult to read afterwards? The mis-use of this cliché is a clear indicator that the person uttering it is not to be trusted with anything resembling advanced information analysis.

The third tell has to do with a management information technique that is common among the asset managers, but is a clear sign that PMs who do it are neophytes. It’s the tactic of comparing budgets to actual costs. This comparison yields usable information the same way a broken clock is correct twice per day – on a purely coincidental basis. In fact, the only time it’s supposed to be used in the accountant’s version of quantitative business analysis is in the calculation of depreciation. Other than that, it’s a useless number. As any real PM can tell you, a cost variance is not budget compared to actuals. It’s earned value (percent complete times budget-at-completion) minus actual costs. And performing the budget versus actuals comparison at more and more detailed levels of the basis of estimate and line items within the actuals accomplishes exactly nothing, even though it does present as being a more sophisticated analysis. It’s profoundly flawed, at any level, and its practitioners are the very opposite of prescient.

Should you come across a self-described expert in the management sciences in general, and project management in particular, who commits one of these tells, don’t react overtly, lest you commit a tell yourself. Instead, simply smile, appear as if you value the “analysis” given – and then completely disregard it, and you will have saved yourself (and your organization) significant time and money.

And don't bother to scrutinize this blog for correct usages of "its" and "it's." I did that five times already.

Posted on: March 30, 2015 08:36 PM | Permalink | Comments (0)

"The most incomprehensible thing about the universe is that it is comprehensible."

- Albert Einstein