Games Anti-PM Execs Play

 

This week I want to expand on one of the main assertions from last week, that comparing time-phased budgets to actual costs (“actuals”) has nothing at all to do with project cost performance, regardless of granularity, as counter-intuitive as that may seem. To be clear, I’m not saying that comparing how much you’ve spent to your budget, time-phased or otherwise, is useless in all cases. If nothing else, it’s an indicator of how much you have left to spend before you go over budget. But “How much do I have left to spend?” is a very different question than “How is my Project (or Control Account, or Work Package) performing with respect to its costs?” Confusing these two questions can lead to ill-advised Project decisions.

Games People Play (Grove Press, 1964) created quite a sensation when it was published. In it, Eric Berne asserted a series of “mind games”[i] that people will engage in, or “play,” that carry an emotional or egotistical payoff, but have little or nothing to do with the actual source of the original interpersonal conflict. It is not my intent to engage in long-range psychoanalysis of people whom I’ve never met, primarily for two reasons: (1) Games People Play, while a best-seller, has subsequently declined in its status as an insightful psychological treatise, and (2) I’m not a psychologist. That having been said, I think it’s fascinating how one “game” in particular, “Now I’ve Got You You Son Of A…”[ii] , umm, female dog, where small errors are blown up to absurdly exaggerated proportions, seems to occur among managers who are against the advancement of PM capability within their organizations, for whatever reasons, but can’t come right out and say so. It’s been my observation that, instead, they will use the comparing-budgets-to-actuals technique to masquerade as legitimate cost performance analysis, and try to influence others to do so, as well.

To demonstrate why comparing budgets to actuals is such a poor technique, consider that the point of any Management Information System (MIS) is to deliver actionable, accurate information. Any information stream that isn’t accurate will not only fail in its primary objective, it will actually work against it, since it often becomes misleading rather than merely decision-neutral. Its implications are shown in the following payoff grid:

Scenarios B and C represent the way Projects’ performance reflected in its cost performance information system ought to function. We only really get into difficulty in Scenarios A and D. I’ve referred to Scenario A as an executive’s worst fear because, in my experience, upper management endures a great deal of angst at the thought that they are sitting on top of a major cost overrun on one (or more) of the projects within their portfolios, and no one is telling them about it. At the other end of the organizational power structure, the members of the Project Team despise Scenario D, where some mis-aligned or erroneously-designed cost/schedule performance system raises a red flag for poor performance when, in fact, everything is doing fine. Ill-advised upper management-types descend upon them like locusts, demanding causal analyses and corrective actions for problems that don’t actually exist, accompanied by the implicit threat of reducing personnel assigned. Consider a scenario where some mis-guided analyst, upon comparing cumulative actual costs to cumulative time-phased budget, discovers that the former figure is significantly higher than the latter, and raises the alarm. Add to this the undiscovered fact that the Project in question has actually accomplished a far larger percentage of the scope than had been planned so that this Project is, in fact, doing really well in cost performance space. No matter – the analyst plays the PM-version of the Bernesian game “Now I’ve Got You…”, the Project Team suffers, and executive attention is turned away from where it ought to go. Equally as damaging is the opposite scenario, where actual costs lag behind the budget, but so does accomplishing scope. The budgets-to-actuals comparison won’t flag this Project as a problem, even though it most certainly is, leading to anxiety-producing Payoff Grid Scenario A.

Nor does cranking up the granularity of budgets-to-actuals (BtA) technique work. Consider a project that, in its original Basis of Estimate (BOE), estimated $75,000 for labor, and $25,000 in equipment, while, in the event, it’s on a pace to spend $70,000 on equipment, and $20,000 in labor. Even though this project is on a pace to come in waayyyy under budget, the BtA comparison indicates real problems, placing the Project Team right back into dreaded Scenario D.

So, my recommendation is to avoid any comparisons of budgets to actuals when the discussion turns to Project cost performance – unless you’re really in to mind games.

[i] Retrieved from https://ericberne.com/games-people-play/now-ive-got-you-you-son-of-a-bitch-nigysob/ on February 11, 2024, 12:26 MST.

[ii] Ibid.