Game Theory in Management

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Modelling Business Decisions and their Consequences

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Refusing to Accept Zuzu’s Missing Petals

The Sure-Fail PMO Implementation Approach

Disruptive Do-Gooders

“Are You A Good Disruptive Influence, Or A Bad Disruptive Influence?” (Munchkins giggle)

Strategies in the Disruption Game

Refusing to Accept Zuzu’s Missing Petals

I believe that we all overly dependent on our experiences. We become familiar with how certain scenarios unfold, and tend to expect similar results from analogous situations whenever we encounter them. Of course, each time these scenarios proceed as expected, it reinforces the notion that our formulaic expectations will be realized at the next iteration. I’ve written previously on how our experiences can become our worst enemy when it comes to selecting the optimal Project Management strategy for resolving a given problem, but what I’d like to address now is the phenomenon where we stick to pre-selected strategies even in the face of evidence that it’s a mistake to do so.

I think it’s fascinating how this effect influences management decisions and business analysis (ProjectManagement.com’s theme for November), because I’ve witnessed countless times managers making poor decisions in the light of evidence that their decisions are ill-advised. But probably the best dramatic example of this effect is beamed into households around the world here in Holiday Season, that example being George Baily’s behavior in the film It’s A Wonderful Life (1946). Briefly, George manages a small Savings and Loan (or Building and Loan) in the town of Bedford Falls, but his uncle Billy misplaces an $8,000 deposit to the local bank, which is run by the antagonist, Mr. Potter. As George contemplates suicide, his guardian angel appears and arranges for George to experience Bedford Falls as if George had never been born, in an attempt to get him to see how his life has had a positive influence on so many others’.

So what we have in this movie is George Baily experiencing an altered reality, but he spends almost the entire time rejecting his new circumstances, even in light of the following:

  • By my count, Clarence Odbody, George’s guardian angel, tells George no fewer than twenty-seven times that the world around him has been changed to reflect what it would have been like had George never been born. Rather than accept Clarence’s information at face value, George constantly explains the things he is seeing and hearing as coming from different causal factors, including:
    • Clarence is crazy,
    • Clarence is playing some elaborate prank on George,
    • George drank some “bad liquor,” or something,
    • Everyone else is crazy,
    • Or George has gone crazy.
  • The clues that Clarence should have been taken at face value far earlier in the movie mount quickly. These include:
    • George’s daughter Zuzu wanted George to fix her flower, which had shed some petals. George surreptitiously hides the petals in his pocket, and pretends to have fixed the flower. When George is transported to the George-less world, the petals have disappeared from his pocket.
    • In what has to be a blow to those who do not accept anthropomorphic global warming, it doesn’t snow in Bedford Falls on Christmas Eve if George is never born.
    • His acquaintances do not recognize him, and his home is obviously derelict.
    • The landscape around Bedford Falls has changed, since the Building and Loan was not in existence to build homes for its families.
  • These and other clues point to the, frankly, inescapable conclusion that Clarence is right, and George is experiencing the world as if he had never been born. Even so, George feels compelled to track down his wife, Mary, to see what’s become of her. Still not completely accepting the alternate-world explanation, he confronts Mary, telling her that he’s her husband. She faints.

Meanwhile, Back In The Project Management World…

The well-known study in Cost Performance Index stability[i], performed by Captain Scott Heise, with attribution to Major David Christensen, represented, in my opinion, a significant event in Project Management Information system efficacy. Probably the most significant inference that came from that research is that, since a project’s Cost Performance Index (CPI) is fairly stable relatively early in its life cycle, then the common Estimate at Completion (EAC) formula of dividing the Budget at Completion (BAC) by that very same CPI will yield an EAC that’s reliably accurate to within 10 points.

However, even in light of this well-done and clearly relevant study’s results, there are many George Baily PMs out there who refuse to accept its implications, that the easily-calculated EAC is reliably accurate. They’ll see that the calculated EAC is indicating a future overrun for their Control Accounts (or even the project as a whole), but will convince themselves that they can correct the negative variance prior to project’s end, even going so far as to generate the so-called “bottoms-up” EAC to indicate that there’s no real problem, or it’s not as big as the despised calculated EAC is showing. I’ve been told of executives who order their PMs to perform this very tactic when the calculated EAC is an embarrassment to them. Cost performance report after cost performance report, project after project, and these PMs won’t accept the evidence in front of their eyes.

Just as George Baily’s ordeal would have been much shorter had he simply accepted Clarence’s explanations earlier in the movie, and proceeded directly to understanding how dreadful the lives of his family, friends, and associates would have been without him, I believe that many managers in the PM world would be far more successful if they were to rely on the calculated EACs, and deal with the indicated overruns more quickly and directly than attempting to deny or minimize their implications (or accusing the calculated EAC aficionados of being crazy).

But then, had George accepted that Zuzu’s missing petals constituted ipso facto evidence of the validity of Clarence’s assertions, It’s A Wonderful Life would have been a much shorter movie.

 


[i]Heise, Scott,  A Review of Cost Performance Index Stability, September 1991, retrieved from http://www.dtic.mil/dtic/tr/fulltext/u2/a246621.pdf  on September 12, 2018, 14:17 MST.

Posted on: November 12, 2018 10:13 PM | Permalink | Comments (6)

The Sure-Fail PMO Implementation Approach

According to 4pm.com, organizations can see a project failure rate as high as approximately 70%.[i] Bad as that is, according to a research paper by McKinsey and Company and the BT Centre for Major Programme Management at the University of Oxford, 17 percent of IT projects fail so badly that they threaten the existence of their companies.[ii] With rates like these, it’s small wonder that project-oriented organizations make it a point to set up Project Management Offices, or PMOs, in order to instill in their project teams the techniques that maximize the odds of their projects coming in on-time, on-budget. So, how ironic is it that the effort to set up and maintain the PMO is, itself, so likely to fail?

I don’t have any hard data on that last assertion, because I’m fairly certain it would be next to impossible to collect. PMO failures do not usually manifest the same way that individual projects do. Individual projects succeed (or, as the data suggests, crash and burn) when their actual performance is compared to their original success criterion of scope, cost, and schedule. PMOs fail much more subtly, and I think it’s important to Game Theory In Management Nation to be able to quickly recognize those signs.

The symptoms of a soon-to-be-failing PMO are easiest to read if you happen to be in the organization when the PMO is initially set up, but they are still observable if you happen across it in the middle of its story arc. There’s this widely accepted implementation approach, or template if you will, that is often employed by start-up PMOs which dramatically reduces its chances of success. This strategy involves employing the following tactics, usually but not necessarily in this order:

  • Executives make the announcement that a Program/Project Management Office is being funded, usually because they’ve just been stung by one of those massive project failures that threatens the very existence of the organization.
  • Then comes the announcement that the PMO will be headed by a person assumed to be in high standing, either within the organization itself or from the outside PM community. Typically, however, the remaining members of the new PMO will be from other teams performing administrative functions.
  • There will be an attempt at clarifying the scope of the new PMO, usually with some reference to one of the maturity models out there, the most famous being Carnegie Melon University's Software Engineering Institute's Capability Maturity Model®. This reference will be wildly speculative, both about the organization’s current Level®, as well as the one to be attained “within 18 months.”
  • Other organizations, recognizing the groundswell of support for “doing PM right,” will vocally support the initiative, promising the head of the PMO the “support” needed to attain the stated goal. Personnel will be encouraged to get their PMPs®.
  • The PMO will get to work on three specific tasks:
    • Identifying the software platforms for handling schedules and cost performance reporting,
    • Arranging to train the recently-transferred staff, and
    • Writing procedures.

It’s that last bullet which proves to be the most poisonous, as we shall see.

  • The tools get selected and installed, and the staff goes through the training, but the procedure-writing will begin to get bogged down. If the original versions of the documents detail minimum standards for all of the organization’s projects, then the existing PMs who disagree with the content of the documents will find ways to argue that these procedures ought not apply to them. And they will succeed, regardless of the level of “support” promised by their superiors only weeks previously.
  • The procedures are finally finished, and very senior executives within the organization sign off on them, implying dire consequences for non-compliance.
  • Some projects make sincere efforts at implementing the procedures, most make half-hearted attempts, some pretend, and others ignore.
  • Once it is realized that the pretenders and ignorers don’t face consequences, the half-hearted teams stop their efforts, and the organization quickly returns to its previous project failure rate.
  • The PMO has now failed, but it has done so quietly. The head of it will be replaced, and this person will go out raging about the lack of genuine support from upper management.

I’ve seen this pattern repeat so many times I could probably recite the steps in my sleep. Naturally, I believe I have a far superior approach to PMO set-up and maintenance, predicated on some rather basic Game Theory, and its key components are…

Look at that! I’m out of pixel ink for this week. Besides, GTIM Nation is probably contemplating which aspects of the failed model are intrinsic to their home organizations, and probably isn’t in the mood for the right answer right now.


[i] Retrieved from https://4pm.com/2015/09/27/project-failure/ on November 3, 2018, 19:40 MDT.

[ii] Retrieved from https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/delivering-large-scale-it-projects-on-time-on-budget-and-on-value on November 3, 2018, at 19:44 MDT.

Posted on: November 05, 2018 10:59 PM | Permalink | Comments (8)

Disruptive Do-Gooders

“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”                                                 -- C. S. Lewis[i]

As we wrap up the hazards involved in disruptive influences (ProjectManagement.com’s October theme), I want to return to the categories I like to use to bin such hazards. They originate in one or more of the following areas:

  • Internal to the project,
  • External to the project but internal to the organization, and
  • External to the organization.

It’s this last category I want to address this week, since it’s both the one that the PM tends to have the least control over, but the one that contains a rather easy-to-avoid difficulty: ceding influence to those who do not have direct involvement in the project nor the organization.

I can’t help but roll my eyes whenever I hear about an organization that has elected to cease manufacturing operations in or purchasing items from countries where the workers are “forced” to work in “sweatshops,” or conditions that most workers in the industrialized world would find objectionable, if not deplorable. As Thomas Sowell has pointed out in his excellent book Basic Economics[ii], when a given manufacturer announces an intent to set up business in one of the poorer countries, it is not at all unusual for people hoping to get a job with the new plant to show up days prior to the actual hiring period. They willingly do so – no one is “forcing” them to do anything. The basic facts are that there are risks inherent in any project or manufacturing initiative, and the entrepreneurs who are doing so are making decisions intended to maximize their chances of running (or expanding) a successful project. Poorer countries are attractive to start-ups because the labor rate is usually lower than in more developed nations. The same nations are unattractive because of their governments’ ability to provide an effective constable force to protect the company’s assets can be uneven, not to mention the chances of an unstable government changing tax rates unexpectedly, or even nationalizing the new plant altogether.

All of these factors, and more, go into the decision of starting business operations in nations perceived as harboring or tolerating “sweat shops.” But the actual people who are desperate for work don’t care about third party tut-tutting about their conditions of employment. Often these positions are critical to them in order to get ahead personally or on behalf of their families. For a third party, who is not directly engaged in either the labor supply nor the hoped-for output, to interfere and act as a disruptive influence over this kind of business transaction strikes me as not only defeating the very purpose – advancing the living standards in poorer countries – they claim to advance, it’s a hazard to the Project Managers. How should this disruptive influence be countered?

First, it must be recognized, the earlier in the cycle, the better. The PM who is assigned to the scope of building the facility, or delivering the expected output, would be well-served to engage in some public relations efforts. The narrative that the disruptive do-gooders are attempting to hang around your neck is one of management exploitation of helpless labor, and they want to use that to push the conclusion that your project is somehow lacking in moral authority. This, in turn, springs from the dopey notion that legal, freely entered-in-to business transactions are either morally correct, or immoral. Actually, such transactions are morally neutral, including those characterized as “price gouging.” As long as neither party is being coerced into entering into a legal transaction – a basic ground rule for valid contracts – then parties not involved in the transaction truly have no grounds for objecting. But that doesn’t stop them from trying, and they are likely not going to experience some kind of epiphany that would enlighten them to their folly.

Keep in mind that this particular type of potential disruptors will almost never have any direct link into the project, neither from its scope completion side, nor from its resource utilization aspect. Much of the disruptive power they wield has been ceded them under the rubric of “engaging stakeholders.” Third party do-gooders suffer nothing for championing a wrong-headed approach. This, by itself, should render anything these stakeholders assert as suspect at best, completely irrelevant at worst.

A practical preventive measure would be to not grant third-party, nothing-to-lose-if-I'm-wrong entities any decision-making authority (or even influence) over the strategic direction for the project.

Also, the savvy PM will be wary of admonishments to “engage all stakeholders.” In my view, the only stakeholders who should be engaged are those who have direct involvement in either the project’s scope, or the resources pursuing said scope. Everyone else is suspect.

So, that’s the litmus test: do the stakeholders have a direct link to the project, AND are in a position to endure losses if the positions they advocate are wrong? Everybody else should read more Sowell and Lewis.

 


[i] Retrieved from https://www.goodreads.com/quotes/19967-of-all-tyrannies-a-tyranny-sincerely-exercised-for-the-good on October 27, 2018, 19:02 MDT

[ii] Sowell, Thomas, Basic Economics, A Common Sense Guide to the Economy, Fifth Edition, Basic Books, 2015.

Posted on: October 29, 2018 10:20 PM | Permalink | Comments (7)

“Are You A Good Disruptive Influence, Or A Bad Disruptive Influence?” (Munchkins giggle)

To continue to paraphrase the Wizard of Oz near-quote above, Dorothy’s answer in the PM universe would be “I’m not a disruptive influence at all! Disruptive influences are old and ugly!” (more munchkin giggling). Of course, Glenda goes on to educate Dorothy on the subject of moral duality in the near-locales of the Emerald City, which is something she will need to understand for the rest of the movie. I would like to do something analogous with GTIM Nation, just not with Glenda’s maddeningly sugary voice and inflection.

Naturally your typical PM will seek to avoid disruptions in their projects – unfortunately, disruptions are part and parcel of the profession, and it’s the PM’s job to deal effectively with them. But, much like witches in Oz, not all disruptions should be assumed to be wicked. I’m willing to bet that more than a few of my readers have been involved with projects where the technical approach to the scope was sub-optimal (or maybe even wretched in the extreme), but management was convinced it was the only way to perform the work. They launched the project with enthusiasm and energy, but even early on there were signs that things might not go as planned. Some conflicts within the team emerged, but were viewed as being a natural part of the Forming – Storming – Norming – Performing cycle. A few activities then started falling behind, but they were within the variance threshold, so no executive action was invoked. Quick question (#1): are these trends representative of a good disruptive influence, or a bad one? Don’t answer right now, but we’ll return here in a moment.

Then, something more dramatic happened: a senior technical project team member abruptly left after an altercation with the PM. The rest of the team hated to see her leave, but the separation was described in an e-mail blast as her “pursuing other opportunities.” I’ll pose the question again (#2): was this incident a good disruptive influence, or a bad one? Again, don’t answer yet.

After a few months a rookie Project Controller, naïve in the nature of office politics, calculates the Variance At Completion at more than 25% over budget, and announces the same at the project review where a senior manager is in attendance. This senior manager asks to see the Variance Analysis Report, which happens to be chocked-full of fluff terms and meaningless jargon; nor does it offer a succinct get-well plan. Again, the question (#3): is this a good or bad disruptive influence?

The exec, who has been around more than a few similar projects, calls for an immediate review of the cost/schedule performance data, even as the PM insists that the variances can be made to go away with a Baseline Change Proposal – or two, or maybe even, at the outside, three. In the historical data he sees that the poorly performing tasks have been showing difficulty for some time, but only recently broke the Variance Analysis Threshold, leading to the anodyne VAR. And, most telling of all, the recently-departed senior technician had been the Control Account Manager (CAM) for the activity. Is this (#4) a good disruption?

Now a risk event strikes the project, one that was thoroughly described in the risk analysis, and has had an impact consistent with that analysis. The Configuration Manager files a contingency BCR, and it is being reviewed by the Baseline Change Control Board. However, the customer’s representative on the board isn’t sure that this incident is risk-based, but might be caused by poor performance, and is slow-walking the BCR. Same question (#5).

Finally, the troubled task impacts the critical path, and the entire project’s forecast completion date is pushed back. The calculated Estimate at Completion (EAC) remains stubbornly at the 25% overrun mark, and it can’t be BCRed away as the project passes the 50% complete mark, as complete spent tops 62%. At this point the project is clearly in trouble. Here are my two questions: (1) which disruptors were to blame? And, (2) which ones were “bad,” and which were “good”?

The project was undertaken with a poor technical approach, which meant that it was probably doomed from the start. The following “disruptors” had, as their material (if not proximate) cause, this wrong-headed approach: disruptions 1 – 4 should be considered good, since they were pointing at the bad initial technical approach. The savvy PM would not have attempted to minimize or hide the causes underlying these disruptions; instead, he would have heeded the information they conveyed, re-evaluated whether or not the selected project strategy was the right one and, if it wasn’t, immediately entertained and/or employed alternatives. Disruptor #5 was the only bad one, coming, as it did, at the time that the project team was least able to isolate its negative impact as a causal factor of the overall project’s woes. Nor did Disruptor #5 provide any information or insight as to what the best approach alternative might be, since most catalogued risk events are generic enough (bad weather, increased vendor costs, etc.) to happen to any project, regardless of the efficacy of the selected technical approach, though one could easily argue that the demonstrably wrong approach significantly increases the odds of a project-ruining event.

After the Wicked Witch of the East experiences the disruptive influence of having Dorothy’s house fall on her, Glenda, being a “good witch,” advises Dorothy to “follow the yellow brick road.” This little piece of advice is repeated an additional fifteen times (by my count) prior to Dorothy arriving at a crossroads and meeting the Scarecrow. Here’s my challenge: decide now how many good disruptive influences will happen on your project before you accept the information they convey, and evaluate alternatives to your approach.

It just might save you an encounter with flying monkeys.

Posted on: October 22, 2018 10:46 PM | Permalink | Comments (9)

Strategies in the Disruption Game

Can Game Theory deliver any insights on the subject of Disruptive Influences (ProjectManagement.com’s theme for October)? Last week I blogged about the difficulties involved when a formulaic, or canned strategy, is employed in a project situation where a novel approach is appropriate. If we flesh out the payoff grid (and Game Theory In Management Nation knows how I love payoff grids), it would look something like this:

 

 

Canned Strategy is Expected

Novel Strategy is Appropriate

Canned Strategy is Employed

(1) Low Disruption

(2) Last week’s blog

Novel Strategy is Employed

(3) ???

(4) Low Disruption

 

In those instances where a canned strategy is both called for and is employed (scenario #1), which, if we employ the Pareto Principal, is probably 80% of the time, then things will probably work out, save for the garden variety project bizarre happenstance(s). Similarly, if a new or novel strategy is called for and employed (scenario #4), usually because of new technology or unusual circumstances signaling a novel approach is needed, then there’s a workable match between the work and the management approach. I discussed scenario #2 last week, which leaves the Game Theory in Management Nation with scenario #3. What happens when the traditional PM organization tackles a project that really isn’t analogous to any of the rest of its portfolio? Is it not human nature to invoke the familiar, and use the same strategies that brought success historically?

Indeed it is, and therein lies our problem. To be blunt, in those instances where a novel technical approach is called for and attempted, but not expected nor accepted by the sponsoring macro organization, several business model pathologies can be expected to manifest, including:

  • Disdain. The PM attempting the novel technical approach will earn the disdain of the organization’s resident “experts,” who have the entire history of successful similar projects behind them. The upstart PM’s experience, capability, or even intelligence will be impugned at length – it’s just part of being an innovator.
  • Competition. The keepers of the organization’s canned strategies will make some attempt at wresting control of the work from the PM attempting the innovative approach. You can bet on it. Of course, the favorite (and, in almost all cases, most powerful) weapon at the keepers’ disposal will be their record of successful similar projects. This is to be expected, since, by definition, these keepers of the canned strategies have absolutely no idea when a new project’s circumstances are outside the parameters of “similar” or analogous projects in their histories. It’s somewhat like our friends, the accountants, believing that every information stream that deals with budgets or costs simply must be derived from the general ledger. I can only imagine the difficulties encountered by the first PM-type who dared to state that a Cost Variance is not the difference between the budget and the actual costs; rather, it’s the difference between the Earned Value and actual costs. He or she must have been laughed out of the manager’s lounge – but they were right, of course.
  • Claiming credit. If, in the rare occurrence that the PM with the novel approach actually overcomes the tsunami-sized bow wave of organizational resistance, and succeeds in bringing in the project on-time, on-budget, the traditionalists will insist that the true credit should reside within their organization, and not with the innovative PM.

So, how does the novel approach-embracing PM counter these tactics? While there’s no sure-fire counter to the above list, it’s been my experience and research that the following may be effective counter-measures:

  • Clearly articulate the nature of your novel management approach(es), including how you arrived at them and why you believe they represent a superior technical solution. Make it clear where your approach differs from the staider ones advocated by the other members of the organization.
  • Point out instances of the times the older methods you seek to displace have failed, even if the failure is only partial. You’re trying to justify a definitive deviance from what others believe is tried-and-true, and avoiding a clear-eyed review of those approaches’ shortcomings isn’t helpful, neither to you nor your organization.
  • By far your most powerful influencer is this: document interim goals or measures of success, and deliver on those metrics. Nothing succeeds like success. If you can demonstrate, in no uncertain terms, that your approach is superior, then your opposition will be in a far weaker (or even impossible) position to continue their antics.

From a management science purist’s point of view, the advancement of novel business models on just their merits shouldn’t have to involve all of this strategizing and counter-measures. But, human nature being what it is, the tactics and counter-measures discussed above can be expected to be employed by the opposition and the winning PM.

And, to any real Game Theorist, winning is what it’s all about.

Posted on: October 15, 2018 09:59 PM | Permalink | Comments (3)
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