Game Theory in Management

Before we exit February and ProjectManagement.com’s theme of ethics, I wanted to touch on a somewhat counterintuitive aspect of project management ethics: those times that your customer behaves in an unethical manner.

I happened to see lots of bad customer behavior when I was working my way through my undergraduate degree, first as a waiter at a family restaurant attached to a huge shopping mall, and then later as a salesman in a department store at another huge shopping mall. In the project management world one rarely sees the transparent grubbiness of those mall shoppers who seek to exploit weaknesses in retail business models or the personnel executing those models, but some patterns do emerge that I believe carry over to our world.

Two characteristics are particularly noteworthy:

• The unethical customer will assume an attitude of superiority. We’re not talking your garden variety client/contractor relationship here – it’s far more imperial. For example, failure to honor a coupon well past its expiration date is guaranteed to bring about massive amounts of condescension from customers who simply assume you are too stupid to understand that they should be covered under the coupon’s terms anyway. These also tend to become rather aggressive when the hapless salesperson points out the obvious.
• The unethical customer is also supremely confident that they will eventually get their way if they demand to see higher and higher levels of management (and in many cases, unfortunately, they were right in this assumption). At some point a high enough strata of manager will realize that the cost of having some obnoxious person tie up their time and the energy of all the layers of employees who have been negotiating with them to this point simply isn’t worth it, and acquiesce to their unreasonable demands.

While restaurant and retail environs tend to bring out extreme instances of these behaviors, I believe they also exist in far more sophisticated project dealings – they’re just better camouflaged.

The two aforementioned characteristics will usually retain some giveaway phrases. For the first characteristic of the unethical customer, that of assuming an attitude of superiority, the reveal is the word “just,” as in “just perform a simple risk analysis.” If a risk analysis was called out in your project’s Statement of Work (SOW), then you pretty much have to do it (though the person who negotiated it might need a good talking-to). But if none of that risk management stuff shows up in the SOW, the nominal reaction of the PM would be to say “no.” Ahh, but there’s that word, “just.” Somehow the customer’s use of that four-letter word conveys that performing such an analysis is no big deal, trivial, even. Well, it’s not, connotative assertions to the contrary notwithstanding. But a further meaning being transmitted here is that “just” performing the analysis would be easy, if only the reluctant contractor wasn’t so incapable, don’t you know. If the contractor wasn’t so inferior, then the requested risk analysis would be easy. In fact, in order for the contractor to establish that he’s not a complete rube, the only option here is to perform the out-of-scope analysis – or so goes the insinuation of the unethical customer.

Then there’s the “all I want is” gambit. Nobody begins a request for a kajillion dollars or a marriage proposal with the phrase “all I want is.” This expression always precedes a request that the speaker views as simple and easy to fulfill, as if any reasonable person would agree – particularly and especially if that “reasonable person” happens to be the PM’s superior. By engaging such terms as “just” and “all I want is,” the unethical customer is attempting to get the PM to agree to scope creep, the most lethal of all project management pathologies.

Now, I’m fully aware that questions of ethics among customers and contractors is a two-way street, and am routinely condescended to by coffee baristas, just like everyone else. But, like I said, two things struck me about this particular two-way street, (1) unethical customer behavior doesn’t go away just because we’ve entered the realm of Project Management, and (2) the words “just” and “all I want is” tend to accompany the communications that precede such behaviors.

Of course, there’s a distinct possibility that the formulaic use of the terms “just” and “all I want is…” is perfectly innocent. That being the case, at this point all I want is to have my comment section flooded with praise for this blog. Can my readers just do that?

In ProjectManagement.com’s February discussion of ethics, I believe an important distinction should be made: while many discussions of ethics center on individuals’ choices and behaviors, ethical distinctions and boundaries can (and often are) transgressed by entire organizations. How do entire organizations become unethical? The same way, I believe, most individuals do: they embrace a narrative that is inconsistent with the facts of the environment in which they exist, and exert effort at insulating that narrative from events or people who would otherwise overturn it. It follows, then, that when an organization turns away from an ethical approach to conducting their business, the first casualty is the truth.

Examples abound, but the one I wish to focus on has to do with Arlo Guthrie’s popular song/narrative Alice’s Restaurant. Released in 1967, the song parts of the recording frame a spoken story about how the narrator and a friend visited Alice, her husband Ray, and Facha, the dog, who lived in the bell tower portion of a deconsecrated church. Since they lived in the bell tower, they left their garbage in the lower part of the church, and had been doing so for some time when the visit occurred. As a favor, the narrator and his friend describe how they collected the garbage and took it to the city dump, only to find the dump was closed for the Thanksgiving holiday. After driving around with the trash for a little while, they noticed another pile of trash that had been dumped off the side of the road. Figuring that one large pile of trash is better than two smaller piles, they dumped Alice and Ray’s trash on the previous pile, and returned to the former church. The story’s narrator is awakened by a phone call the next morning from the local police, who eventually charge and bring him and his friend to trial. After some shenanigans concerning the visual nature of the evidence collected and the fact that the judge was blind, the two are convicted and sentenced to picking up the trash they left, and paying a small fine. The incident comes back up later when the story’s narrator is being evaluated by his draft board, which declines to induct him for service in the Vietnam War due to his having a criminal record. Nice, happy ending, right? The song/story Alice’s Restaurant would become something of a 1960s-era anti-war anthem, supporting the narrative of intelligent young people giving “The Man” his comeuppance (for a thorough definition of who “The Man” is, I suggest a viewing of the Jack Black movie School of Rock).

But is that narrative consistent with the facts as related by the narrator? Consider the evidence:

• Alice and Ray use the main area of a former church as a personal garbage dump.
• Unless Alice and Ray live above the Arctic Circle (they didn’t – the backstory as related in Wikipedia indicates that Alice and Ray’s former church residence is in Massachusetts[i]), it would not take long for even a relatively small accumulation of garbage to:
  • Develop a strong, unpleasant odor,
  • Attract roaches, mice, and rats, among other vermin,
  • Incubate a wide variety of pathogens, and
  • Reduce the value of both Alice and Ray’s residence and the homes around them.
• I am aware of no style of church architecture where the area of the building reserved for the congregation isn’t significantly larger than the square footage of the bell tower. In other words, the dump area was likely much larger than the “living” quarters in this facility.
• The narrative does not assert nor imply that Alice and Ray were involuntarily compelled to live under these arrangements. They were apparently unaware of the dangers of such an un-hygienic living circumstance, or, knowing, would not exert the effort to correct it on a consistent basis.
• Alice owned a restaurant. Would you go to a restaurant where you knew the owner dumped her garbage, over a long period of time, in a room inside her own home?
• The story’s narrator never uses this language, but he essentially pollutes a hillside. A key aspect of the narrative embraced by the 1960s youth movement was that they revered the environment, and aggressively opposed all polluters, but it looks like that wasn’t the case here.

In short, the proffered narrative of free-spirited young people surviving harassment from their local government, and actually turning the whole incident into an anti-war positive, can only be considered viable by the most blinkered of listeners. Given the facts, my interpretation is that lazy, un-hygienic polluters failed to receive their comeuppance from the ultimately righteous local constabelry.

Anyway, that’s how I interpret the proffered facts, and hold them to be at odds with the conclusions within the story. Given that the truth is usually the first casualty when an organization begins to behave unethically, ask yourselves this question: are there any narratives  -- no matter how charming, or oft-repeated – within your organization that are inconsistent with available facts?

[i] Alice's Restaurant. (2016, February 18). In Wikipedia, The Free Encyclopedia. Retrieved 02:35, February 21, 2016, from https://en.wikipedia.org/w/index.php?title=Alice%27s_Restaurant&oldid=705556686

In last week’s blog I likened the efforts to maintain an ethical workplace or project team to the Hawk/Dove Game, and the fact that once a member of the population has selected a counter-productive strategy (“Hawk”), more and more players will do so until the Nash Equilibrium has been reached, which, in Hawk/Dove, is 25% Hawk, 75% Dove. This is true even though the total population’s payoff is maximized if all members maintain Dove strategy. To the extent that members of a project team selecting strategies consistent with the Jungle Fighter archetype from Michael Maccoby’s classic book The Gamesman (Simon and Schuster, 1976) are analogous to Hawk/Dove players selecting Hawk Strategies, there are managerial actions available which can help prevent a downward spiral that results in a thoroughly unethical workplace.

Let’s begin our analysis with a question: what is it that Jungle Fighters do that puts them at an advantage over the other Maccoby archetypes (Craftsman, Company Man, and Gamesman)? It’s been my experience that this type primarily uses three tactics:

• Calumny,
• Exaggerating their own accomplishments and rivals’ shortcomings, and
• Minimizing their own errors and rivals’ accomplishments.

And when I use the term “rivals,” to the Jungle Fighter that’s pretty much everyone else inside the organization, even the superiors to whom they appear to be unctuously supporting.

What do these three tactics have in common? They all involve communicating with other members of the project team, either to those members who are equal to or below the rank of the offending Jungle Fighter in order to establish a consensus narrative, or else to superiors in order to establish their preferred script more directly. All well and good, but, since inter-project team member communications are impossible to control, and difficult in the extreme to even influence, what’s a project manager to do?

Virtually every project manager can dramatically increase the odds that their project teams will behave in an ethical, mutually supportive manner by communicating two key points about the way the team will be managed. Point 1: to the extent the PM is in a position to dole out promotions or other benefits, the basis for doing so will be exclusively based on objectively measured progress towards project goals. Purely tangential or incidental evidence of merit, such as number of hours of free overtime worked, will not enter in to the personnel evaluation process (incidentally, if you belong to an organization where significant amounts of “free” overtime are expected or demanded, it’s too late: such organizations are already chocked-full of Jungle Fighters). Point 2: At the initiation of any conversation among one team member and the PM that involves another member of the team, the discussion will be paused, and that third team member will be called in to participate. There will be no ex parte conversations about other members of the project team, period.

By communicating these two points, the PM will make it clear to each member of the project team, not that they are suspected of being Jungle Fighters, but that the use of the Jungle Fighters’ main tactics will be futile should they ever be employed. By conjoining the terms for the team’s success with that of the success criterion for its individual members, the game has thus been redefined in such a way to dramatically dissuade any part of the population to behave in such a way as to detract from the team’s overall objectives.

Not to sound like a hard-bitten cynic, but it’s been my experience that attempts to improve the level of ethical behavior within a project team by engaging in eat-your-peas-style hectoring is ineffective. The superior approach is to remove the incentive for poor behavior, and the way to do that is to employ a little bit of game theory, as we have done here. There are many other instances where a little game theory can go a long way towards helping PMs attain better results.

Hence the title of this blog and my second book.

The effectiveness of game theory is based upon the idea that certain artificial situations analogous to real-life circumstances can be created, with the utility of various strategies tested in comparison to others. As I discuss in my must-have second book, Game Theory in Management (https://books.google.com/books/about/Game_Theory_in_Management.html?id=OwAgeMZQzt4C) there are many such artificial situations – “games” – used to compare these strategies, including the Ulitmatum Game, the Prisoners Dilemma, or the Pirate Game. But one particular game tends to be used rather often when evaluating participation/defection strategies. Its name is Hawk/Dove.

The parameters of the Hawk/Dove Game are pretty simple. Imagine two birds in a common environment. These birds each have two basic strategies available to them – they can peacefully forage for food, and keep or consume all they gather, or else they can act aggressively, and attempt to take the other’s food by force. The population involved in this game maximizes their payout if they behave like doves all of the time. However, if the available food supply should drop below the level needed to keep both birds alive, the last one to switch to Hawk strategy will be the first one to starve.

The same basic truths are present when the population of birds is increased to 100, with some additional insights. In a population of 100 birds who have all employed the Dove strategy, if just one bird switches to Hawk, then other birds in the population will begin to do so in order to maximize their personal payoffs, and will continue to make the switch until something known as the Nash Equilibrium is reached. The Nash Equilibrium, named after Thomas Nash, the central character in the movie A Beautiful Mind, is:

a solution concept of a non-cooperative game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only their own strategy (emphasis in the source).[i]

In Hawk/Dove, the Nash Equilibrium is reached when the 100-bird population assumes a behavioral profile of 25% Hawk, 75% Dove, expressed as either 25% of the birds always act like Hawks, or else each bird acts as a Hawk 25% of the iterations, and like a Dove the remaining 75% of opportunities (known as a “Mixed Strategy”). Again, note that the overall population’s payout is maximized when every bird behaves Dove-like 100% of the time.

Meanwhile, back at the 100-person office, the organization’s shareholders have a natural incentive for everybody to act ethically (or dove-like), since the population’s payout is maximized when they do so. By “ethically,” I mean that the workers pursue the organization’s stated objectives, and do not act aggressively towards their co-workers. However, with the introduction of even one aggressive member of the project team, the entire team’s cooperative dynamic changes, and not for the better. Typical unethical behaviors in this case study include calumny, over-claiming on members’ achievements, exagerating other workers’ failures, and just generally acting in a manner consistent with what Michael Maccoby described as Jungle Fighters in his seminal work The Gamesman. Of course, the exact point of the Nash Equilibrium in such circumstances will change from organization to organization, but it’s a rare company that can expect the entire population to return to consistently selecting a non-aggressive strategy once at least one member has successfully engaged in aggressive tactics. This is especially true if the organization is in decline, or is perceived as such, and its members believe that they must act hawk-like, or lose their jobs. Is there a managerial strategy to forestall such a downward spiral? I believe there is, and its characteristics include…

Wow! Look at that – out of blogging space again! I’ll take up other aspects of the Ethics Game, and useful strategies for its successful completion next week, in Part 2 of The Ethics Game.

[i] Nash equilibrium. (2016, February 3). In Wikipedia, The Free Encyclopedia. Retrieved 20:40, February 6, 2016, from https://en.wikipedia.org/w/index.php?title=Nash_equilibrium&oldid=703036567

One of the coolest aspects of belonging to an organization like the United States Chess Federation (USCF, now US Chess) is that you know your precise value to that organization. It’s your score – if you have a score of 2000, you are an Expert; over 2200 gets you National Master status, and over 2400 makes you a Senior Master.  Points are attained by playing in sanctioned tournaments or matches, and are adjusted for the players’ relative strength. Chess, by its nature, is unforgiving of poor play – if you lose a chess game, it is fairly difficult to blame poor officiating, the weather, aggravated injury, the venue, and so forth. In essence, no amount of arguing, manipulating, charming, or spinning will influence your score, and along with it your standing in the US Chess organization. Its beauty is in its nearly perfect basis in the objective measurement of merit relative to the organization.

At the other end of the spectrum, I imagine, would be participating as a member of the faculty of a liberal arts college within a state-run university. I once took a sophomore-level literature survey course (“survey” – right. It ran the gamut from George Elliot to the Bronte sisters) from a woman professor who was so predjudiced against male students that none could ever attain above a C in her classes, whereas no female could be graded below a B. There was simply no way that objective evidence of the relative scholastic merit of her students could be introduced into a review or assessment of her grading tendencies. As it turns out, just prior to the drop deadline a couple of friends (one male, one female) gave me the inside baseball on this professor, and I escaped her course. But she did inadvertently teach me an extremely valuable lesson: the more subjective the basis for evaluating and assigning merit, the more slanted and vicious that method becomes.

Which brings us to Project Management. Some of the best managers I have ever encountered have been highly educated and certified, and some of the worst have been (in my opinion) under-educated, and without certifications. Unfortunately, the exact opposite is also true: a couple of the best PMs I have ever met had neither a degree in business nor management, with zero certifications, and at least two of the worst have had a BBA or better and one of the professional certifications associated with project management. And when I say “the worst,” I don’t mean these managers merely drove virtually any piece of scope for which they were responsible into the proverbial ditch. These would, despite their wretched histories, insist on playing roles of influence in the ways in which the other PMs within their organizations managed their work, inflicting managerial damage far beyond their nominal reach. How did these poor managers get into positions of influence far beyond what would be indicated by their actual merit? The same way that the predjudiced professor did: by arguing, manipulating, charming, or spinning their way past any objective basis for evaluating their true value to their respective organizations. 

However, while certs and scholastic achievement are susceptible to significant variance in predicting who is or is not a genuinely talented PM, it has been my experience that the best share a characteristic that is consistently lacking in their poorly-performing counterparts. That characteristic is humility.

By “humility” I do not mean a tendency towards low self-esteem; quite the contrary, genuine humility is usually marked by a quiet confidence, that the winners have a clear-eyed grasp of their authentic value to their organizations, and therefore have no need to elbow-aside competitors, insult or put down potential rivals, unctiously flatter superiors, indulge misandry, or engage in any of the other manipulatory behaviors that their arrogant associates must pursue, lest anyone see past the fascade and realize the arrogant ones are not as valuable as they purport to be. Just something to keep in mind: when you encounter people within your project team engaged in arguing, manipulating, charming, or spinning, they’re probably not advancing a merit-based agenda.

And, while I can prove that Bobby Fischer was a better chess player than George Elliot (pen name of Mary Ann Evans), not even my old English Lit professor can prove that Elliot was a better writer than Fischer (being, as she was, hopelessly maudlin).