Game Theory in Management

As I’m sure anyone who’s ever launched, headed up, or even participated in a Program or Project Management Office knows, there are hundreds of things that can derail your efforts, and bring your PMO crashing down in ignominious defeat. Elements that are outside your organization, inside your organization but outside the PMO team itself, or even within the PMO represent existential threats that can spell ruination, and dealing with them, or even recognizing them in time to attempt a counter-strategy is extremely tricky. If only there were a proven technique, something that, on its face, utterly and graphically contradicts the majority of the anti-PMO narratives that are constantly popping up and needing to be refuted, then the typical PMO would at least have a fighting chance of establishing the value of its generated information streams.

Well, good news, my fellow PMO aficionados!

This technique exists, it’s extremely simple to implement, and it absolutely drives a goodly share of your opponents to a place where their ignorant, nefarious motives in opposing you can be easily laid bare. I’ve seen this technique rescue failing PMOs, and secure needed status for upstart ones. It is singularly effective, and in such a dramatic manner as to be analogous to the one weapon that can kill various monsters, such as werewolves or vampires, the Silver Bullet.

“Enough already!” I can hear Game Theory In Management nation yelling. “What’s the technique?”

Why, it’s a lowly histogram.

With the same ears with which I heard the “What’s the technique?” question I just heard a collective groan. How can a simple histogram overcome these anti-PMO monsters? I’m glad you asked.

You don’t actually need to use a histogram for this particular information stream, but I’ve found it the most easily understood by execs who are either (a) not very good at interpreting complex management information products, or else (b) have the attention span of a typical executive, which is about 10 seconds. If you don’t make your case inside of ten seconds, your odds of having your version of the story resound in the board room are quickly reduced to nil. So, make your case effective, and to do this often requires a hard-to-ignore graphic, like a histogram.

Our magic histogram will be divided into months along the X axis, and will have three bars per month:

• The target projects’ Budget at Completion (BAC)
• Its “bottoms-up” Estimate At Completion (EAC)
• …and its calculated Estimate At Completion[i].

Generally speaking, these three bars may very well track within 5% of each other for the majority of projects’ life spans. But, when they do vary, it’s invariably in such a way as to demonstrate the value of the PMO in blatantly unequivocal terms.

This is because the projects that turn into disasters will have the following characteristics:

• Their managers will never own up to the unfolding catastrophe, instead convincing themselves that they will be able to overcome the difficulties afflicting their project. Hence, the so-called “bottoms-up” EAC will be influenced downward to match the total budget.
• The way that asset managers (i.e., accountants) predict at-completion costs is by trying to derive a pattern from spending rates. This technique is comically ineffective. It also has the advantage of being propagated by one of the PMO’s most entrenched enemies, which I’ll return to here in a minute.
• Conversely, you can count on the troubled projects manifesting performance issues early on in their life-cycles; it follows, therefore, that the one performance indicator that recognizes this (bias-free) will be the first to raise the sorely-needed red flag.

The calculated EAC is a uniquely Earned Value-ish concept, and tends to be exclusively within the PMO’s domain. The Cost Performance Index (CPI) is the amount earned (BCWP) divided by the amount spent (ACWP). Divide this number into the budget at completion, and you have an EAC that’s accurate to within 10 points (once the project has cleared the 15% complete mark). In other words, this simple technique will notify upper management of pending project management train wrecks far sooner than any other method.

If the PMO’s got it, it needs to flaunt it.

By plotting this calculated number and showing it in a histogram that also shows the projects’ budget and “official” EAC, an unmistakable pattern emerges. The budget bar remains fairly steady (unless an approved Baseline Change Request is processed), and both or either of the “bottoms up” estimate or the accountants’ estimate will tend to mirror the total budget. It’s basic human nature for the former, and the utter lack of reliability of the technique for the latter.  But, for those projects that are headed for difficulty, the calculated EAC bar will jump higher than the other two bars, and will tend to stay noticeably above them for reporting cycle after reporting cycle. By the time the troubled project’s troubles are so obvious that they can’t be explained away any longer, the calculated EAC will have been not only flagging the overrun, but demonstrably quantifying it rather precisely. This is at the same time as all of the other “information” streams have been saying, essentially, “nothing’s wrong here – we’re doing fine!” The only time the bottoms-up or accountants’ version of the EAC even begins to report accurately is when the overrun can no longer be hidden, and by then it’s too late for executive action that maybe, just maybe could have averted the disaster, if only they had been notified earlier.

I’ve employed this technique on a few projects (!) that accurately predicted multi-million-dollar overruns, and the response was always the same. Early on the members of the failing project team would vehemently denounce the technique, claiming (absurdly) that their “bottoms-up” EAC must be considered authoritative. The upper-level managers would receive the histogram with alarm, but actually be mollified by the troubled projects’ managers into disbelieving the calculated EAC. After a few reporting cycles with the delta between the “bottoms-up” EAC and the calculated version remaining significant (or even growing), the PMs would employ some desperation tactic, like filing a get-well Baseline Change Proposal (BCP), or tapping project reserves, but the inevitable conclusion would become plain for all to see: the calculated EAC had the story right, all along, and everyone else had it wrong.

And now, for the piece de resistance…

If the first Silver Bullet didn’t kill the monster, try this one: it’s another histogram, except this time each month has a single bar, the calculated Variance at Completion (VAC) amount. Take all of the projects in the portfolio, and calculate their EACs. Subtract this figure from the total budget (BAC), and then sort them from lowest number to highest. The result is a chart that ranks the projects, in order, from most troubled/highest projected overrun to healthiest/highest underrun. For good measure, color the overrun bars bright red, and the underrun bars green. This report will drive the managers of the troubled projects bonkers, but it’s pure gold to your organization’s executives.

Did I say pure gold? No, rather, pure silver, as in Silver Bullet.

[i] Make sure the colors of the histogram’s bars have high contrast. I like to use gray for the total budget, orange for the bottoms-up EAC, and either bright green or blue for the calculated EAC.

*…with apologies to (the real) Ira Levin.

It was another dark and stormy night. I was staring at the stenciled letters on my frosted window office door, ylnatS yrrebpsaR, etavirP eyE, when my secretary called out “Goodnight, Stanly. I had better get paid tomorrow, or else!” I pulled a whiskey bottle and shot glass out of my lower desk drawer, when the phone rang. It was Charlie Gumshoe, from the PM police department.

“Stanly! I need you to get over to the Stepford Robotics Corporation first thing tomorrow morning.”

“Why? What’s going on?”

“We’re not sure. They’ve got some weird connection with Monolithic Corporation. We think Monolithic is supplying them Project Management Office personnel, in exchange for some robotic welding machines.”

“What’s wrong with that?”

“Nothing on its face, but we believe that Monolithic is attempting to flood the marketplace of PM ideas with their own cliched approaches, which would inject a whole range of irrelevancies into the discussion. If they get new tech companies like Stepford parroting their particular version of Project Management…”

“I hear you. How will I get in?”

“We’ve arranged for you to assume an alias and join an Independent Cost Evaluation team on a State contract that shouldn’t have anything to do with Monolithic. Your new name is Ira Levin.”

“You mean like the author?”

“Whoa, that didn’t occur to me until just now, but that’s kind of funny, isn’t it? Just in case a Monolithic employee is there, do you have some kind of a disguise?”

“Sure.”

* *  *  *  *

As I took my visitor’s badge from the receptionist at Stepford Robotics, I saw that the rest of the team had assembled in the foyer. We headed off together to the large conference room where the review materials were waiting for us in binders. As we opened our binders, the male project team member began presenting the basics of the scope, cost, and schedule baselines, short bios of the project team, etc. Another oddity: every single member of the project team was born in 1990 but hailed from all over the globe. Along about the beginning of the third hour, they began to discuss their risk management plan.

“Are you kidding me? You guys actually spent time on a risk management plan?”

“Risk management is integral to successful Project Management!” they all said, in unison.

“Says who?”

Again the project team stared back and forth at each other, their eyes darting about, their heads going through small but jerky motions. The lone male spoke up again, his voice creepily even.

“There are many sources for this assertion, most of them respected professional associations and scholastic venues. Would you like a precise listing?”

“No, thanks. I know the academic world loves this stuff. I’m just surprised that a high-tech outfit would engage in it. Just spare me the whole business about how ‘risk management’ also involves ‘opportunity management,’ because of ‘upside risk.’”

“But that is so!” they all exclaimed, again in unison.

One of the project team who, it seemed, had been staring at a point approximately three feet in front of her face, suddenly spoke up.

“You do not look like Ira Levin.” Thanks, Charlie, I grumbled.

“The author?” I replied. “No, I don’t, but I never claimed to be him.”

She turned her head back to looking straight in front of her. The male project team member continued.

“We have a complete list of the project’s stakeholders, and will be communicating with them thoroughly throughout the project.”

“Do any of these stakeholders have connections to your competitors?”

The entire project team turned to glare at me as the presenter spoke up.

“Engaging stakeholders is integral to successful Project Management!” he asserted.

“Yeah, so is keeping tech advances out of the hands of your rivals. You can bet that they will be attempting to gain such knowledge, by secondary or tertiary means, if necessary. So I’ll repeat my question: have you vetted these ‘stakeholders’ to see if they have any connections to your competitors?”

The brunette who had been staring at a point three feet in front of her replied.

“Two on the list of stakeholders are related by marriage to one of our main competitors. Another is a second cousin to a common supplier.”

“How did you know that?”

She slowly turned her head to look at me.

“Facebook.”

“Oh.”

The presentation continued.

“We will be updating the resource dictionary used for creating the cost baseline every twelve hours.”

I interjected. “What good does that do you? I mean, after the cost baseline is approved, why do you need twice-daily updates to the resource dictionary?”

“Accurate original estimates are integral to successful Project Management!” they all said, again in unison.

“That’s the third time you all have used that specific construction, that something is ‘integral to successful Project Management.’ Who told you that?”

“Our Monolithic Corporation programmers … we mean, mentors!”

The cat was out of the proverbial bag. Monolithic and Stepford had collaborated to create a PMO staffed entirely of androids, programmed with the unsupported conventional hokum that often masquerades as legit PM. At this point the brunette spoke up again.

“Without the goatee, Mr. Levin looks just like Stanly Raspberry, the famed Project Management detective.”

The androids were slow to move, but the members of the review team who worked for Monolithic tried to grab me before I could get out the door.

“Raspberry!” they cried. “Get back here!”

“Escaping is integral to successful life-living!” I shouted over my shoulder as I raced my convertible out of the parking lot.

My long-time readers will recognize the title of this blog as a derivative of my first book, Things Your PMO Is Doing Wrong (PMI Publishing, 2008). It’s easy to stand astride the struggling Project Management Office team members and kvetch about what they could be doing better, but that’s not how Peters and Waterman created their best-seller In Search of Excellence. Instead, they sought out successful organizations and queried what they thought they were doing right. In that vein, I had an opportunity to direct an extremely successful PMO, but it was successful because of the deviations I took from the nominal, staid approaches that my predecessors had taken. I’ve repeated this strategy on several occasions, and have never seen it fail. The following is a partial listing of the unusual tactics that went into it.

First off, the successful PMO Director will recognize that their main task is not to change behavior, or compel compliance with modern PM theory or practice. Without exception, every single failed (or failing) PMO Director thinks to the contrary, and will spend/has spent a great deal of energy towards those ends. This energy has been completely wasted. Even in those instances where the people involved tell you to your face that they recognize the value of what you are trying to do, and promise to support it, the pursuit of changing people’s behavior to any significant degree is a waste of time.

No, the successful PMO Director will realize from the get-go that their job is simply to put into the hands of the decision-makers the information they need to optimize their decisions in the project/program management realm. This job is simple, but it’s not easy, and it absolutely does not include eat-your-peas-style hectoring of the other members of the organization. They have their jobs to do already, and really don’t need any lectures about how they should be doing better.

Unfortunately, the ability to collect PM data, process that data into usable information, and deliver that information in a format that its consumers can readily understand has been turned, via formality of operations, from a relatively straight-forward task into a labyrinth of irreconcilable diktats, fraught with double-binds. The successful PMO Director recognizes this, and is able to jettison the superfluous elements that the “experts” expect of the PMO.

In order to advance this capability, the successful PMO Director will employ the following three tactics to any change in the business model:

• The new capability must be falling-off-a-log easy for the participants. Any capability advancement that depends on extensive training, re-training, or behavior modification on the part of the organization is doomed.
• In almost all instances, the actual systems being introduced will require the direct participation of only a subset of the target organization. For most PM applications, for example, beyond the PMO’s personnel there’s really only a need for Control Account Managers (CAMs) and/or Work Package Managers to help set up the baselines, and provide status once per month. However, if one of these people from whom you need participation opts out, you must respond immediately. Their non-participation cannot stand unchallenged, or else you may as well accept defeat in the here-and-now, rather than watch a slow, agonizing decline.
• When those from whom you require participation are actually participating, they’re golden, even if their data is marginal, or clearly contrived. Data can be improved – participation can’t.

I know, I know – these ideas are absolutely outside the mainstream. And yet, I’ve seen them work on multiple occasions, despite some highly formulaic and hackneyed objections, including:

• If you’re not “doing” (insert some aspect of PM here, such as risk management, quality, communications, whatever), then you’re not authentic.
• On the opposite side of the assertion in the previous bullet, anything you want changed from the existing status quo will be portrayed as an unacceptably onerous demand.
• Those managers who have gotten ahead based in some part on a lack of accountability for their actual cost or schedule performance will attempt to ruin you personally. How they go about this will vary from organization to organization – you just need to know they are out there, and will destroy you and your PMO as soon as they are able.

The successful PMO Director will navigate these difficulties, typically with these strategies:

• If you can’t out-and-out dismiss the element of PM that’s being held out as the missing piece of “authenticity,” then imply (don’t state) that that piece will be addressed once the basics are in-place. In most instances, once the basic cost/schedule information is made available and working, interest in the “missing” piece(s) will dissipate.
• As for the accusation that any change being wrought is onerous, refer back to the very first bullet in the first list. If you’ve included the falling-off-a-log-easy aspect to your implementation approach, this charge will be recognized as self-evidently absurd.
• The political assassination attempts do not readily lend themselves to a simply articulatable counter-strategy. However, there is hope. I actually addressed this prickly subject at length in my third book, a copy of which I’ve promised to the first person who uploads to the comment section a selfie of my checklist for seminar attendees from my April 2 blog while attending an actual PM seminar.

As for those who would say that, absent a notable change in the behavior of the organization, any claim from the PMO that it has advanced Project Management capability is specious, there’s a real irony at hand. As the basic, readily available cost and schedule performance information gets disseminated, even those project team members who have zero formal training in PM will start to discuss things like how to identify the causal factors behind their negative schedule variances, and the most appropriate uses of resources on tasks not on the critical path. They’ll start thinking about Project Management as they realize its capacity for improving their odds of project success, and in a way that force-feeding them the same precepts would have never accomplished.

And that, in my opinion, is how Project Management is done right.

When fairly large organizations institute a Project/Program Management Office (PMO), some very strange dynamics are often bubbling just beneath the surface, dynamics that can easily doom the PMO’s ability to attain even a mediocre level of success. Every organization is different, of course, and many, many PMOs start up and enjoy a long, successful run. But of those that fail, the arc towards failure tends to be remarkably consistent. I’ve seen the pattern so many times I can almost recite it in my sleep.

• First, some enlightened Vice President, Director, or other honcho, who recognizes the value of having Project Management practices adopted across the organization’s portfolio, will convince a plurality of the other wizards with whom he hobnobs to provide the funding for a PMO.
• This enlightened one will then either promote a mid-level manager from inside the organization, or do an external hire, and name that person the PMO Director. This person will be either (relatively) young and idealistic, or more experienced and seasoned, having performed the same function for another, similar organization.
• The new PMO Director will also either promote from within (it’s amazing how quickly an Earned Value Management course, followed up with a basic course in driving one of the more popular Critical Path software packages, can turn a lowly administrative assistant into a fully-functional Project Controls specialist), or do a few more external hires, or a mix of each. They will then attempt to codify what the rest of the organization’s project teams “must” do in PM space.
• Those project teams already fluent in PM will either negotiate an exemption from the procedures being churned out by the PMO, or else will insist that one of their members has a hand in directing the requirements.
• Once the first major project’s team has arranged to not have any part of the new procedures apply to them, the floodgates open, and all other projects will seek to carve out exemptions for themselves.
• At some point, a major project will want to set up their own team of project controls specialists, outside the purview of the PMO. These are usually comprised of subcontractors, who are almost always notably more expensive than the organization’s home team version. No matter: some excuse will be offered on why the sub’s people are more appropriate for the specific application, and a “shadow organization” will have been born.
• As the shadow organization grows in influence and expertise, the PMO will attempt to bring them into compliance with the growing number of procedures being generated. These attempts will fail.
• Some project teams will be perfectly happy using the PMO’s personnel and techniques, but others will not. As this list of others grows, the original enlightened VP will become frustrated with the Director of the PMO, further eroding the Director’s influence and ability to stop the proliferation of shadow organizations.
• The PMO loses its funding, unable to justify its budget in light of the highly uneven advance of capability maturity across the entire organization and number of projects not using their personnel or policies.
• Another (or even the same) enlightened VP will convince a plurality of the other wizards with whom he hobnobs to give the PMO idea another shot. The current Director will move on, and the cycle starts anew.

Because of the way that the introduction of shadow organizations within the macro-organization becomes a harbinger of institutional PMO failure, savvy PMO Directors will often attempt to leverage authority or influence to either stop these shadow orgs from coming about in the first place, or, if they already exist, thwart them. In addition to churning out procedures, additional tactics include restricting access to the Critical Path software, or attacking the basis for rogue projects to claim exemptions to the way they “ought” to perform Project Management, based on the PMO’s procedures.

These attempts will also fail.

So, what’s the solution?

The solution is to set up the PMO in such a way that you are clearly offering a service to the project teams. Never – and I do mean NEVER – presume to tell them how to do their Project Management, especially via some sort of codex that you think ought to be binding. In previous week’s blogs I have stressed the main corollary of the Triple Constraint, “Affordable, Available, High Quality: Pick any two.” You must not only make your PMO flexible enough to accommodate any project team’s preference in selecting which two, you need to communicate this flexibility, loud and clear. The subcontractors already have one strike against them: they’re almost always going to be more expensive than the members of the PMO’s team. Exploit that weakness. Offer a level of PM support that’s not as rigorous as the nattering nabob class insists it must be, and make it readily available to any potential customers.

Subs are attractive because the PMs know that they work at the PM’s discretion. They can be let go for any reason, or no reason, meaning that they will never crank out dubious PM procedures, and then demand adherence to them. If you, as the PMO Director, see shadow organizations suddenly taking root, don’t employ any of the previously reviewed tactics to try and stop them. Simply offer whatever it is that makes them attractive to your organization’s project teams.

In short, as disruptive to the PMO’s goals the shadow organizations can be, don’t try to stop them from doing Project Management. It’s futile, and a waste of time and energy. Just do it better than they do.

As Project Management seminar season approaches I think it’s a good idea to be able to readily identify which paper presentations are worth attending, and which are a complete waste of time. Of course, most people make this type of decision based on the presentation’s title and the descriptive blurb that accompanies it in the schedule. If that’s not enough, extra clues about a particular session’s efficacy may be gleaned from the presenter’s short biography. However, I’ve been fooled into wasting between an hour and an hour and a half attending presentations that were basically self-aggrandizing theater, time that would have (literally) been better spent at the beach or pool – or, in some cases, taking a nap. In retrospect, I’ve come to the realization that the waste-of-time sessions had some things in common. So, to prepare my readers for the upcoming seminar season, and with a hat tip to John Baez’s Crackpot Index, I’m going to provide a quick-and-easy checklist that will help score the presentations, based on the materials provided when you check in/register for the seminar, or, if necessary, the content of the presentation within its first ten minutes.

The pathology that afflicts many of these seminars is intertwined with something about which I’ve been complaining long and loud, and that’s the lack of actual science in management science. The development of an hypothesis, advancing it towards theory, and disciplined collection of data or the exact staging of an experiment to either prove the theory or disprove the null hypothesis, peer review of the findings, all leading up to a Project Management paper presentation at one of these get-togethers is distressingly rare. Instead, we get inundated with, broadly speaking, three different types of material:

1. Ideas about how risk/quality/communication (or other trendy type) management should be performed, supported by virtually nothing more than speculation or anecdotal evidence.
2. The “Look What We Did On Our Gee-Whiz Project!” presentation, where no real causality analysis goes in to determining how (or even if) the particular project was successful.
3. The bazillionth eat-your-peas-style covering the basics of or scolding about how everyone ought to be doing Critical Path, Earned Value, or any other aspect of traditional PM.

If you can attend a session that avoids these categories, it’s likely to be worth your while. However, for the remainder, which may or may not belong to one of these categories and is, therefore, possibly a waste of time, use the following scoring to quickly determine the sessions’ worthiness of your attention.

Start with -100 points, then:

1. For every assertion without hard backup data that we’re supposed to accept simply because of the authors’:
   1. PMP® certification (add 10 points)
   2. Other PMI® certification (add 20 points)
   3. Other, non-PMI® certification (add 40 points)
   4. Affiliation with PMI® (add 50 points)
   5. Affiliation with another PM-centered professional organization (add 60 points)
2. Every time the paper presenter mentions his college degrees, add another 50 points.
3. Add 25 points for each piece of anecdotal evidence that “supports” the paper’s thesis.
4. Add 100 points if the paper doesn’t have a clearly articulatable thesis.
   1. Add 200 points if the presenter doesn’t know that the presented paper ought to have a clearly articulatable thesis.
5. If the presenter mentions the project-owning organization’s name as a point of reference, don’t add any points. However, if he keeps referencing it as if the name of the organization itself lends credence to his main assertions, add 20 points for the academic infraction, and 100 points because this is simply very irksome.
   1. Add an additional 100 points if this organization happens to be The Pentagon or a well-known aerospace company.
6. Any statistical inference based on fewer than 50 data points, add 25 eval points,
   1. …unless the inference is based on fewer than five observations, in which case add 500 points.
7. Any reference to a deceased person who “almost certainly would have agreed” with the author’s conclusions adds an automatic 200 points,
   1. …especially if the author claimed to have known the person being referenced, and
   2. … another 500 points if the deceased person reference didn’t publish any findings in a peer-reviewed journal, but just happened to be well-known.

If you can make these determinations without actually stepping foot in the hotel ballroom/conference center meeting room, and a full slate of sessions’ scores remain in negative territory, then you’re in great shape. However, if many are in positive score territory, then you can rank them from smallest to largest to maximize the odds that you won’t be wasting your time. Keep in mind that it’s entirely possible that a whole seminar is being put on by a bunch of people who will lean towards flattering themselves, with precious little true management science being performed. If this happens, it’s not really the presenters’ fault – it’s the fault of the committee scoring the original paper proposals.

Then there are those times where you are actually in the beginning of the presentation when the score suddenly moves from sub-zero to positive territory. When this happens, you should have a measured response, based on the following table.

While some of the Recommended Response tactics may seem extreme, consider that they are most likely in response to expertise signalers whose only true objective is to make themselves look better among their peers, at the expense of wasting your time. With that in mind, I would argue that these tactics are fairly benign!