Game Theory in Management

I was recently in a discussion with my older son, who works as a prosecutor and graduated from Notre Dame Law School (Magna Cum Laude … not that I’m proud, or anything), when he brought up a highly relevant point that I had completely missed.

“Objection!” I interjected, “Evidence not entered as fact!”

“That’s gibberish” he replied.

“Not according to the television law shows I’ve seen.”

“Then you need to watch a higher caliber of law shows.”

Meanwhile, back in the PM world, there exists a surfeit of ideas that claim to be within the umbrella of legitimate project management science. Some of these (critical path, earned value) unquestionably belong, while others are at best suspect, at worst plunging whole sectors of project management theory into irrelevance. As my regular readers know, I regularly skewer these ideas, which nominally include:

• Generally Accepted Accounting Principles masquerading as project cost/schedule performance analysis,
• Risk Management or Analysis, in most of its forms,
• Communications Management, which does have its place, but has been marketed far beyond its nominal efficacy,
• Quality Management, which shares with risk management an over-dependence on Gaussian Curves,
• Human Resources management, which belongs with, well, resource management,
• Procurement, which belongs completely under the asset managers’ purview,

…among others. I can rail to my blogger heart’s content against these theories and practices, but there is no final arbiter, a judge who can render a decision that all parties must respect going forward.

Or is there?

Note what the Agile/Scrum developers did. In the crushingly competitive IT market, they adapted just those project management concepts that they believed provided a competitive advantage, and paid less (or no) attention to those practices that were, well, irrelevant. What traditional PM practices are missing from most Agile/Scrum projects? Just:

• GAAP practices pretending to provide cost/schedule performance,
• Risk Management or analysis, in most of its forms,
• Communications Management has been intensified, but only internal to the project team, and serves as a substitute for more formal change control or configuration management. All that business about engaging all stakeholders is notably absent.
• Quality Management is also put into its place, being very important to successful IT project delivery, but not to the point that the QC guys can slam the brakes on the whole project, or dramatically alter the way the software engineers do their jobs,
• Many (most?) IT projects get delivered without any HR influence, and
• Procurement. Including procurement might be a bit unfair, since IT projects are typically labor-intensive, but you see my point.

For those concepts and ideas whose developers/backers desperately want to be considered relevant, there will be no judge, jury, and competing assertions tested for veracity in a finding-of-legitimacy setting. They can only submit articles, columns, and blogs, entreating their readers to use some of those concepts in order to be doing “real” or “legitimate” PM. In the meantime, the ultimate decider of relevancy – the free market – will pick and choose which ideas are indeed helpful in their markets, and which are, well, irrelevant.

The jury’s out on those areas I’ve regularly criticized in this blog. But I’m optimistic, though this optimism may be fueled by the sub-standard legal dramas I’ve been watching.

Several science fiction works have addressed the concept of robots or androids being made so similar to actual humans that they are unaware that they aren’t real, living people. Movies (Blade Runner), and television series (Star Trek, Twilight Zone) have explored the concept, and I believe that the fascination with the premise has to do with the idea that we may not know ourselves very well, and, if we were to be confronted with our “real” selves, it might be a shocking experience. Meanwhile, back here in the real (PM) world, there are many software packages that claim to be able to provide any project manager with the information needed to keep a handle on their projects’ scope, cost, schedule, configuration, risk, communications, portfolio and strategic management…

Hmmm… that list is most of the whole PM enchilada. Some would have us believe that the capacity for computers to dramatically outperform humans in quickly and accurately collecting and processing data is a good thing. Add that to Hatfield’s Axiom #12, that the 80^th percentile best managers with access to only 20% of the information they need to obviate a given decision will be out-performed by the 20% worst managers who have access to 80% of the information so needed, and we have a truly chilling corollary: a given computer only has to be as good as the worst 1/5^th of managers to believably replace us in the workplace.

Personally, I don’t believe it will ever happen, and here’s why: Hatfield’s Axiom #11. It states that, for project management information systems to have any kind of value, they must be (1) accurate, (2) timely, and (3) relevant. Computers have accuracy down pretty well, and they process large amounts of data so much faster than their human counterparts that #2 is covered; but they will never be able to crack #3, determining which information bits are relevant, and therefore worthy of being used for decision-making, and which are not. Quantitative Analysts, known as “quants,” are professional data-scourers, who review large amounts of data in order to tease out some form of pattern, a repeatable observation of correlation that might point to a previously-unknown causation. But they don’t manage projects, they advise financial market brokers. Projects are a whole ‘nother animal. But that doesn’t stop Gaussian-curve lovers (risk analysts) and asset managers (accountants) from asserting that major project decisions can be reduced to an algorithm, based on the availability of knowable facts that produces winning decisions on a consistent basis. They have, in fact, been asserting some variant of this absurd idea since before robots (by definition, portable computers) knew how to run. Many industrial robots in Japan are so life-like that they’ve begun to assume jobs formerly handled exclusively by real people, such as receptionists. Since it’s a sure thing that, should an organization develop a true PM android, they wouldn’t be eager to advertise it excessively, for fear that real people would tend to avoid being led by a machine. The conclusion: there may be androids in the PM realm, indoctrinated in some truly irrelevant project management techniques, who are currently in charge of major projects. If this is the case, how would we know?

As fate would have it, I have a couple of tests that will determine if your PM is a real person, or an android. Test #1 involves whether or not your PM insists on keeping risk analysts on the project well past the creation of the original cost and schedule baselines. If the answer is yes, you should be concerned. I’ve previously defined “risk management” as institutionalized worrying, tripped out in statistical jargon. Here’s another definition: the results of risk analysis is a lazy thinker’s attempt to quantify relevance. Since relevance can’t be quantified, the best a robot PM could do is to have statisticians continue to guess the odds of bad things happening to their projects. So, if your PM is such a one, he may be a machine.

Test #2 is based on the extent that your PM has embraced the idea that the point of all management is to “maximize shareholder wealth.” My regular readers know that I’ve mocked this notion previously, but here’s a new angle of attack. Whether or not a given decision actually maximizes shareholder wealth is usually calculable, with the notorious “return on investment,” or ROI, being the go-to formula. But remarkably little of PM, past cost and schedule performance, can be readily quantified. A real person PM has a bit of decision-making-from-the-gut that inferior (strikethrough) mechanized managers can never duplicate.

Now, if you have come to the realization that you are, in fact, working for an android, don’t panic. All those science fiction movies about how human-like androids really want to kill us all off are probably extreme. Just the same, you might want to re-watch The Terminator series, just to re-familiarize yourself with how to overcome them…

Before you reject the question in the title as self-evidently absurd, consider the basic structure of your garden-variety martial arts movie:

• The protagonist, a young, up-and-coming martial artist, coming off a start-the-movie victory, is noticed by some large, mysterious organization comprised of other martial artists.
• This noticing invariably involves some invitation to a different place, where the protagonist’s skills are put to the test.
• A higher authority of some kind – usually a police or government intelligence agency – reveals their presence within the large, mysterious organization to the protagonist, claiming that they are there as part of an investigation into some nefarious activities.
• This higher authority is convinced that the nefarious activity is happening within the large, mysterious organization, but don’t know if it is being orchestrated by the leader of the organization, or if he’s even aware of it.
• As the protagonist participates in the test/competition, he becomes aware that some behind-the-scenes conniving is occurring that is aimed at preventing him from attaining the stated goal of the original invitation.
• Nevertheless, the protagonist overcomes the conspirators, and discovers that the leader of the overall organization is, indeed, involved in the nefarious activities, up to his eyeballs.
• Here, these movies typically go in one of two directions: either the protagonist overcomes the leader in one-on-one combat (Enter the Dragon), or else overcomes all of the other members of the organization except for the leader, and quits the scene in disgust (Dirty Harry, which, technically, isn’t a martial arts movie per se, but stay with me).

Now compare and contrast this story arc with that of the typical young, talented Project Manager:

• After having successfully bid and managed a smaller project, and/or attained a PMP® certification, or some other notable accomplishment, a young up-and-coming manager is noticed by her organization’s superiors.
• This manager is moved over to a larger existing project, ostensively to help it out of some difficulty.
• At least one extant member of the managerial staff is a widely-recognized or well-respected expert in some aspect of project management, and informs the new PM that some nefarious business practices have crept into the technical approach used in the larger project.
• This expert knows that the nefarious practice is occurring, and is probably the proximate cause of the project’s difficulties, but is unsure if the senior manager is ignorant of the practice, or is actively promoting it.
• As the new PM adds improvements to the baselining and the cost/schedule performance measurement systems, she becomes aware that the organization’s accountants believe that they should be the source and residence of such information, and begin to delay or even defy their roles in setting up those systems.
• Nevertheless, the new PM succeeds in delivering the sorely missed cost/schedule performance reports, which clearly indicate the specific parts of the project’s Work Breakdown Structure responsible for the overruns and delays.
• Here is where the career story arc can take one of two directions: either the poorly-performing managers are finally exposed and reassigned, or else they are exposed and stay in place, due to the senior management team’s direct intervention on their behalf, at which point the new PM despairs of succeeding in an organization that has abandoned a meritocracy, and seeks employment elsewhere.

This story arc is one I have encountered many times in my PM career, and I suspect it does not strike many of my readers as alien, even as it mirrors the typical martial arts move plot structure. And if the story is the same, with only settings, characters, and types of actions that push the plot forward differing, then perhaps we PM-types should be on the lookout for movie cameras hidden in our work areas.

Also, I hereby claim ownership of the rights to any action figures based on my character.

When I finished my undergraduate degree in the early 1980s, I knew what car I wanted: a Porsche 911 SC. I even had the color picked out (white, with the black trim. British Racing Green would be okay too. Everyone seemed to do this car in red, and the purple, black, and yellow ones were right out). Besides its legendary performance, perhaps a small piece of this car’s attraction to me was that it had a reputation for being highly attractive to girls, to the point that there were stories of pretty but rather forward girls actually jumping into the passenger’s seat of 911 SCs, without actually being acquainted with the owner. I may have thought about what I would say to such a forward woman, with the “winning” line being “Hey, beautiful. Want to go somewhere?” (This alone may have been sufficient reason for the exotic car gods to deny me Porsche ownership.)

Of course, reality had other ideas. The price of a 911 SC in 1982 was $39,500 USD, which is $97,807 in today’s money, and would have taken about two year’s wages for me to purchase. Besides, the girls I was dating at the time were fairly well educated, and weren’t the type to spontaneously hop into a stranger’s Porsche, even if it was white with black trim.

Flash forward to 2016, and my familiar sedan finally needed replacing after 290,000 miles. I decided on a Honda Accord, with a 6-cylinder engine. I did some research into how it compared with the Porsche, which was when I found out that the Honda out-performs the SC. No, I’m not kidding.

It’s faster 0-60.

It’s faster in the quarter-mile.

The Accord has more horsepower (a lot more, actually).

It even brakes better.

If you’re wondering how that’s even possible, it has to do with the intervening 34 years of technological advances. P.J. O’Rourke once asserted (I’m paraphrasing) that the things that were considered outrageous luxuries fifty years ago would hardly do on a camping trip today. Imagine, if you will, the looks you would get if you were to insist on back-up cameras, curtain air bags, and automatic obstacle-avoidance braking on a 1980s Porsche. The salesman wouldn’t know what you were talking about, even though each of those things (and a great deal more) are standard equipment on many 2016 models. In 1969, Seiko offered an analogue chronometer (clocks or watches accurate to within -4 or +6 seconds per day) for $175 ($1,142 in today’s money); today, however, digital watches that accurate are now available for under $10. For those keeping score, that’s more than a 99% reduction in price.

Also in the 1980s I received my first instruction in Earned Value and Critical Path Methodologies. Back then companies doing business with the U.S. Department of Defense would purchase forms printed by the Government Printing Office, roll them into our IBM Selectrics, and type the budget, earned value, and actual costs information onto the forms, and then either hand-deliver them or snail-mail them to the customer. Today, networked PCs perform almost all of the functions of project cost and schedule performance reporting, from the processing of the original estimate, through the time-phasing of the budget and collection of data from the general ledger, through pulling status and re-calculating projected end dates and at-completion costs, wrapped up by transmitting electronically, instantaneously. All of this used to require several (if not many) people to perform, at least some of them with advanced expertise. Now, if your estimating software doesn’t seamlessly pass its data to the critical path scheduler for time-phasing, which then passes the budget and the current status to the cost processor, which automatically accepts data from the general ledger, then your system is very, very close to being obsolete. By today’s standards, even the high-end project management information systems from as recent (?!) as the 1980s would hardly be perceived as acceptable today. But keep in mind, this effect is cyclical: in 2051, those PM specialists will, no doubt, view our gee-whiz systems as wholly inadequate; and, if we somehow know what those systems will be like, we would be amazed (1950s-era PM: “What’s a ‘Selectric’?”)

As for my own anachronistic response to pretty women jumping unbidden into my Honda, I think my responses will include:

• “You may have – entirely understandably – mistaken me for Brad Pitt.”
• “You either have an advanced knowledge of car performance parameters, or else are in need of an eye exam.”
• “Hey! Get out of my car!”

I like spending space in this blog ripping into openly fraudulent management science precepts that have somehow crept into the generally-accepted mainstream. I got to thinking the other day, how do these ideas get introduced in the first place, in such a way as to make them appear valid or attractive when they are plainly suspect? And I was instantly reminded of the book Walden Two.

For those of you who are (blessedly) not up-to-speed on the theories of B. F. Skinner, Walden Two was a utopian novel about an isolated community that was structured around the theories of behaviorism he would later expound upon in the infamous Beyond Freedom and Dignity. By basically shedding the norms of societal behavior that did not fit into the mold of stimulus-response-reward/punishment, this isolated community – surprise, surprise – became highly profitable and successful, populated by happy, well-adjusted people. The narrator, a reporter, who has come out to do a news story on the community, is so impressed that he abandons his reporter life, and joins the community.

Imagine that.

So, essentially this Harvard psychology professor advances his pet theory initially in a utopian novel (Walden Two preceded Beyond Freedom and Dignity by more than twenty years). Something similar happened with Critical Chain, where the technique long-known as “crashing the schedule” (i.e., transferring resources from non-critical path activities to critical ones in order to shorten the project’s overall duration) got a new name and, in a fictionalized setting, succeeds at several levels, among them in the project management realm.

Imagine that.

This kind of approach irritates me no end. I think it’s highly disingenuous, and ought to be considered ipso facto evidence of charlatanism. If you happen to belong to a well-led organization, a standard operating procedure is that, should your manager receive a communication that criticizes the work or character of a member of the project team, but such a communication is unsigned, it goes straight into the trash can, no exceptions. Indeed, organizations that do not have such a practice, formally nor informally, should be automatically assumed to be poorly-led. I think something similar needs to happen in the PM arena: if your profound, wide-ranging idea is introduced, not through a peer-reviewed publication such as the Project Management Journal, but rather through a fictionalized setting, such as a novel, well, your idea is probably too silly to be considered in a valid academic setting, no exceptions.

But that’s the purist in me talking. In the real world, many goofy ideas (my regular readers know I’m thinking about risk managers, communications experts, and GAAP practitioners, among others, who attempt to make inroads into the PM realm) arrive with so much glitter on them, it takes a hard-bitten blogger to call them out as suspect, much less mock-worthy.

But perhaps I’m mistaken. It’s happened before. So, I say, let’s do a test: we’ll set up two colonies of rats (the white, cute ones, not the grey mean ones, no matter how closely the latter resemble my critics). Colony A will receive electric shocks each time they refuse to perform risk analysis, enhanced communications practices, or adequate asset management, and will be rewarded with food pellets each time they are observed pursuing these objectives. Colony B will simply be fed the food pellets they retrieve at the end of the maze.

Care to bet which colony gets fat?