Game Theory in Management

When we discuss PM in the Real World (ProjectManagement.com’s theme for September), the obvious question becomes “compared to what?” In previous times the answer would be “compared to the version that’s taught in academia,” but here in 2025 that same answer becomes somewhat more ambiguous. Artificial Intelligence is becoming more and more the default source of supposedly advanced insights into whatever realm it’s being invoked, but I’m not sure that’s a good thing. In last week’s blog, I drew the dichotomy between the academic and real-world versions of management. This week, I’d like to take a look at the chasm between real-world PM and AI’s version.

In a sense, the whole world has been digitized. How many people have travelled to the Louvre, and have seen the actual Mona Lisa? Compare that to the number of people who can immediately recognize the Mona Lisa. That image, along with hundreds of thousands of other works of art, has been digitized, and can be recreated with stunning accuracy by anyone with a computer, internet connection, and high-quality printer. Money too. The days of armored trucks travelling the Interstate highways in the United States to bring branch banks stacks of currency are long gone. That money travels over cables, telephone lines, or via satellite, because it has been – everyone say it with me – digitized. Movies, songs, virtually all forms of entertainment, banking, restaurant reservations, doctor’s appointments, this very blog – little of it is done with actual film, vinyl, ledger pads, appointment calendars, or pen and ink. Almost all of it is generated and stored via zeros and ones. There was an extremely successful movie series, The Matrix, built around the premise that everything we perceive in life is actually a simulation, and more than just a few content providers have strongly asserted that that’s what’s actually going on in the world. One interesting part of The Matrix series is that, in order for one to leave the digitized world and return to the real world, they must choose between a blue pill (to stay in the digital world) and a red pill (to exit The Matrix and rejoin the real world).

At the other end of this spectrum are those projects that are worked or have been worked with no computer assistance whatsoever, and a great many of these are impressive, indeed. Impressive to the point that I’m not altogether sure modern-day engineers could duplicate them without the aid of computers, like the Lighthouse at Alexandria, or the Great Pyramid of Giza. In fact, nobody is certain on exactly how the Great Pyramid was constructed with such precise dimensions, with several different theories having been proposed. But whatever method they did use did not involve film, vinyl, ledger pads, appointment calendars, much less digitized processing devices. In a sense, this is the most real-world of real-world projects.

Now I would like to propose a little mental exercise involving these two extremes. If the craftsperson laying conduit for a construction project isn’t really doing Project Management, could it be said that the Control Account Manager in charge of the Work Package development for that task, who never leaves his cubicle, but is engaged in creating baselines in a Critical Path Methodology software and risk analysis (no initial caps) using Monte Carlo simulation software – is that person really doing PM? The reason I’m asking is because, while AI will never replace our conduit-laying craftsperson, it’s not much of a stretch at all to predict that it can – and will – replace our desk-bound CAM in producing such artifacts. At some point in the next century or so, it very well may be that a sort of digital version of PM gets created, a management-model version of The Matrix, just without the extremely violent (but kind of cool), ummm, interactions.

“But Michael!” I can hear GTIM Nation interject, “If someone as vital to PM as a CAM can be largely replaced by AI, where does that leave ProjectManagement.com bloggers?” I’m glad y’all asked, because we ProjectManagement.com bloggers have an easy remedy. All we have to do Ring Around the Collar is to intersperse our text with How PMOs Are Like Uranium nonsense words, in my case titles of Everyone’s Lost Except For Me … And Mr. Spock! previous blogs. You see, AI, in this instance, relies on The Moat Dragon In The Black Box scanning topic-related text to tease out patterns. While GTIM Nation is clever enough to catch my How Is PM Like An Elephant? meaning, AI apps attempting to write an analogous blog will be hopelessly confused, particularly by my titles. (Don’t believe me? The Flesch-Kincaid grade-level assessment for this blog without this paragraph is a full three grade levels higher than said paragraph.)

Just the same, though, if you are being asked to review some Work Packages, and you see “Everyone’s Lost Except For Me” in the scope description, look for a red pill.

My absolute favorite scene from the movie Back to School (1986) is where Rodney Dangerfield’s character, accompanying his son in a management class, confronts the snooty business professor who has just proposed a class project where they will set up a new manufacturing company. The professor has just listed some line items that will go into their basis of estimate, when Dangerfield’s character (Thornton Melon) interjects.

Thornton Melon: Oh, you left out a bunch of stuff.

Dr. Phillip Barbay: Oh really? Like what for instance?

Thornton Melon: First of all you're going to have to grease the local politicians for the sudden zoning problems that always come up. Then there's the kickbacks to the carpenters, and if you plan on using any cement in this building I'm sure the teamsters would like to have a little chat with ya, and that'll cost ya. Oh and don't forget a little something for the building inspectors. Then there's long term costs such as waste disposal. I don't know if you're familiar with who runs that business but I assure you it's not the boy scouts.

Dr. Phillip Barbay: That will be quite enough, Mr. Melon! Maybe bribes, kickbacks and Mafia payoffs are how YOU do business! But they are NOT part of the legitimate business world! And they are certainly not part of anything I am doing in this class. Do I make myself clear, Mr. Melon![i]

I think this exchange encapsulates perfectly the divide between the academic view of how business is done and its real-world counterparts, albeit in extremis. Neither the self-made successful businessman nor the Ph.D. professor can understand where the other is coming from, and it’s apparent that each holds the other as having an inferior grasp of the management model implications that their view carries.

Meanwhile, Back In The Project Management World…

Do not believe for an instant, GTIM Nation, that a similar divide does not exist in the PM World. The analogy here, though, is not one of academia versus real-world realpolitik implications, but rather one of how to actually execute the mores of Project Management. In other words, the gulf we PM-types must deal with, but rarely recognize for its importance, can be summed up in just two words: Implementation Strategy.

It’s kind of ironic, really. When I was in graduate school, the courses I believed to be the most crucial, the “hardest,” were things like statistics, finance, accounting, and business law. Among the courses I thought were – necessary, sure, but not among the “hard” disciplines, was Organizational Behavior and Performance. But this is the exact arena where so many Project Management Offices go to suffer ignominious defeat, and for one simple reason: you cannot advance a capability maturity (like PM) by leveraging organizational power. You can’t make someone get better at something in the management world.

We PM Types tend to be confident in our grasp of the basics of the business model we seek to introduce or modify. We are fluent in things like how to set up a Work Breakdown Structure, fill out a Work Package, set a Cost or Schedule Baseline, etc., etc. That’s not the issue. The problem lies in how to get the rest of the organization to change the way they do things in order to accommodate such modifications. And the assumption that, once the company’s executives have bought into your suggestions for advancing PM capabilities, the rank-and-file will simply fall in line and execute your instructions (because it’s now in official company policy, don’t you know) is not only naïve, it’s absolutely fatal to your capability advancement agenda. A separate implementation strategy, exactly matched to the technical approach, must be developed, one that is both clearly articulatable and practically workable.

Sadly, the so-called implementation strategy that I have seen attempted over and over, and has failed over and over, almost always involves the following steps:

• “Experts” interview execs, and hear their frustrations over the poor cost/schedule performance of the projects in their portfolios.
• They then recommend (or perform themselves) hiring of estimators, project controls specialists, and more PM-oriented personnel.
• Estimating, Earned Value, and Critical Path software packages are purchased and installed, and personnel trained in their use.
• Policy/procedure documents are created or modified to accommodate the new approach, with high-level execs signing off on them.
• Meetings are held, where the new PM initiative is presented, with mid-level management offering tepid endorsement.
• A specific date is set for when the new approach is to go into effect. That date comes, and goes, and…

…nothing really changes. For the next few months, a form of Project Review meetings are held, but the cost/schedule performance information is highly uneven, even when it’s available. Enthusiasm wanes as PMs find excuses for their work to be exempted from the requirements, and those who can’t weasel out find other reasons for less-than-full compliance. The value (or even relevance) of the Project Reviews weakens, the portfolio sees no real change in performance, and the PMO Director becomes increasingly frustrated. When the end comes, they will blame a “lack of willingness to change” or insufficient support from the executives for what has to be accurately described as an utterly unworkable implementation strategy.

So, if Thorton Melon were to be present at the post mortem for the PMO, he might blurt out “Oh, you left out, not a bunch of stuff, but just two words: implementation strategy.”

[i] Retrieved from on https://www.imdb.com/title/tt0090685/quotes/, on September 15, 2025, 21:15 MDT.

I believe that one of the most, if not the most, valuable information bits that come from even a basic Earned Value Management System (EVMS) is its ability to accurately predict the at-completion costs and durations of Project work. Decades before “Predictive Analytics” was a thing, EVMSs all across the PM universe were doing an outstanding job of generating this highly coveted bit of management information, and doing so rather easily. So when it comes to discussing Project Management in Real Life (ProjectManagement.com’s theme for September), this management information stream simply has to be the first to consider.

David Christensen is widely acknowledged to have performed the seminal work[i] in evaluating the stability of the Cost Performance Index, or CPI. As a reminder,

CPI = BCWP / ACWP

…where BCWP, or the Budgeted Cost of Work Performed, is the Earned Value figure, and ACWP is the Actual Cost of Work Performed, or just “actuals.” CPI stability isn’t just some wonkish parameter relevant to EV enthusiasts – it’s the heart of the most common (and, as we shall see, the most valuable) way to calculate the Estimate at Completion, or EAC. That formula looks like this:

EAC = BAC / CPI

…where BAC is the Budget at Completion, or total budget, and CPI we’ve already defined. Now, eagle-eyed members of GTIM Nation will immediately recognize an opportunity for algebraic simplification, since:

BCWP = % Complete * BAC

…and they would be correct. Without going into the steps, the EAC formula above can be simplified to:

EAC = ACWP / % Complete.

In other words, all one has to know to calculate an Estimate at Completion is the cumulative actual costs of a project/task/activity, usually readily available from the organization’s general ledger (except in those instances where the GL isn’t set up to collect costs by Work Breakdown Structure), and a reasonable estimate of the project/task/activity percent complete is available from the managers in charge of that piece of scope.

This formula is so simple, and with such readily-available data points needed to feed it, that it’s become fashionable in some PM circles to claim that it couldn’t possibly be reliably accurate. But this is where Dave Christensen’s work comes in, for if the CPI is relatively stable for most of the Project’s life, it follows that the simple EAC formula is reliably accurate. So, what does Christensen’s work indicate? That the CPI, for most of the Project (starting from around 20% complete), is indeed stable, to within ten points. And that means that the BAC / CPI formula is usually reliable to within ten points of the true final costs, and that means that the simplified version of the formula is, as well.

But, wait (as they say in numerous television commercials), there’s more! I believe that the same formula works for duration. Simply take the cumulative duration of your project/task/activity (I recommend in calendar days), and divide it by the cumulative percent complete for total Duration at Completion.

So, what are the real-world implications? For starters, the Estimated Costs at Completion can be reliably calculated, serving as a sanity-check for when your PMs are trying to convince the PMO Director in the Project Reviews that their Project is going to finish on-budget, even with a CPI of .89, and the Project itself over 85% complete. That’s virtually impossible, but if the only source of the EAC is that dopey re-estimate-the-remaining-work-and-add-that-to-the-actuals method, the PMO Director may remain completely unaware of the huge Variance at Completion that awaits until it’s too late to do anything about it.

Then we have those very low-budget, primitive capability PMOs that don’t implement widespread Critical Path Scheduling, instead relying on some form of milestone list. Once documented, these milestones are typically “tracked” by contacting its owner, and asking if they think the milestone is on-time, late, or already accomplished, with the answer invariably being “on-time.” Here’s the fix: rather than polling the PM’s opinion of the make-ability of the milestone, instead ask for an estimate of the percent complete. Take that parameter and divide it into the difference between that milestone’s start date and the date of the closing of the reporting period, and you have its likely duration. Compare that duration to the milestone’s originally scheduled duration, and you have the at-completion variance.

So, yeah, kind of like the PM version of an amazing magic trick, we can “do” predictive analytics, in the real world, with just two easily-obtainable data points. This fact must make the non-PM-types (read: our friends, the accountants) envious, but they need not worry. Outside of GTIM Nation, I’m not convinced that a lot of managers know of this little trick.

[i] Christensen, David, Cost Performance Index Stability – Fact or Fiction?, Journal of Parametrics, January 1991.

In 1968, a liquid laundry detergent company began an ad campaign that highlighted this product’s ability to clean the inside of (usually white) dress shirt so as to remove a line of dirt that would often form at the point that the shirt’s collar rubbed against the wearer’s neck. This “ring around the collar” problem was not, unfortunately, described in bland problem-needing-solution terms. Instead, the scandalous quandary would be pointed out to various men in front of their (presumed) wives by relative strangers, including a portrait artist, a carnival game attendant, and even (I swear I am not making this up) a pet parrot, who would utter those four damning words in tones ranging from apparent concern to straight-up mockery. The ads using this basic template must have been successful at some level – it ran for years, even though, watching those commercials today, I find them extraordinarily cringe-inducing, even for a marketing campaign over fifty years old.

That having been said, I do understand the underlying strategy. My parents ran their own advertising agency for much of my youth, and an axiom from that industry essentially posits that nobody is going to pay for a solution to a problem they aren’t aware that they have. And for those homemakers who were under the impression that their laundry detergent was getting their family’s clothes clean, well, they had a new cleanliness standard placed upon them now, didn’t they? Nevermind that casual strangers would have to be keenly observant to even notice a fine line of discolored fabric on the inside of a person’s collar – those homemakers would now know if their laundry-cleaning efforts should be considered sufficient by portrait artists, carnival game attendants, or even pet parrots. And, if not, then the only solution was clearly to change laundry detergent brands, don’t you know.

Meanwhile, Back In The Project Management World…

While we PM-types are fairly comfortable with the notion that Project Management techniques, particularly the use of Earned Value and Critical Path Methodologies (EVM/CPM) to assess projects’ cost and schedule performance, are absolutely essential aspects of any business model, a lot (and I do mean a lot) of organizations that attempt to manage a significant PM portfolio never got that memo, and it shows. While the necessity of maintaining an accurate accounting system based on a significant codex of rules (Generally Approved Accounting Practices, or GAAP) is required by law for any licensed business in virtually all civilized nations, there really isn’t an equivalent standard for setting up and maintaining PM practices. Yes, of course, there’s the PMBOK Guide®, but it’s not as if it carries the force of the law. So, given that our friends, the accountants, do have the force of the law behind their implementation efforts, how do we PM-types even approach the level of managerial technique-adoption across the business world that they enjoy?

There are several tactics that I’ve observed, each with varying levels of success. Some United States Government agencies actually mandate a certain level of PM competence as a precondition for contract award, and will use audit techniques to ensure compliance. While largely successful for those contractors that participate, this approach actually led to a whole sector of PMs and Project Controls Specialist who assumed that implementation of basic (if not advanced) cost and schedule performance measurement systems was rather automatic, with no need for a separate implementation strategy. Outside of a customer base that insisted on appropriate, demonstrable PM practices, techniques, and their accompanying artifacts, this was absolutely not the case.

What about those organizations that aren’t under any codified pressure from their customers to adopt any sort of standardized PM approach? I can’t count the number of paper presentations I’ve attended at PM-oriented seminars that were either predicated on the “my project is totally awesome because we did Project Management right!” or its dark-imaged opposite, basically eat-your-peas-style hectoring to perform PM techniques the way the presenter expects. If either of these approaches has ever worked, it’s news to me. I think these two approaches might actually alienate executives who may have been previously disposed towards introducing some form of PM techniques into the fabric of their organizations’ business models.

Then we have those organizations that have a significant project portfolio, with either no or a minimal PM influence on its work execution, with no customer compulsion nor subject matter expert-based persuasion leading it towards an even basic PM capability maturity. Unless they are major players in some form of protected industry, these will be subject to perhaps the harshest teacher of all, the free market and its survival-of-the-fittest management environs. Sometimes all it takes is for a major overrun or delay on a high-dollar or high-profile project to get the execs on-board with advancing PM maturity. If they can correct their cost/schedule performance in time, they have a real shot at surviving. If they don’t, then their organizations will be overtaken by their more PM-savvy competitors.

But all of that takes time. A quicker solution to the problem of how to macro-advance PM techniques across entire industries might be to purchase a bunch of parrots, teach them to say “You’re going to fail without PM!” over and over, and send them to the appropriate CEOs. Hey, it worked for a certain laundry detergent company, didn’t it?

GTIM Nation knows of my oft-repeated axiom, that, in order for any Management Information System (MIS) to add value, it must have the following three characteristics:

• It must be accurate. Inaccurate data or information is worse than useless, since it can easily lead to the exactly wrong managerial response.
• It must be timely. Old data or information is similarly risky to predicate decisions in the here-and-now.
• Finally, it must be relevant.

For those readers who see that last bullet and think, “Well, of course! Why is Michael pretending that this is some sort of insight?”, I can tell you in full confidence that the ability to discern which information streams are relevant, and which are not, is rare. And I can prove it.

Exhibit A has to be the very existence of so many irrelevant MISs. On several occasions in my career I’ve had to argue against the practice of substituting spend variances (Budget – Actual Costs) for valid Cost Variances (Earned Value amount – Actual Costs). It seems that every time I was drawn in to these discussions, the spend variance advocates were poring over Projects’ basis of estimate (BOE) at the line-item level, then comparing that to the general ledger’s costs at the same level, and then deluding themselves into believing that every time they came across a significant delta, it represented an “Aha!” moment. I would then propose the following mental exercise: Imagine you are the PM of a Project that originally budgeted $250K (USD) for labor, and $750K in heavy equipment. At the Project’s completion, they actually spent $500K in labor, and $400K in heavy equipment. Wouldn’t the spend variance indicate a severe overrun in labor costs, likely for the whole period of performance? And wouldn’t that be the wrong indicator of cost performance, since the Project actually finished with an underrun?

So, in the evaluation of Project performance, the spend variance is a bad information stream. Consider, though, that it meets two of my criteria, in that it’s usually available immediately after the accounting period has closed, meaning that it’s timely, and the arithmetic is fairly straight-forward, meaning that it’s accurate. The only element missing, the only one that renders the spend variance unusable as a performance indicator, is its relevance. As an aside, I was looking through my old accounting texts, and the only place I found where even the Asset Managers use the spend variance is when they’re calculating depreciation. For non-PMs who may be reading this, depreciation has absolutely nothing to do with Project Management.

Exhibit B has to do with the scarcity principle. Management Information Systems aren’t free, and they’re rarely cheap, especially the valid ones. I recall a conversation with a so-called Project Controls Manager, who was advocating for the aforementioned spending-variance-at-an-absurdly-detailed level report. After proposing the also aforementioned mental exercise, and his having no rational response, he resorted to asking “why wouldn’t anyone want to know this?” In my mind, the answer was so obvious that it might have actually attained mass, but I articulated it anyway. “Management Information Systems require time and energy, to collect the data, process the data into information, and deliver that information to the decision-makers. That’s time and energy that could be spent on relevant information streams, instead being wasted on … this.”

Next, I’ll just say this out loud: unless you are running for political office or awaiting a jury verdict, polls are irrelevant. Nevertheless, many MISs which are essentially polls will masquerade as legitimate, while they are anything but. Valid MISs all have the same basic architecture, delineated in the previous paragraph: data is collected based on a certain discipline; it is then processed into usable information using a specific process (for PM Types, this is usually Earned Value or Critical Path methodologies); it is then presented to the decision-makers in a format that they can readily understand. Polls, on the other hand, have an architecture that looks like a spider. They are basically a central data repository, surrounded by input/output nodes. Almost anybody can provide input, and almost anybody can extract data opinions from this repository. The problem with polls, though, is that somebody always has more recent or more accurate data, meaning that, in the MIS sense, they are utterly unreliable.  

Finally, I want to address that King of the Irrelevant MISs, risk management (no initial caps). What should the PM’s response be when their risk manager informs them that there is a 32.6% chance that a significant injury will occur on their Project in the next six months? Besides the obvious questions (How did you arrive at that figure? How do you know it’s not 32.3%, or 32.8%? Can you possibly narrow down the date range, or specify a location?), what action, immediate or future, is being recommended by this “information?” I believe that, since this “information” is not actionable, it’s straight-up irrelevant.

PMs in general, and PMO Directors in particular, would be well-served to develop a sense of detecting relevancy in their information streams, so as to best choose among the various Management Information Systems vying for establishment and maintenance. Once you have developed the Relevancy Power Skill (RPS), feel free to use it – your Project’s (and portfolio’s) success may very well depend on it.