Game Theory in Management

I once worked for a company whose CEO had a philosophy about employee attitudes that was remarkably telling. It was that every employee should come to work every day at least a little bit scared. I remember hearing about it, and at first thinking it was a bit creepy, but the more I thought of it the more I could kind of see his point: it’s easy to imagine a complacent workforce being or becoming a poorly-performing workforce.

But upon further review, I think my initial reaction was the correct one: it is a creepy philosophy, particularly for an upper executive to have. But this blog isn’t about feelings of creepiness in evaluating business models, so I’ll be a bit more precise. The notion that an organization’s employees need to be consistently and acutely aware that their jobs may be in jeopardy in order for them to perform optimally is a sure sign of poor leadership – tyranny, even – and organizations so afflicted will almost always under-perform their confident rivals. Here’s why.

The easiest and most obvious piece of evidence (Exhibit A) has to do with our own experiences. Recall instances where you were enthusiastically pursuing an activity or task. Compare that to an activity that you didn’t want to do, but had to. It’s been my experience that, in the case of the former, I brought my best effort forward; but, in the latter circumstance, I did just enough to get a pass from the person who had forced me to do the chore. Of course there are many gradation levels in-between, but by invoking these extreme examples you see my point. To put it in the lexicon of my cited CEO, the workforce that arrives every morning at least a little bit scared will usually be out-performed by the workforce that shows up every morning at least a little bit enthused.

Exhibit B has to do with Hatfield’s Incontrovertible Rule of Management #12: The manager-leader must have three characteristics to succeed:

1. He must have the optimal (or near-optimal) technical approach to addressing the problems before the organization. People tend to avoid following the inept.
2. He must genuinely care about the personnel on his team. If the team perceives their leader does not care about them personally, they will tend to not care about him, or his technical agenda, either.
3. The manager-leader must have so much confidence in his technical approach that he is willing to carry it out alone, if necessary. The example I like to give here is, if George S. Patton were to be parachuted in to Europe in 1943 by himself, he would begin attacking Nazis right away, and not wait for everyone (or anyone) else to lend him support.

Notice than invoking fear in one’s own team is not included in the three necessary characteristics. Shorter version: are there successful teams comprised of non-anxious members? Of course there are. Are there failed teams comprised of highly anxious personnel? Of course. Therefore, team anxiousness cannot be the sine qua non of successful performance.

Then why did this CEO believe to the contrary? Consider this definition of “tyrant” from Dictionary.com:

2. any person in a position of authority who uses power oppressively or despotically.[i]

Now consider how much easier it is for “any person in a position of authority who uses power” to ignore Hatfield’s Incontrovertible Rule of Management #12. They don’t have to do due diligence in keeping up with developments in their field of expertise, since their frightened team members will obey direction even if it’s the wrong approach. The tyrant need not care about his team members personally since, again, they will obey the direction given out of fear, if nothing else. And, ironically, tyrants tend to behave in such a pathological manner because they, themselves, are not afraid, having been exempted for various reasons from the negative consequences of their poor decision-making.

And that, ultimately, is why tyrants make such poor leaders. Once their people begin arriving to work afraid, even to a small degree, the tyrant has insulated himself from criticism, even in the instances of the most obvious of errors. Besides making the organization so led miserable, this insulation is a virtual guarantor of management failure.

[i]Retrieved from http://www.dictionary.com/browse/tyrant, December 26, 2016, 11:03 MST.

As I continue with December’s theme of Human Resource Management, my attention was grabbed by the stories of the self-driving cars, and their progress in being introduced to major metropolitan areas. They make some mistakes, sure, but so do human drivers. I’m sure this question will be hotly debated for generations, but what criterion should be invoked to decide if the robots driving cars are superior to their average human counterparts? And, if the question is relevant for robot versus human automobile operators, can an analogous question be asked of robot versus human project management?

Yes, I know that the job of project management is largely one of dealing with situations and circumstances that no one could have foreseen (not even risk managers), meaning that we PM-types largely laughed at all the headlines warning the professionals in the more mundane fields that their jobs would some day be taken over by machines, and that day would come around sooner than they thought. We were immune! No machine could manage a project!

Well, let’s take a look at that. Just as a broken clock is right twice per day, so, too some of the people who consider themselves better-than-average project managers prone to making poor decisions most of the time. Since a Magic 8 Ball could be expected to only return good decisions on a random basis, relatively simple robots could replace the poorer project managers right away.

Consider also that some PM decisions are fairly automatic, and could be reduced to algorithm. Check the following table:

Think of PM capability as a continuum, with purely random right answers on one end, and ingeniously insightful project decisions at the other. Hatfield’s Rule of Management #11 is that the 20% worst managers who have access to 80% of the information needed to obviate a given decision will out-perform the 80^th percentile best managers who only have access to 20% of the information so needed. This being the case, if the appropriate Earned Value and Critical Path methodology systems are in place, robots would only have to better the lowest PM quintile to become a viable alternative! Let that sink in for a moment.

As for me, I hope the robot that I’m replaced with is less like C3P-O, who comes across as a bit fussy, and more like Robot B-9, from the television series Lost In Space. At least he could project electric shocks from his hands/claws, which could come in handy with respect to interactions with other project “professionals” (see my blog Should We Use Electric Shocks on the Risk Managers?).

Why does any organization need a Human Resources department? Yes, I know they set policy, the ground rules that any repeated gathering of people need to have in order to perform their functions properly, and that these rules apply to virtually all aspects of our professional lives, from how much we’re paid to what constitutes appropriate dress. But for those people who have been paying attention, these rules are almost never uniformly and consistently applied across the organization. High-performers and members of the top executives’ families can (and do) incur at least mild infractions of the rules with relative impunity, while poor performers and those with no connections can be subjected to harsh enforcement of the exact same rule set. Are there any organizations where this is not the case?

Well, yeah. Chess teams. Wanna know why?

Organizations of chess players in general, and chess teams in particular, are set up in such a way as to determine who’s best at playing the game. To this end they will usually set up a point system, almost always mirror-images of the ones used by the United States Chess Federation (USCF), or the Federation Internationale De Eschess (FIDE), where points are awarded for winning sanctioned tournament games, deducted for losing them, all adjusted for the relative strength of the opponents. Your value to such organizations is equal to your current score. Nothing more, nothing less.

The system is as beautiful as it is uncompromising. You could be the direct descendant of Jose Raul Capablanca, and be of no use to a chess team; or, you could be Phiona Mutesi, from the slums of Uganda, and be of extreme value to the same team. Your USCF or FIDE chess rating does not know or care about your background, the color of your skin, your religion or your social-economic status. It simply reflects your ability to play the game of chess, and groups of people who want to win in tournament play will base their decisions on organizational placement on that number alone. It’s an infallible indicator of capability, and vastly outweighs any other consideration.

Meanwhile, back in the project management world, the ability to precisely quantify any given project team member’s value to accomplishing scope on-time, on-budget is a bit more elusive. Most project teams include personnel from a variety of specialties, any of which, if done poorly, could utterly wreck the project. Each of these specialties requires a varied set of talents. Even if a particular person possesses these talents – at a high level – they may still not be much of a contributor if they are unwilling to work hard. As is the case with so much else of the so-called management sciences, there are simply too many parameters to capture and evaluate, and many (if not most) of those parameters are impossible to quantify.

Which lands us back into that swamp of subjective business analysis, the very bane of legitimate management science.

The inability to structure, much less enforce, a more pure meritocracy in the way in which project team members are hired, fired, promoted, demoted, assigned or reassigned has to be one of the most dangerous PM hazards out there, right behind scope creep in its potential negative impact while presenting as something completely innocuous, due to its familiarity, no doubt. By this I mean that many management pathologies have crept in to the typical decision-making process when it comes to matters human resources, such as whether or not the candidate appears to be a “good fit,” or other such subjective evaluation criterion. So, is there a “tell,” an indicator of which project teams are probably comprised of winners, and which are likely to be besotted with marginal talent? Sure there is. Consider these more objective measures:

• College degree(s)
• Professional certifications
• Successful experience
• Previously-held leadership roles
• Ability to deliver

When these form the basis for who gets assigned and promoted within the project team, you may have a winner. Conversely, the more subjective measures, including:

• Close relationship with executives
• Previous project failures
• Inability to perform

…combined with an absence of the objective measures, means that the project team is probably not based on a meritocracy, and therefore, likely to fail.

If only we all had a PMI®/ProjectManagement.com equivalent of a USCF rating…

Check virtually any organization’s mission statement (or similar self-description document), and you will invariably find words to the effect that they consider their employees to be their most valuable asset. It’s true, of course, but it’s true of well-managed teams and poorly managed ones as well. From recruiting to assignments, compensation packages to promotion criterion, what the Human Resources Department does, or fails to do, clearly has an extraordinary impact on the chances of the organization’s success. Since much of management science has to do with recognizing and frustrating those pathologies of thought that can infest and harm the organization’s chances of success, the question must be asked: from a Project Management point of view, what are the behaviors of poorly-performing HR divisions? Put another way, is your company’s HR department filled with Jedis, or Sith?

Who, Exactly, Taught Those Sith Guys How To Talk Smack?

For those of you who have been confined to that part of the world free from American pop culture influences, according to the Lucasfilms/Disney Star Wars movies, a long time ago, in a galaxy far, far away, a galactic empire arose from a galactic republic because an evil cult, known as the Sith, infiltrated the government, eliminating the virtuous sect of the Jedi. Similarly, in this galaxy, as 2016 gets ready to transition to 2017, the virtuous ProjectManagement.com website struggles against the forces of fraudulent management science initiatives, some of which have wormed their way into typical Human Resource departments. Had the Sith revealed early on in their insidious efforts who they were, or exactly what they were trying to accomplish, they would have been frustrated; however, since they were able to hide their allegiances and true intent, they successfully overcame the forces of good and attained absolute control. Similarly, one sure way of advancing an agenda that advances the careers of a few insiders at the expense of the macro organization is to influence the HR department to enact certain practices. If your HR department does some of these things, it may have already been compromised. In that galaxy far, far away, we had Obi-Wan Kenobi state “Only a Sith deals in absolutes” (which is, itself, an absolute, but we’ll let that pass for now). Is there a similar, readily-articulated test in our PM galaxy that could help identify the forces within HR working against the whole organization?

Sure. Consider first off the difference between the desired goals of the self-seeker and the macro organization: the macro organization seeks to improve itself by attracting and retaining talent, and ensuring that the rewards the organization has to offer go towards the most deserving. It is, in other words, striving towards a true meritocracy. Compare that to the goals of the self-seekers, who look to be the recipients of the rewards that the organization has to offer without actually having merited them.  I discuss this at length in my most recent must-have book, but, for the purposes of this blog, here’s a short list of symptoms that the people in your HR department might have glowing orange eyes sometime soon.

Beware Whom You Elect Emperor

Some of the cruder compromised HR departments won’t even bother to erect a convincing facade of following merit-based processes when hiring or promoting, meaning that people who are clearly not deserving or competent will suddenly be announced as having been “assigned” a certain role, with no opportunity for others to compete for that position. Compromised HR departments that do erect such a facade aren’t much better – they invariably skirt the vetting process by pointing to an acute need, or some amorphous capability or experience owned exclusively by the selected “candidate.”  When some capacity not normally part of the job description suddenly becomes the standard by which all candidates are measured, it’s a “tell” that the position is, as we Americans colloquially put it, wired. And, just so we’re clear, applying for a position that’s wired, and not for you, is a colossal waste of time.

An ancillary effect that occurs as the less-deserving advance within the organization is that the more-deserving are displaced, or frustrated. What happens then? Well, it rarely happens immediately (Hatfield’s Rule of Management #3: Your antagonists never receive their comeuppance in a timely manner, or in your presence), but over the long term frustrated superior performers will be drawn to organizations that more closely resemble a true meritocracy. Organizations structured more like a true meritocracy will almost always out-perform those that do not. Combining the premises inherent in the previous two sentences yields the conclusion that organizations based on a true meritocracy will attract talent, while those that don’t will repel it.

Meanwhile, Back At The Jedi Temple…

Oh, sure, they’ll attract the occasional Darth Maul or Darth Vader, though it should be noted that Vader was originally Skywalker, a powerful and virtuous Jedi, prior to being converted to the Sith. The truly talented never need to resort to the underhanded political tactics of the inept to get ahead, but the inept can’t get ahead without them. The ability of your HR department to differentiate among them is one of the primary indicators of long-term project management success.

However, if you experience difficulty breathing when a new addition, who’s been assigned a high rank, holds their thumb and finger up about one inch apart, then it may be time to look for a more meritorious project team.

It was yet another dark and stormy night. My secretary had just left, complaining yet again over not having been paid exactly on-time, and slamming the frosted glass door with my name on it, ylnatS yrrebpsaR, eyE etavirP behind her, when the phone rang.

“Is this Raspberry?” the older man’s voice at the other end inquired.

“Is that who you called?”

“Yeah, but I was expecting your secretary to answer.”

“She’s upset about something, and left early. Is this Roger Doright?”

Roger had been one of my earliest clients. He was a regular, straight-up guy, something of a mentor to me. As he approached retirement age, he had turned over more and more of his corporation’s decision-making to his kids.

“Yeah, it’s me. How have you been Stanly? I haven’t spoken to you in years.”

“I’m good Roger. How are things with you?”

“Well, I’m having a bit of a problem, which is why I called you. I have a hunch that a couple of the major projects in my company’s portfolio are about to go off the tracks, but their PMs insist that all is well, and offer up reports reflecting that. I can’t argue with the reports, so I need somebody to dig a little bit deeper. Are you available?”

“Sure. I can be out there tomorrow morning.”

“One more thing…” Roger continued, “my youngest son, Irvin, needs to learn the project management ropes, so I would like for him to accompany you.”

“What’s his background?”

“Oh, he’s been through all the relevant classes and coursework to do what you do, the whole investigative PM thing, with his specific role being ‘Clue Analyst.’ But he lacks real experience. He’ll meet you at my corporate headquarters tomorrow morning.”

As I put down the phone, I remember thinking “Great, just great. A newly-minted ‘Clue Analyst.’ But Roger has done so much for me, that I suppose I can grit my way through this.”

*   *   *

The dark and stormy night had given way to a bright, clear morning. An overly enthusiastic young man approached me in the foyer of the office building.

“Stanly Raspberry? I’m Irvin Doright. Let’s get  you badged in – the portfolio reviews are about to start, down in the Hatfield Conference Room.”

“The what conference room?”

“It’s in the basement. It was named after an obscure ProjectManagement.com blogger my father liked to read. Let’s get going.”

As we walked into the conference room, several of the PMs glanced up, recognized me, and stifled grimaces.

“What’s he doing here?” I heard one whisper to another.

I looked over the review documents in the pack that was passed out to the participants as I took a seat in the back. The first PM got up to address the projected slides behind him.

“As you can see, my project is on-time and on-budget. At this rate of performance…”

“Excuse me,” I interrupted, “but I can’t seem to find the Cost Performance Reports.”

“The CPRs are in the back.”

“Oh, okay, but why aren’t they in the front? Why are we talking about … what is that chart, anyway?”

“It’s the bottoms-up Estimate at Completion, showing that we’ll finish on-budget.”

“Well, I did a quick calculated EAC, and your own Earned Value data indicates a $12 million dollar overrun.”

“Mr. Raspberry, I’m not seeing that in the risk register!” Irvin hissed at me.

“Nor is that consistent with our information” the PM added.

“That’s because conventional risk analysis techniques and bottoms-up EACs are irrelevant to project performance and accurate at-completion figures” I replied.

Most of the people in the room gasped, almost as if they were paid actors awaiting some common-sense challenge to their embraced business model.

“Irvin Doright here is the owner’s son” began the PM, “and heads up our risk management division. Irvin, do you agree with Mr. Raspberry’s assertion?”

“Absolutely not – risk management deals with virtually all aspects of project management, and my Monte Carlo analyses have been spot on.”

“Not this time” I answered.

“Bruno, confiscate Mr. Raspberry’s badge, and escort him off the premises” Irvin ordered.

Once I was “escorted” off the site, I placed a call to Roger.

“I think I see your problem…”