Game Theory in Management

My younger son is completing his undergraduate work at a State University, which means he’s getting fed a steady diet of the Leftist worldview. It’s okay – I did my undergrad work at the same University, so I’m ready to counter some of the more egregious stuff.

Take environmentalism (yes, this blog has a management component to it – just bear with me). The main arguments he invokes when suggesting that corporations must be reigned in has to do with the scenario where some company comes in to an area, town, whatever, sets up a facility to extract or manufacture, damages the environment, and then high-tails it out before any enforcement agency can interfere or hold them accountable. This is a favorite scenario of the anti-corporate types as they argue for more oversight and restrictions on the managers of such opportunistic and greedy entities. But I have to ask: where did the notion that companies only seek to extract profits from an available market at the expense of a multitude of other concerns, the natural environment in which they operate included? 

I blame a familiar target, Generally Accepted Accounting Principles, or GAAP.

As I have previously and often asserted in this blog, there are three types of management:
•    Asset
•    Project
•    Strategic
Of these, only Asset Management has at its core the notion that the point of ALL management is to “maximize shareholder wealth.” Project Management (for the umpteenth time) seeks to deliver a specific product or service (scope) on the customers’ parameters of time and cost. Strategic Management is oriented towards garnering more market share than its competitors. Neither Project Management nor Strategic Management has anything to do with, say, the decision to rent or buy a certain piece of office equipment, or whether or not the employees are putting in “free” overtime. 

Indeed, the natural extension of the notion that the point of all management is to maximize shareholder wealth is the very scenario feared by environmentalist, or any other stakeholder who stands to lose by the corporate entity behaving in just such a fashion. Your typical Project Manager would just assume have a happy project team chasing the project’s scope; Strategic Managers are actually happier when the competitions’ workforce is noticeably demoralized. Not so the Asset Managers – as long as the Profit-and-Loss statement looks really good, their view is that their decisions and influence have delivered an environment (pun intended) where the company’s assets are pulling in more revenue than they are expending, which is always a good thing based on that philosophy. Is the company’s revenue projection headed downward? Having the employees work harder and longer (without incurring additional costs) is the obvious answer. If that doesn’t work, they will look for other areas to cut costs: training, seminars, facilities, perks – nothing is off limits, up to and including layoffs (strikethrough) reductions in force. It’s simply the way they see the business world.

And it’s not just the environment. Recently a person bought up the rights to a drug used to counter certain parasites, and increased the price 5500% (1).  While this struck the rest of the universe as an outrage, it must be pointed out that (a) it was perfectly legal, and (2) it maximized shareholder wealth. In short, any intellectually honest GAAP adherent should admit that it was a pretty clever maneuver – either that, or step up and admit that the whole “maximize shareholder wealth” meme is openly fraudulent, or at the very least hopelessly inadequate.

Any takers?
 

(1)Skeptical Raptor’s Blog, Skyrocketing Prices of an Anti-Parasitic Drug: The Facts?, retrieved from http://www.skepticalraptor.com/skepticalraptorblog.php/skyrocketing-prices-of-an-anti-parasitic-drug-the-facts/, October 25, 2015, 18:23 MDT.

The American Television Christmastime special Rudolph the Red-Nosed Reindeer originally aired December 6, 1964, and quickly became something of a classic (i). Part of its plot involves an Island of Misfit Toys, whose inhabitants, quirky as they are (their leader is a winged lion toy), long to be given to children around the world, and enlist a runaway Rudolph in their efforts to be re-entered into Santa’s worldwide toy distribution queue. (SPOILER ALERT!) They are eventually successful in this endeavor. 

Meanwhile, back in the nearly-as-fantastic world of competing Project Management theories, I have noticed a pattern in the introduction and attempted implementation of hypotheses that ostensibly fall under the PM umbrella, but are really either tried-and-true ideas that are being repackaged with new terms and being reintroduced as something new, or else they are notions that lack serious evidentiary underpinnings, but are nevertheless being sold as profoundly insightful analysis methods or management practices. Both versions of this PM strange toy concept tend to follow observable and repeatable patterns, which might help with early identification the next time one of them bursts onto the scene, thereby shortening the amount of time needed for them to be relegated to the Island of Misfit Management Science Theories.

The first step involves performing some sort of cross-pollination of existing management science ideas (generally accepted or not), and kluge them together into a cohesive structure that can be presented as a new idea. Typical sources of these conflated ideas are from the areas of statistics and the general ledger, since each of these sources have the following characteristics:
•    They are generally accepted as valid,
•    They aren’t easy to understand in-depth, making serious challenges (or challengers) more rare, and
•    Should an informed challenger actually contest the “new” theory, a ready riposte exists in implying (or even stating outright) that the challenger is simply moribund in their management approach, or else too ignorant to recognize the importance of the “new” concept.
Next, the new idea will need a whole new lexicon to accompany its introduction to the PM world. Hence, Crashing the Schedule becomes “Critical Chain,” performing a thorough cost and schedule estimate becomes “Life Cycle Estimating,” and institutional worrying tripped out in statistical jargon become “Risk Management.” Some nonsense terms can be brought in at this point, pummeling the language but helping sell the misfit idea. My favorite example is redefining “opportunity” as “upside risk,” which a certain Special Interest Group managed to do a while back. Don’t worry about the various dictionaries failing to follow the new definitions – there’s only one or two that need to be modified. Which brings us to…

Step three is to get an article published in one of the PM trade magazines or journals that introduces and markets the idea. Note that I did not say presents the evidence, scholarship, and logic behind the idea – that approach belongs to legitimate advances in the management sciences. No, I’m talking about out-and-out selling the concept, trendy jargon and all. Getting published in the Harvard Business Review is pretty much the gold standard here – get your absurd but jargon-clouded concept onto those pages, and you’re ticket to Misfit Island might not get punched for months, or years. (In fact, as an indicator of how far the overreach of Gaussian Curve aficionados have progressed in their infiltration of legitimate management science, HBR ran an article entitled “Managing Risks: A New Framework,” that had – I swear I am not making this up – a disclaimer added that read “Editors’ Note: Since this issue of HBR went to press, JP Morgan, whose risk management practices are highlighted in this article, revealed significant trading losses at one of its units. The authors provide their commentary on this turn of events in their contribution to HBR’s Insight Center on Managing Risky Behavior. ” (ii) Here’s my plain English translation: “Events following the publishing of this piece pretty much invalidated all of its assertions. Where’s the map to that one island?”)

Once reality finally bumps up against these misfit ideas, they generally drift on ice floes (strikethrough) discussion boards towards the Island of Misfit Management Science Ideas. Occasionally they are retrieved and trotted back out onstage, but it generally requires someone with Santa Clauses’ level of influence to do it.

  (i) Rudolph, The Red-Nosed Reindeer, retrieved from IMDB, http://www.imdb.com/title/tt0058536/, on October 18, 2015, 20:39.
  (ii) Kaplan, Robert S., and Mikes, Annette, “Managing Risks: A New Framework,” June 2012, retrieved from https://hbr.org/2012/06/managing-risks-a-new-framework on October 17, 2015, 19:48 MDT.
 

Fresh off my piece about celebrating International Talk Like A Pirate Day, I thought I’d do some pirate-like blogging. As most people are probably aware, pirate ships couldn’t  demote or dismiss crew members in a way that allowed them to simply disembark at the next port, since that meant that they could inform on their former comrades-in-crime to the Royal Navy. Should a member of the pirate crew show himself to be incompetent or a little too treacherous, the nominal remedy would be to either have that detractor walk the plank, or, if everyone was in a particularly good mood, they could simply strand the unwanted person on an island somewhere where the target would be unlikely to be rescued any time soon. 

As I was doing my research for ProjectManagement.com’s October theme, Benefits Realization, I found myself becoming frustrated with trying to figure out exactly what it is. It has been my experience that, whenever a concept proves to be difficult to articulate clearly, in a few sentences at the summary level, there’s probably a deficiency in the underlying evidence, and hypotheses in the management sciences are certainly no exception. ProjectManagement.com actually has a blog with this theme, written by David Davis, so I read some of his stuff. The one piece that raised the red pennants with me was from last year. Here’s the main pull-quote: “The final litmus test of the benefit delivery is to ensure the results are properly accounted in the company Profit and Loss (P&L) applications (or as they are ‘booked’).” (1)

There are some problems with this sentence, assuming (as I do) that it accurately reflects the benefit delivery piece of the Benefits Realization cycle. The most glaring has to be that, if the “litmus test” for benefits delivery is whether or not it’s “properly accounted “ for in the profit and loss statement, then there can be no question: Benefits Realization has nothing to do with Project Management. As I have pointed out multiple times in my previous writings, Project Management is all about delivering the customer’s scope demands, on a schedule and budget that the customer either stipulated or approved. PM is a completely different animal than Asset Management, which is measured by such things as return on investment (ROI), and the profit and loss statement. Need more evidence that Benefits Realization doesn’t belong in the set of management science theories that make up modern Project Management? Search the writings on Benefit Realization at length, and you won’t come across a single supported assertion that Benefits Realization will help bring projects in on-time, on-budget. Heck, even PMI®’s definition describes it as beneficial to the company or organization, with nary a mention of how it’s supposed to help achieve project success.

So, if BR is supposed to help the organization, how does it do that, exactly? Remove the trendy terms, and it appears to boil down to an act of quantifying the beneficial aspects of an organization’s activities that would not normally show up in the accounting system – hence Mr. Davis’ assertion that it’s necessary “to ensure the results are properly accounted in the company Profit and Loss (P&L) applications (or as they are ‘booked’).”(2)  This represents another problem with BR: absent malfeasance, all transactions are correctly “booked” once money (or some other precisely quantifiable thing of value) has changed hands. Benefits Realization seems to wish to capture these previously unrecognized benefits in the General Ledger, which is all fine and dandy until someone points out that adding such fuzzy, non-monetized assets (BR isn’t being sold as a good way to add liability) to the General Ledger will result in greater tax liability.

So, Benefit Realization isn’t a real Project Management tool, and I’m willing to wager a keg of rum that it would be rejected outright as a proposed modification to Generally Accepted Accounting Principles. Having this BR concept walk the epistemological plank appears to be rather harsh – avast! Over there! A perfectly acceptable, out-of-the way island! It even appears to have about seven people on it already, living rather comfortably. We should send it there. Arrrrr.

  (1) Davis, David, “Benefits Realization PMI Model,” blog posted on September 29, 2014, retrieved from http://www.projectmanagement.com/blog/Benefits-Realization/10732/ on October 10, 2015 14:12 MDT.
 (2) Ibid.
 

In the New York Times style section from September 29, Brian Lombardi has an article entitled “27 Ways to be a Modern Man.”(i)  Some of this piece I find interesting, while other parts are just loopy. For example, Lombardi asserts that his envisioned Modern Man will own a melon baller (ii) . I don’t even know what that is, which, I suppose, means I’m either not modern, or not a man, by Lombardi’s standards. (I’m assuming that it’s not a device that enables watermelons, honey-dew melons, and cantaloupes to be shaped like softballs, just in case a Modern Man wanted some messy bat-practicing fun. I could be wrong.)

Along those lines, though, I was wondering what I would consider to be a “Modern Project Manager.” After all, isn’t that the point of any certification program, to help potential employers ascertain who has the talent to contribute to a present-day project team, and who might not? So, without the formality of a proper certification criterion document, I’ll offer up a quick talent-discerning checklist for what makes up the “Modern Project Manager.”
1.    The Modern Project Manager has a reliable information stream that tells her how her project is performing in cost and schedule space…
2.    …and this system is not based on either the general ledger, or what the company’s accountants are telling her.
3.    If the Modern Project Manager blogs, he alternates between personal pronouns – none of this “his or her” business.
4.    The Modern Project Manager will not initiate a complex risk analysis or risk management system, nor inflict an existing one on his project team.
5.    But, if the customer is in to that kind of thing, then the Modern Project Manager will gladly provide the results from whatever analysis said customer desires to see. 
6.    The Modern Project Manager attributes his teams’ successes to them, and their failures are automatically attributed to him alone.
7.    Sadly, the Modern Project Manager is fluent in all aspects of human resources law and regulations, even at the expense of assimilated knowledge of the technical nature of the work in front of her. This has become a necessary capability in the overly-litigious world of modern business, both in order to ensure that the project team does not create or maintain an “environment” that any employee would believe to constitute harassment, and to better deflect any frivolous complaint against the project team.
8.    Construction PMs may be used to communicating with walkie-talkies, Information Technology PMs with e-mail, and far-flung PMs via video conferencing. But how many people actually know what a heliograph is? (It’s a device that uses signaling mirrors to communicate over distance, used in place of telegraph lines in the early 1900’s.) At the time, the heliograph was considered fairly advanced, and yet in 2015 the only examples of it are in museums. The point? Communications technology is among the fastest to advance. The Modern Project Manager knows how to text and/or tweet (and, in 2130, business students may dig this article up and point to it, saying “Look at this! Can you believe they used to have to rely on text messages? Also, what’s an e-mail?”)
9.    That having been said, brand-new technology is rarely economical to use on a large scale. The Modern Project Manager does not cling to outmoded approaches, nor does she seek out trendy but unproven technology. Selecting this precise mix of innovation versus tried-and-true technical approaches is the hallmark of the successful Modern Project Manager.
10.    And, of course, the Modern Project Manager logs on to ProjectManagement.com on a regular basis, and makes it a point to read a certain blogger…

  (i) Retrieved from http://www.nytimes.com/2015/10/02/fashion/mens-style/27-ways-to-be-a-modern-man.html?_r=1 on October 3, 2015, 13:49 MDT.
 (ii)  Ibid.
 

A week ago Saturday, September 19 was “International Talk Like a Pirate Day.” I generally try to observe ITLP Day, owing to its historic linguistic roots, its sense of whimsy, and the implied license to engage in truly memorable exchanges with my wife (“Avast, me darlin’, you’d best be stealin’ some more ale for me and me maties.” “Stop talking like that, or I will kill you.” “Don’t you mean ‘keel-haul’?”).
During this time it occurred to me that the profession of pirating must have been quite the crucible for determining talent in the areas of seafaring, thievery, combat ability, and willingness to mangle the English language. Merriam-Webster Online defines “talent” as “a special ability that allows someone to do something well.” (1) So, in all our legitimate businesses’ project teams, the truly talented members are instantly recognized as such, and placed in positions where their special abilities will significantly enhance the overall teams’ ability to attain scope on-time, on-budget, right?

I’m not saying that that never happens, but it is pretty darn rare. As I discuss in my upcoming book The Unavoidable Hierarchy, the human factors that are naturally arrayed against any organization establishing and maintaining a pure meritocracy are many and varied. An abbreviated list includes:
•    Cronyism,
•    Nepotism,
•    Relative physical attractiveness of the, shall we say, non-optimal talent,
•    Ubiquitous and/or oleaginous displays of fealty to the upper ranks of the owning organization from the aforementioned non-optimal talent,
•    Manipulation of the project team’s internal narrative to mis-assign the team’s failures to its talent, and successes to the ones doing the manipulating,
•    …all the way down to a talented employee reminds the owning organization’s Human Resources Director of her daughter’s ne’er do well, pirate-like boyfriend.
With these factors (among many others) in play, it’s a near certainty that pure meritocracies, if they ever see the light of day at all, are relatively short-lived animals.

So, what’s the truly talented but truly frustrated project team member to do? Well, there is actually a certain dynamic in-play that helps the underappreciated but talented employee: if their owning organizations are to stay competitive with others in their business environment, they simply must outperform such competition, and that involves putting your best talent in a position to use their special abilities to bring their projects in on-time, on-budget. This trade-off implies that, while true meritocracies are rare and tend to be short-lived, their business pathology-ridden counterparts, while common, tend to be the first to be overtaken by units of the Royal Navy and sent to Davy Jones’ locker.

In-between we have most organizations, which maintain some survivable balance between meritocracy and upper management’s mascots receiving the lion’s share of promotions, recognition, and loot. If you find yourself on-board one such organization, how do you get ahead, if the avenues for demonstrating your superior abilities are limited, and rarely recognized? There are generally two options:
•    Engage in demonstrated acts of loyalty to the command structure, in an attempt to become a mascot, or
•    Find a different ship, and leave the underappreciating one to its fate.
If the latter of these two choices appears overly harsh or abrupt, consider that, should you attempt the former and be found out to be less than sincere, the typical remedy that they will employ will be to have you walk the plank.
 

  1 Retrieved from http://www.merriam-webster.com/dictionary/talent on September 26, 2015, at 13:27 MDT.