Game Theory in Management

A few years ago I gave a keynote at an Earned Value Management-themed conference, where I used the example of the Battle of Agincourt to point out how the landscape for launching or maintaining a successful PMO had changed, and the PM community had better recognize the nature of those changes before our brand loses virtually all of its value.

For those of you who may not be that into English history, the Battle of Agincourt occurred on Friday, October 25^th 1415, and was fought between French forces led by Constable Charles D’Albret, and vastly outnumbered English forces led by Henry V. Henry was attempting to escape with around 6,000 men to the stronghold at Calais when he was intercepted by as many as 36,000 French near the town of Agincourt. With the martial technology available to each side roughly equal, being outnumbered six-to-one would normally be an automatic death sentence. The numerically superior French could simply out-flank and surround the English and cut them to pieces, similar to the tactics employed by Hannibal at Cannae. But two things had changed in the run-up to battle, and D’Albret failed to recognize their implications.

First, the battlefield was a freshly-ploughed meadow in between two thickly-wooded areas. There was simply no way to encircle the English forces, especially with the French cavalry. If the English were to be brought to battle, they would have to be confronted head-on, down the corridor flanked by the woods.

Secondly, it rained heavily the night before, leaving the field a muddy morass. The typical French knight carried upwards of 80 lbs. of armor into battle, and their horses would be even more heavily armored. By the time the French forces had traversed the approximately 100-yard distance to the English lines, they were exhausted, and still struggling through the muck. They would prove to be easy pickings for the lightly-armed English infantry, who could simply hatchet them to death as they struggled in the mud. By the time the battle was a few hours old, there was a wall of struggling, bleeding, and dying Frenchmen in front of the English lines. Before the day was out, Henry had won an astonishing victory.

What does all of this have to do with Project Management Offices, you ask? Well, two things have changed since the halcyon days of mandated project management capabilities, and I’m convinced that most executives have failed to recognize the implications.

First of all, the ability to demonstrate an advanced project management capability, for the most part, is no longer required of organizations performing project work for the Federal (U.S.) government, nor of virtually anyone else. I believe the main reason that PM requirements arose in the first place has to do with the dual nature of Earned Value and Critical Path method-based information systems. Their first function is to provide valuable cost and schedule performance information to decision-makers. Their second (and far more stringent) function is to generate a narrative of what happened on the project, how it happened, and who made the key decisions. PM information systems create a sort of audit trail, so that errors can be traced back to their origins. It is this second aspect of PM information systems that makes them fairly unpopular with project teams.

Secondly, since the PM capability is no longer required, the implementation approach can’t be top-down, or retain elements of attempting to leverage organizational power to compel the PM capability’s advancement. In short, the directors of Project Management Offices are no longer in the position of enforcers of requirements, but must instead become marketers of information streams to decision-making customers.

So, what’s the acid test to determine if your PMO presents as an enforcer of policy, or a source of valuable information? It’s essentially this: does your PMO behave as a master of the organization’s project teams, or their servant? It’s an important distinction, because the latter can access many more opportunities for success, whereas the former is in danger of becoming a figurative mass of struggling belligerents, just asking to be eliminated from the management arena.

Right up front I want to say that one of the reasons I dislike consultants is because I envy them. I’d really like to be able to make a living doing what they do, while being readily recognized as an expert in the field. I think I have the problem-solving piece of it down. It’s the ability to smoothly communicate the nature of the problems and a recommended solution that evades me. Consider the following table:

…but that’s just me. Generally speaking, though, many (if not most) of the organization’s sub-executive personnel who interact with consultants harbor at least a little bit of resentment, in my experience. It’s usually not the consultant’s fault, either – it’s the fault of those who hired her.

In several of my previous articles, columns, and blog postings I have asserted that, in organizations comprised of degreed, certified, experienced professionals, whatever the results of the consultant’s analysis may be, there are many members of the existing staff who not only already know the true nature of the problem that prompted the consultant’s hiring, they probably have a better handle on how to fix it, both in the short- and long—term.  If I’m right here (and, naturally, I am) then a useful mental exercise would be to put yourself, Ms. Executive, into the shoes of your management team. What are they to think when they see an outsider to the organization given access to the most profound information streams the company has at its disposal, while enjoying higher per-hour pay AND a perceived superior position with respect to their standing in the company’s executive structure (even if it’s temporary)? How could this not engender at least some level of resentment?

Now consider what prompted the need for the consultant in the first place. We’ve already established that, within professional organizations, there are almost certainly some people who already know the nature of the problem that summoned the consultant, and have a pretty good handle on how to fix it – all before the consultant gets badged in. Why haven’t they been “consulted?” It’s because the host organization has wandered so far away from being structured on a meritocracy that its native talent has no avenue for contributing as they are capable.

I’m not (that) naïve.  Very few organizations can even come close to basing their hiring and promotions purely on merit – the brilliant analyst who never has the opportunity to socially interact with the company’s executives doesn’t have the same advancement opportunities as the poorer performer who does have such access. But, when the macro organization has departed so far from the meritocracy model that the internal communication avenues that would normally identify and eradicate problems prior to their becoming major issues has ceased to function, the only real alternative is to bring in outsiders who can circumvent these failed communication avenues, and relay what many of the personnel already know.

Which may lead some already within the macro organization to wonder if all of the executives tumbled out of the same clown car together…

Prior to revealing the adventures of Stanly Raspberry in last week’s blog, I was discussing the inherent difficulties of consulting from the point of view of comparing and contrasting those consultants who were very familiar with a certain repeating problem, but may have little or no idea of how the client organization works, or its weaknesses, with those consultants who were very familiar with the organization, but in a bad position to advise against deeply-held, ingrained management pathologies for fear of losing the business. This week I would like to explore the former category a bit further, since that is where we will discover the optimal consultant.

Consider your family doctor. You see her whenever you are moderately or severely ill. Is she a consultant? Well, she certainly provides a service, one that can’t be performed by just anybody. On the other hand, does she ever, herself, consult a consultant? Well, yes, when her patients have, say, a heart condition, or cancer. In that case she would employ a specialist on your behalf. Now think about the characteristics of the doctor your family doctor is consulting: your family doctor sees you, over and over, for a variety of ills. The consultant will probably only see you once, for this particular type of problem. Assuming the consultant is successful in the prescribed treatment, he will, in all probability, never lay eyes on you again. I’m thinking that this is a trait of true consultants everywhere: they know the problem, and only incidentally interact with those with the problem.

Of course, the project management world is a bit different from the health care industry, but the nature of consultants is something of a constant – which raises the question: What problems would bring a project-performing organizations to bring in a consultant? I’m thinking one (or both) of two reasons: there aren’t enough projects (or customers willing to award project work to the organization), or the projects that the organization already has aren’t performing well. Let’s take them in that order.

When the proposal backlog is thin, or the win rate is on a downward trajectory, who’s responsible, and what do they need to know? The responsible parties are the strategic managers (or those who perform that role), and they need to know about the competition, what they’re doing, how they’re doing it, what their market share is, and why. Only with this information in hand – and, by implication, the existence of the management information systems that generate this information – can they make the informed decisions that can reverse the decline of the proposal backlog and/or contract win rate. And now, ask yourself:

Does any of this information come from the general ledger, or from a risk analysis?

Rather than have my wonderful readers go to the proverbial back of the book, I’ll give the answer up right here and now: no, nein, nix, no no Nanette, nyet, and, well, no.

Okay, what about the other consultant-inducing problem, of poor-performing projects? In these cases the decision-makers need to know how those projects are performing, both with respect to time (schedule) and cost (budget). “Aha!” say the accountants. “That cost and budget stuff – we’re all over that!” Well, not actually, not in project space. The general ledger – the chief (only?) source of management information at the disposal of the accountants – doesn’t really do cost performance. Oh, it can tell you how much you’ve spent, and even compare that to what you were planning on spending. But that’s not the same as actual performance. To get that, you must be able to ascertain how much progress was actually attained against what was actually spent, and how much progress was actually attained against what you had planned to attain. Then – and only then – can an informed decision be made based on project performance.

Soooo… the accountants can’t provide this information, for the reasons just stated. The risk managers can’t provide this information, either. They can only tell you the estimated odds of bad stuff happening.

The obvious conclusion to be derived from our little mental exercise is that the ultimate consultant seeks out data, processes it into information, and provides that information to strategic and project managers on market share and project performance that enables the overcoming of whichever problem the organization is facing. They do this because they’ve done it before, and know which information streams are relevant, and which are superfluous.

And in neither case do accountants nor risk managers qualify.

It was the same dark and stormy night from the last adventure. I was sitting at my desk, staring at the words on the glass panel of my office door, yrrebpsaR ylnatS, eyE etavirP, when a weasel-like shadow moved across it. I knew in an instant who it was: my landlord, Fair Et Weaselhead. He opened the door and walked in.

“You’re three months in arrears in your rent, Raspberry.”

“Yeah, you keep reminding me.”

“And I’ll keep reminding you until I get my money. What’s your problem, anyway?”

“The other business-oriented consulting detectives are getting all the clients these days … I’m not sure why.”

“Maybe they’re better than you.”

“Maybe they can charge less because their landlords aren’t setting their rents too high.”

Just then she walked in.

She was about six feet tall, with long black hair, wearing a double-breasted jacket over a black pleated skirt. Through her pince-nez-styled sunglasses, she looked over the both of us.

“Is this a bad time?”

I answered “no” at the same instant Weaselhead answered “yes.”

“Which of you is Stanly Raspberry?”

“I’m Raspberry.”

“I may have a job for you, if you’re interested.”

“He’s interested!” exclaimed Weaselhead.

“What’s your fee?”

“His retainer is $900, which just happens to be the value of three month’s rent.”

She sat down in the cane-bottom chair, took out her check book and a fountain pen, and began to write.

“Make it out to Fair Et Weaselhead” Weaselhead demanded.

After she tore the check out of her book, Weaselhead snatched it, and darted from the room.

“Okay” I began, “I guess I’m your man. What’s the problem?”

“My name is Dee S. Tress, and I’m the head of the Project Controls group for Acme Corporation. About six weeks ago we hired a consultant from Monolithic Corporation…”

“From who?”

“It’s ‘from whom,’ and you heard me. Anyway, my company’s principals mean well, but they’ve gone soft on the need for project management information systems, and instead are listening to the risk managers’ nonsense. This Monolithic guy is just selling them more of the same, and I’m powerless to stop him.”

“What’s he doing right now?”

“Giving his final report to the management team.”

“Can you get me into his office?”

“Sure.”

“Let’s go.”

 *  *  *

Dee took me to the temporary office the Monolithic consultant had been using. I looked over his desktop and bookcase.  “Hmmm….” I said.

“What is it?” Dee asked.

“Look at these books – Walden II by Skinner, and The Critical Chain by Goldratt. Very telling.”

“How so?”

“Both books use the same device, of advancing a dubious near-science proposition through a fictionalized setting.  The authors adapt a theoretical approach to a problem and, rather than collect evidence and provide legitimate analysis, they make up characters and settings where their theories are ‘tested.’ And – wouldn’t you just know it – they work like a charm!”

“But by making a management science point in a fictionalized setting, isn’t that what Michael is doing right now, in this blog posting?”

At this point both Dee and I looked up at Michael, through the computer monitor. He leaned over the keyboard, and shouted “Get back to work!”

Dee continued: “Those two books, weren’t they best-sellers, with wide-ranging effects on their respective fields?”

“Yeah” I responded pensively. “Yeah.”

“What does that tell you?”

“That your Monolithic consultant isn’t about conducting a proper review of Acme’s projects’ audit trail, but would rather construct a narrative that sounds plausible enough to get him invited back, while, essentially, flattering your superiors.”

“You know,” Dee realized, “he did seem remarkably uninterested in the project managers’ view on what was wrong, and spent all of his time with the accountants and risk managers!”

“Dead giveaway. Where is he right now?”

“Down in the basement – the Hatfield Conference Room.”
“The who conference room?”

“It’s named after an obscure ProjectManagement.com blogger.”

“Let’s go.”

*  *  *

As we entered the conference room, the Monolithic consultant was just wrapping up.
“…and that’s how the brilliant, insightful risk managers saved the corporation, charging only a fraction of the value they brought. The End.”

The Acme executives stared at the consultant, enraptured. The room exploded into applause, as the CEO exclaimed “Well done, very well done indeed! Can you come back and perform another ‘analysis’?”

“Oh yes, please do!” the other managers cried out, in unison.

“We’re too late” I whispered to Dee.

“What can be done?” she asked, her eyes welling with tears.

“We have to get the truth out there … how are you at writing blogs?”

As I’ve begun to explore in my previous post, the consultant/client relationship is fraught with danger. Last week I discussed the difficulties inherent in assuming that any consultant – almost by definition a newcomer to the macro organization – could possibly attain the inside knowledge needed to successfully analyze the managerial pathologies buried deep within the client’s business model. Now, I’m going to turn my acerbic gaze at the other end of the board room table, to the client. Even in those cases where the consultant hired is perfect, and perfectly candid, there’s a very real barrier to the recommendations actually being implemented: it’s the inner child.

In 1964 Eric Burne published his best-seller Games People Play. In it, he asserted three crypto-Freudian aspects of the persona: the child, the adult, and the parent. He also postulated that, when we interact with others, these three aspects can align – my adult, for example, engaging my readers’ adults – or else they can clash (risk managers attempting to write like adults, for example), leading to interactional conflict.

Burne also theorized that we run scripts in our heads, a kind of on-going narrative. In my (not-yet bestselling) second book, I took that idea a step further: I maintain that we actually have three scripts, or one narrative fulfilling three purposes:

·         The child narrative tells us who we are to ourselves,

·         The adult narrative guides how we interact with others, and

·         The parent script pushes us on how we ought to view ourselves and interact with others.

Of the three, the child narrative is most difficult. I believe that we all maintain some delusions in our narratives. Sometimes they’re small and inconsequential (my second book will start selling like gangbusters here, real soon). Other times they’re not so small, or inconsequential. To what we should aspire is not that difficult to change; how we ought to interact with others, while a bit more uncomfortable, can stand correction. But who we are to ourselves – that narrative is extremely painful to change, even in the least little bit.

So, you’re the perfect consultant, sitting across from the client at the conference room table. You have been called in to review the business and its functioning, and report back to your customer on why the organization is highly vexed by a particular problem, or set of problems. Here’s my question:

Is it reasonable to assume that what you have to say will not be painful to hear?

The organization is the sum total of the decisions of its members. Those members with higher levels of responsibility make the choices that have the most far-reaching effects, and the CEO, by extension, has the highest level of accountability for those instances where pathologies have been allowed in to the business model. When significant delusions fuel the narrative that tells the organization who it is to itself, and those delusions are brought before the cold analysis of the outsider, the result is not unlike dropping metallic sodium into rain puddles.

I read a quote recently, and I’m sorry that I can’t accurately attribute it. It may have come from the limitless Jonah Goldberg. A paraphrase is “The truth does not illuminate. It enrages.”

It follows, then, that the consultant has some choices, none of them particularly appealing. She can tell the truth, fulfilling her original charter and accomplishing the mission put before her, but risk enraging the client beyond any possibility of call-back. She can fudge on the truth, taking the politically expedient position that infuriating her client will only lose future business, while making a somewhat less-robust report on the true nature of the difficulties she has analyzed, and hope for future opportunities with the same client.

Or she can lie outright, pinning the blame for the vexing issues on the known enemies of the organization, both internal and external, confident that, by reinforcing the organization’s leaders’ child persona, she will be invited back for more “analysis” work.

Given these options, it’s easy for my dear readers to assume they would make the right choice, being so positioned. But keep in mind – we’re not dealing with the client’s parent, or even adult narrative here. It’s the highly emotional, irrational child’s, and appealing to its sense of proportion is risky, at best (Hey! Maybe the risk managers can compute the odds here!).