Game Theory in Management

On August 2, 216 BC, during the second Punic War, Roman consuls Lucius Aemilius Paullius and Gaius Terentius Varro led an army of over 80,000 men against a Carthagian force of around 50,000, led by Hannibal, at Cannae, a village on the southeastern part of the Italian peninsula. Due to an anomaly in the rules of command in the army of the Roman Republic, command of the Romans actually alternated day by day between Paullius and Varro, and history records Varro as having been in command on August 2^nd. Typically, when Roman forces had an adversary outnumbered to this extent, victory would be all but assured, regardless of who was in command. Unfortunately for the Republic, this would be a very a-typical confrontation. Without getting into the gory details, the Romans lost somewhere between 45,000 and 70,000 men killed, while Hannibal lost around 8,000. Cannae is considered to be one of the most lopsided, complete military victories in history. Since the battle took place on an open plain, it’s fairly obvious that the Romans were poorly commanded, despite their numerical superiority. Whether or not Paullius could have managed an order of battle better than Varro is pure speculation, other than the fact that it’s hard to imagine a worse handling of the forces than the one Varro produced. Kind of makes me wonder if those soldiers marching into battle had any misgivings about the whole odd-days-Paullius-is-in-command, other times it’s Varro arrangement. As canned strategies go, this one was pretty lame.

Meanwhile, Back In The Freudian Psychology World…

Sigmund Freud and his daughter Anna asserted the existence of ego defense mechanisms, defined as:

Defense mechanisms are psychological strategies that are unconsciously used to protect a person from anxiety arising from unacceptable thoughts or feelings. According to Freudian theory, defense (mechanisms) involve a distortion of (reality) in (some) way so that we are better able to cope with a situation.[i]

Among the ego defense mechanisms that may have a bearing on the PM World (or on the Battle of Cannae, for that matter) is one entitled rationalization, defined as:

Rationalization is a defense mechanism proposed by Anna Freud involving a cognitive distortion of “the facts” to make an event or an impulse less threatening. We do it often enough on a fairly conscious level when we provide ourselves with excuses.[ii] 

Varros was one of the few Romans who survived the Battle of Cannae. How, exactly, he explained his crushing, nation-endangering defeat to himself or to others is not noted in history, but he must have done a pretty good job of rationalizing it. There’s no record of his suffering any rebuke or career reversal as a result.

Meanwhile, Back In The Project Management World…

Have you ever been in a PMO where the head honcho seems to have walked into the office with his technical agenda already set, before he or she is even aware of the strengths and weaknesses of the PMO Team itself, much less the macro-organization taken as a whole? I have written in previous blogs of the axiom Affordability, Quality, Availability: pick any two, and how at the very least the person formulating the PMO’s implementation strategy needs to consider which two aspects to emphasize, and which one to give short-shrift. The alternative – to attempt to pursue all three aspects simultaneously – is simply a recipe for disaster. The first time a significant problem arises with, say, quality, the PMO head will focus on correcting it, usually by committing more resources to the problem. When those resources are unavailable for other demands, the PMO head will pivot to attracting more talent, which drives costs up, making the PMO’s services less affordable. Another pivot to addressing escalating costs, and the quality problems resurface, on and on, like a massive business model version of the old whack-a-mole arcade game.

As the downward spiral increases in intensity, so, too, will the tendency for the PMO head to rationalize away the causes of these difficulties, and the most common target is the macro-organization for being too recalcitrant to accept the technical agenda and implementation strategy offered up by the PMO.  It’s classic Freudian rationalization. The difficulties simply can’t be due to the poor technical agenda/implementation approach that didn’t even take into account the affordability-quality-availability paradigm, no siree. It simply must be due to the ignorance or organizational resistance of the rubes in the extant organization, failing to recognize the advanced capabilities of the PMO head. Yeah, that must be it.

So, What Did We Learn From This Little Foray Into Roman History And Freudian Psychology?

Well, a few things, including:

• When the person setting the PMO’s technical agenda is using a canned strategy, without taking into account the new circumstances, the nature of the macro-organization, or skill set of the team, this strategy is almost guaranteed to fail,
• …especially if that canned strategy does not take into account which of the quality/affordability/availability characteristics are most important to the present situation.
• When it does, in fact, fail, the director of the PMO will tend to blame the very macro-organization that he neglected to adequately assess prior to the implementation attempt, engaging in the ego defense mechanism of rationalization. After all, look at all of the published guidance that agreed with him!
• If the person setting the technical agenda for the PMO received that assignment because it was “his turn,” or for any other reason than a record of success in highly analogous situations, then the attempt will almost certainly end badly.

But, somehow, Varros such PMO directors survive, and often don’t suffer any consequences. Odd, isn’t it?

[i] McLeod, S. A. (2019, April 10). Defense mechanisms. Simply Psychology. www.simplypsychology.org/defense-mechanisms.html.

[ii] Ibid.

As GTIM Nation knows, I’ve written previously about the notorious outlaw Billy the Kid, not so much because of him personally, but due to the disparity between the stories about him and the actual details of his biography. For example, American recording artist Billy Joel’s second album, Piano Man, featured a track entitled The Legend of Billy the Kid. It’s fortunate that the word “legend” appears in the title, since several of the specific assertions in the song’s lyrics are false. Consider the following table:

One has to wonder why Mr. Joel would bother being this specific about biographical details that are so at odds with the facts. It’s almost as if, when it comes to New Mexico history of the latter half of the 19^th century, he really doesn’t know what he’s singing about.

Meanwhile, Back In The Project Management World…

Most seasoned PM-types are frustratingly familiar with the difficulties inherent in trying to implement a cost and schedule performance measurement system for an organization that hasn’t worked with one previously, or is nominally disposed to resisting such implementations. Oft-heard objections include:

• It’s too difficult/time-consuming/expensive to implement (it’s not),
• If, by some miracle, you do find a way of getting one installed that’s not back-breakingly difficult, then it won’t return usable or reliable information (also demonstrably false).
• Only highly- (or over-) paid professionals can perform this feat (again, demonstrably false).
• Such systems aren’t applicable to the work this team is performing (if the work in question is a function or related to asset management, this is actually true. Unfortunately, many genuine project teams will attempt to invoke this objection),

…among others. The thing about these types of objections is that they are fairly easily refuted. Where the legend of Cost/Schedule Performance Measurement Systems, specifically Earned Value, begins to deviate strongly from its true nature is when we evaluate some of the assertions from supposed supporters of such systems.

Probably the most common example of this is the notion that the Cost Baseline (a.k.a., the Budgeted Cost of Work Scheduled, BCWS, Planned Value, or PV) must be derived from the most accurate Basis of Estimate available, with only the most recent element-of-cost, overhead rate, and anticipated escalation rates available considered acceptable. While, from an estimator’s point of view, these data elements should be the best available, from an Earned Value perspective they matter little (if any) to its reliability as an information stream. Consider the fact that, once work has commenced on a project, the EV calculation for estimating the at-completion costs has nothing to do with the accuracy of the original estimate. It’s counter-intuitive, but it’s true. The most common formula,

Estimate at Completion = Budget at Completion / Cost Performance Index

…can be reduced to

Cumulative Actual Costs / Percent Complete

…meaning that the original cost estimate is entirely superfluous for the purposes of this critical information bit.

There are many other instances of this effect, but y’all see my point. Legends about historical figures that find their way into entertainment venues usually do not lead to significant breakdowns in the advancement of the management sciences, with their associated loss of efficiency and missed opportunities. Legends that grow up around legitimate PM practices can (and will) do precisely that.

It's almost as if those singing about perpetrating these “rules” should re-brand them as “legends.”

[i] Wikipedia contributors. (2022, April 12). Billy the Kid. In Wikipedia, The Free Encyclopedia. Retrieved 19:38, April 16, 2022, from https://en.wikipedia.org/w/index.php?title=Billy_the_Kid&oldid=1082234887

[ii] Ibid.

[iii] Ibid.

[iv] Ibid.

Psychiatrist Eric Berne’s best-selling book Games People Play (Grove Press, 1964) had a profound impact on the way many people tended to evaluate the behavior of others. After introducing his theories on “Transactional Analysis,” Berne goes on to describe three dozen “games,” which are essentially attempts by those “playing” them to engineer circumstances and manipulate people into recreating scenarios that would lead to an anticipated emotional payoff. My main takeaway from the book is that, while such “games” are almost certainly being played, the hoped-for payoff is perhaps a bit more nuanced. I think the power of the sought-after payoff from the game can be divided into one of two bins: people so engaged are either trying to (a) reproduce the conditions of a previous, traumatic failure, in order to set it right by now making the “correct” decision(s) and escape the regret attached to that episode in their lives, or else (b) are recreating the conditions of a previous victory, confident that their earlier choices will once again produce successful results, along with the emotional reward that comes with it.

Meanwhile, Back In The Project Management World…

Translating Berne into a business model vernacular, we get a perfectly acceptable mode of behavior and operating: people influencing Team members and circumstances to implement a specific management strategy, with the anticipated payoff of a successful project. This person is either (a) using a business model known to have failed in its previous iteration, but will now succeed due to some key changes or modifications, or else (b) recycling a business model known to work in an analogous situation. Now, that all having been stipulated, I believe that there are Berne-like “games,” or canned, go-to strategies that many PMs employ in situations where they are clearly inappropriate, yet the playing PM is convinced that they are on-track for an economic, emotional, or even power payoff at the strategy’s conclusion. In Games People Play, Berne used clever titles (“Let’s you and him fight;” “If it weren’t for you;” “Wooden Leg”) for his games. Since he’s waayyy smarter than I am, I’ll employ the same technique.

“My Black Box: None Other!” In this game, the PM changes or introduces a new software platform that will be performing the project management-oriented cost and schedule performance analysis, specifically the Critical Path and/or Earned Value Methodology software, though sometimes this could include a system that pretends to function as a performance analyzer, but isn’t. In this latter category, so-called “action item trackers” are common. Nominally, this isn’t an issue, but can quickly become highly problematic when such choices are based not on an even-handed analysis of the best fit for the current PMO, but on previous experiences with projects that really have nothing at all to do with the existing organization or scope. The game proceeds as the PM procures the preferred software, installs it on the Project Team members’ computers, arranges for training, fires the metaphoric starting pistol, and then…nothing significant happens. Sure, he’ll get his project reports in his preferred format(s), but no noticeable change occurs in actual project performance. The PM playing the MBBNO game will then blame the members of the Project Team for not implementing this preferred “solution” correctly, making it appear that others are responsible for any failures.

“Assign Easy Work To Favorites, Impossible Work To Scapegoats.” The title of AEWTFIWTS pretty much says it all, but it’s worth examining, if for no other reason than to recognize when it’s happening within your PMO. If the PMO is more concerned with advancing certain favored people rather than maximizing the number of projects being brought in on-time, on-budget, then it will behave in such a way as to protect the reputations of those people at the expense of performing well with the more difficult scope. Truly talented PMs, when handed problematic projects, will often demonstrate their ability by bringing in disaster-headed work to marginally acceptable results, whereas the being-carried PMs will have the same results with rather simple scope to execute. If the entire portfolio appears to be performing at a just-acceptable level, the head of the PMO may be engaged in this game.

“Now I’ve Got You, You (Very Bad Term).” This is a derivative of one of Dr. Berne’s games, but in this case it involves a scenario where a genuinely talented PM is being overly scrutinized by colleagues to see if she violates any of the rules laid out in procedures or policy documents. Almost always carried out by the Maccoby archetypes of Company Man and Jungle Fighter, the ones playing this game aren’t as interested in actual project success as they are in maintaining a highly controlled hierarchy. If NIGYYVBT is being played in your organization, the very latitude of action the Project Teams need to succeed is being curtailed, and it’s not because those doing the scrutinizing have overall portfolio success as their objective.

Now, if any member of GTIM Nation is tempted to tape a hard copy of this blog on an offending manager’s door, I would advise against it. The three games I reviewed are just the tip of the iceberg, and there’s another little game out there I refer to as “We Only Pretend To Encourage Open Communications.”

It’s not every week I get to use two different terms that need explaining in the title of this blog, but that’s what’s called for with this topic. “Moat dragon” is slang for a person of low-to-middling status within an organization who assumes some measure of the authority of the person they serve by acting as a sort of filter, or regulator for people who seek access to the organization’s decision-makers. Sixty years ago, this person may have been called a “secretary,” and basically controlled the executive’s calendar, as well as screening their incoming phone calls. At a certain level, answering the telephone and scheduling meetings and appointments for another person in a 1960’s-era office presents as fairly mundane work. From another angle, though, this function effectively controls, or highly influences, the information flow in and out of this executive’s office, a very powerful sway indeed. Communications have rightly been referred to as the life-blood of the organization, making this person analogous to that organization’s beating heart, or at least its carotid artery. Rather than prolong the anatomical metaphor, I’ll return to the feudal version, with the executive as the king of the castle, his knights as the Project Team, the moat as the exec’s outer office, and the filter/influencer impacting the communications in and out as the … well, you know.

Now, just because rotary telephones and pen-and-ink day planners are a thing of the past doesn’t mean that communications controllers/influencers aren’t having an outsized impact on those communications, and, by extension, decisions coming from the execs. I have written previously about an effect that I’ve referred to as “the black box syndrome.” This is where an organization has been sold on the idea that, if they were to buy this one particular software package, it can feed its decision-makers all of the information they need to successfully lead their Project Teams, or facilities, or portfolios, or … well, anything up to and including the whole enterprise. I find black box syndrome to be a particularly pernicious business model pathology for a variety of reasons, not the least of which is the fact that the Management Information System (MIS) that enabled informed decision-making last year is, in all probability, making notable progress towards obsolescence in today’s competitive environment. The need for more timely, accurate, and relevant information never goes away. Recall the Information Technology (IT) axiom “begin with the end in mind.” For specific applications, this is undeniably true. But in the macro sense, the successful manager does not know what the essential information output that will be needed next year looks like.

From the Project Management Office (PMO) perspective, we already know what the proverbial 80% solution looks like. Even a simple Earned Value Management System, preferably derived from baselines generated from a Critical Path Methodology-based network, used by each and every part of the project portfolio provides invaluable insights into that portfolio’s cost and schedule performance. This information can be further distilled to predict at-completion costs and dates, indicate which types of work the organization performs best, which customers are more reliable or profitable, the types of market strategies that ought to be pursued, and which ought to be abandoned. Many PM-types can spend their careers pursuing this 80% solution, arrayed against our friends, the Asset Managers, as well some within our own camp (cough, risk managers, cough), and delivering an organization into a place where they can become significantly more competitive by embracing the tried-and-true. It can be very rewarding. However, when black box syndrome strikes an organization that’s pretty good at the basic PM stuff, the capacity of those oversold and underperforming software systems to begin to function as moat dragons becomes manifest.

For example, virtually every “enterprise” or “portfolio” management software will claim as its most significant payoff a measurable increase in efficiency. This is, of course, an Asset Management goal, with little appeal to we PM types. To engage in a bit of hyperbole, PMs flat do not care if the printer/copier/scanner they are using to produce a deliverable report was purchased, leased, or what kind of service contract came with it. We just want to know if we’re going to be able to deliver said report to the customer on-time, on-budget. Also, I have yet to encounter any of these enterprise or portfolio management information systems that takes into account the organization’s underlying strategy with respect to the Quality-Affordability-Availability, pick any two, structure. This is not a trivial oversight – the MIS that claims to deliver all the relevant information needed to attain success across a portfolio or enterprise that emphasizes certain points of view at the expense of others causes damage by influencing decisions in a particular, perhaps (probably) inappropriate direction.

In the 1960s, moat dragons could change the course of an organization by frustrating people, and, by extension, their ideas, from receiving a hearing before that organization’s executives. In the 2020s, this function (or malfunction) is potentially taken over by overhyped computer programs and companies susceptible to black box syndrome. So, yeah, feel free to upgrade your portfolio/enterprise Management Information Systems. Just take a peek inside that black box prior to plugging it in.

It might have a dragon inside.

The reality television show Married at First Sight, currently aired in the United States through the Lifetime network, is premised on the idea that “experts” pair volunteer singles to get married to each other, but there’s a catch: as the title implies, these singles don’t meet each other until they are literally participating in their own marriage ceremony. I pretty much view the series as a milestone on the downward trajectory of American culture. That’s not to say, however, that it’s without a capacity to demonstrate some of the more interesting aspects of group behavior.

One of the things that I found to be a glaring example of the “experts” not doing a very good job of screening candidates has to do with the fact that virtually every couple has to deal with an issue or problem that probably should have been detected during the pairing process. A Season 2 groom threatened to harm his bride, and she eventually took out a restraining order on him.[i] One groom found out almost immediately after his wedding that his new bride had an outstanding arrest warrant. A majority of the couples end up divorced, if not at the end of that particular season, then later[ii]. If I’m in a charitable mood I can be led to believe that these red flags were simply missed by the “experts” conducting the matching process; however, I can’t help but to recall that conflict is one of the main reasons people are attracted to reality shows. Consider that, should each of the couples promptly fall in love with each other, and consistently demonstrate that they will elect to stay married at the completion of the season, the series would become mind-numbingly boring to all but the most sentimental of viewers. To be clear, I am NOT accusing these “experts” of allowing an easily-detectable issue to go unaddressed until after the paired couples exchange vows in order to attract more viewers when the inevitable conflict manifests itself. Nope, not doing that at all. Not at all.

Meanwhile, Back In The Project Management (Office) World…

When a project-oriented organization grows to the point that it decides to establish a group or team that handles PM issues and technical agendas in a coordinated fashion, to ignore how its own business model is bound to influence the nascent PMO’s functioning would be a blunder (not that it doesn’t happen). If the new PMO Director thinks they can simply harangue upper management with PMBOK Guide® quotes to advance the PM capability maturity, ultimate failure is virtually guaranteed. What’s critical in the start-up (or restart) phase is an assessment of the particular PM-centric needs of the macro-organization, combined with a clearly articulatable strategy for how the PMO will meet those needs within the constraints of the prevailing business model, whether or not those constraints are documented, or even acknowledged. And for this, we’re going to need some, ummm, experts.

What would these experts be looking for? Besides a familiarity with the specific marketplace and the organization’s place within it, a basic assessment involves the Quality-Affordability-Availability, pick any two paradigm. The organization that has succeeded by concentrating on affordability and availability is not going to be well-served by a PMO that insists that its Project Managers strictly adhere to the drivel more rigorous edicts of the guidance-issuing community. A (very) basic PMO structure alignment analysis would look like this:

• Organizations known for providing projects on a ready basis (availability), for a competitive price (affordability), should have a PMO that makes available cost/schedule management information systems on a “cafeteria” basis. The individual PMs can pick and choose which information streams help them, and at what level of rigor.
• Companies that deliver a higher-quality service, and can do so presently, will need a PMO with a high level of demonstrable expertise. An advanced training program will be needed. Also, this PMO will need some level of insulation against attacks from the Asset Managers whenever budget defense time comes around.
• The implication of organizations that deliver a high-quality service/product, charge a competitive rate for it, but aren’t generally available (customers need to queue up) is that they need to expand. The PMO that delivers insights into which types of projects perform better than others will match this profile best.

I can’t help but to recall that a natural conflict exists between the business model/world view of Asset Managers and PMs. Consider that, should the new PMO succeed, our friends the accountants would no longer be the exclusive source and residence of the information streams needed to keep the company afloat. To be clear, I am NOT accusing Asset Managers of, generally speaking, deliberately failing to provide a modicum of support for the PMO in order to maintain their positions atop the management information stream hierarchy. Nope, not doing that at all. Not at all.

[i] Wikipedia contributors. (2022, March 8). Married at First Sight (American TV series). In Wikipedia, The Free Encyclopedia. Retrieved 00:40, March 12, 2022, from https://en.wikipedia.org/w/index.php?title=Married_at_First_Sight_(American_TV_series)&oldid=1075875406

[ii] Ibid.