Game Theory in Management

Waaaaayyyyy before PMI® became a professional association in 1969[i], many large-scale, complex projects were being successfully completed on-time, on-budget, by managers who had an extremely advanced grasp of the field of PM, even if they didn’t articulate their understanding in terms we use today. I could be wrong about this – any day now the Construction Office chamber of the Great Pyramid could be discovered and accessed, with the schedulers still waiting for their early-version Critical Path Methodology software to complete a forward and backward pass on their 20,000-activity network. But my speculation is that these historic PMs would do things like assign a higher priority to time-critical tasks without invoking the term “crashing the schedule.” I’m also fairly certain that, prior to 1823 and Carl Friedrich Gauss’ publication of the monogram Theoria combinationis observationum erroribus minimis obnoxiae, PMs were quite aware of many of the things that could go wrong with their projects, they just didn’t document them with some statistical speculations of their odds of occurring in a “risk register” (no initial caps here, either).

Once PMI® did come into existence, and much of its approach to the management sciences took on a scholastic flavor, the lexicon not only became standardized, it became a bit more academic, a function of applying its wide range of theories across multiple industries. PMs working the American Interstate Highway system in 1958 may have had little in common with those working in the nascent National Aeronautics and Space Administration (NASA), but managers in both organizations would have instinctively known that some activities would have to be completed before others could actually start, and that comparing those activities’ percent complete to their cumulative spent cost and schedule could give them a pretty good idea of how much their work would cost at completion, and how long it would take. They would have understood the basics of schedule logic and cost/schedule performance indicators, even if they didn’t use those exact terms.

And therein lies a problem: many in PMI® today have come to the practice of Project Management on scholastic or theoretical terms, while many others have arrived with a boots-on-the-ground understanding of its precepts. This latter approach is how I swerved into PM. I was working for a Department of Defense contractor that was building a type of advanced communication system. The design and development of this system came with a myriad of research deliverables and design reviews that were described in a document known as the Contract Deliverables Requirements List, or CDRL. Trick was, these deliverables’ due dates weren’t firmly established. They were almost always described as being 90 or 180 days after some other deliverable was submitted, or 30 days prior to one of the design reviews. My title at the time was “Data Manager,” and it was my job to “coordinate” the development of all of these deliverable documents, oversee their progress, and transmit them to their far-flung recipients on-schedule. At the time personal computers were something of a novelty, but I had one in my office, running one of the earliest spreadsheet packages, Lotus 1-2-3. So, I went through the CDRL, one entry at a time, and in the cells I had labeled “Due Date,” would place the equation to add 90 (or whatever) days to that deliverable’s predecessor’s end date. Without having been taught what a finish-to-start link was, or the term “lag,” I ended up constructing a Critical Path network that would automatically re-calculate a myriad of Start and Finish Dates based on the values that were placed into the Today’s Date field, and whichever Review date was considered reliable.  It wasn’t until the Project Controls Analyst on this project saw what I was doing, and told me that I should look in to the Project Management profession that I had any idea that that’s what I had been doing all along.

So, back to the communications gap. Having spent a lot of time around construction and manufacturing PMs, as well as their Agile/Scrum counterparts, I realize they’re discussing the same ideas, just using a different lexicon. So, as a service to GTIM Nation members who may find themselves in a situation where they have to serve as a translator between the Practical and Scholastic-oriented PMs, I offer the following conversion table.

This is far from an exhaustive list, but it will suffice for now.

Or, there’s more, but I’m done.

[i] https://www.pmi.org/about/learn-about-pmi/founders

I was reminded of the quote in this blog’s title from Dicken’s A Christmas Carol (that actual line of dialogue is from the ghost of Christmas Present – he’s throwing a paraphrase of one of Scrooge’s previous assertions back in his face) while attempting to get a handle on all of the business model pathologies that have been inflicted by our friends, the Asset Managers, by the acceptance of the axiom that the point of all management is to “maximize shareholder wealth,” with its accompanying metric, the Return on Investment (ROI). Of all of the ironies attached to the ability of this management worldview to misdirect, one of the most profound has to be that the tenets of Project Management actually provide the best remedy, the best hope for those advancements in the management sciences needed in an ever-advancing, technology-driven business world.

The idea that the prominent (if not only) litmus test for evaluating a given business strategy ought to be how it impacts the organization’s equity probably pre-dates Luca Pacioli’s seminal work in bookkeeping, published in the late 1400s[i]. I would go so far as to speculate that the double-entry bookkeeping method, already the basis for assessing profit and, therefore, tax revenue, became truly accelerated into management philosophy preeminence as the industrial revolution spread across the world, necessitating heavier and more complex interactions with the banking and finance sectors. Now, don’t misunderstand: I’m not saying that all, or even most of the theories, techniques and practices emanating from Asset Management arena are invalid, or harmful. What I am suggesting is that, when those theories, techniques, and practices are employed outside of the Asset Managers’ appropriate purview, they create business model pathologies that not only can detract from the organization’s ability to achieve its mission or goals, they can actually harm the organizations’ members, or even the management science realm writ large.

To support this bold assertion, let’s return to A Christmas Carol for Exhibit A. Two “portly” gentlemen are appealing to Scrooge for charity dollars, to help feed and clothe the poor. While not said explicitly, it’s safe to infer that Scrooge refuses them on the basis that (a) the poor have recourse to other, non-charity resources, ones that require no sacrifice on his part (hence the quote in the title), and (b) there’s absolutely nothing for him to gain by engaging in charity. To Scrooge, every shilling donated is a total loss – no return on investment, and a negative ROI. Of course, by the end of the story he has reversed this world-view, but only through the extraordinary intervention of the three spirits.

My next example comes from the publishing industry. It’s been said that Frank Herbert’s novel Dune was rejected by over twenty different publishers before Chilton Books picked it up, and they were better known for printing automobile repair books. While I’m sure that each of those twenty publishers had subject and thematic bases behind their manuscript evaluation process, I’m also pretty sure that the major criterion for accepting or rejecting a given work was its predicted ROI. But this only points to a major failure of the ”maximize shareholder wealth” paradigm, as well as the failure of ROI to return a reliable quantification: there are simply too many variables to recognize, much less accurately quantify.

Besides leading to poor managerial decisions, overuse of Asset Management approaches can introduce business model pathologies into the organization. I had a dear Uncle who had worked as a Vice President at a utility supply company. Most of the employees were paid a regular salary, but the sales staff was paid based on commission. Once, one of the other veeps became upset upon learning that one of the sale staff had received a larger paycheck than the veep. In his mind, his placement in the organization’s hierarchy above the sales person should have precluded this event. My Uncle pointed out that the sales person in question was only paid more because he had brought in more business for the company, which was good for the entire organization. But the thought that human resources ought to be renumerated based on their placement within the organizational structure rather than actual contribution had permeated the company. And when I say that this represents a business model pathology, consider the “remedies” to the perceived problem: either raise the ignorant veep’s salary (a mistake), or lower the performing sales person’s renumeration (a huge mistake).

In contrast, Project Management theory focuses on attaining a specific outcome, accomplishing set scope. To engage in a bit of hyperbole, if the Project Team accomplishes this goal on-time, on-budget, we PM-types really don’t care if they did so by working fewer hours, or if their renumeration was better than our own. Those are elements of Asset Management, with its infernally over-used Return on Investment calculation. In short, as long as we’re attaining scope on-time and on-budget, we’re actually happy that the personnel didn’t have to exhaust themselves in a workhouse-like environment.

So, I’ll pose this question: does pre-enlightened Scrooge present as a Project Manager, or as an Asset Manager?

[i] Wikipedia contributors. (2021, November 24). Luca Pacioli. In Wikipedia, The Free Encyclopedia. Retrieved 19:14, December 13, 2021, from https://en.wikipedia.org/w/index.php?title=Luca_Pacioli&oldid=1057012804

The Agile/Scrum Project Management strategies and techniques were developed to address the business model needs specific to information technology (IT) projects, specifically software engineering work. The major driver, of course, had to do with configuration management. Traditional PM techniques for processing baseline changes typically entailed the creation of a Baseline Change Control Board that would meet once per month, and review the baseline change requests’/proposals’ (BCR/BCP) scope variations, along with the accompanying modifications to cost and schedule. One of three outcomes would be produced: the BCR/BCP would be accepted and implemented, rejected, or sent back to its originators with instructions on how it should be modified in order to gain acceptance. If either of the latter two outcomes were to happen to a critically-needed change to the project, the resolution to the subject BCP/BCR could potentially drag on for months, a time interval fatal to all but the most drawn-out of IT projects.

To accommodate the far more fluid and fast-moving IT project configuration management process, three “roles” are defined, specifically:

• Scrum Master,
• Product Owner,
• Development Team,

…with their specific functions and areas of authority spelled out in such a way as to allow for processing baseline changes quickly and efficiently, all while avoiding the outcome of a poor or non-existent configuration management process, the dreaded rubber baseline. There is, however, another aspect of IT Project Management that is also very different from its product or building-oriented cousin, and it has to do with the nature of the Work Breakdown Structure. To make this distinction, I want to propose a mental exercise that includes a water pump, the kind that’s installed on automobiles (well, the ones that burn fuel).

For those of us who haven’t had the experience of having to replace one of these things ourselves, the part is really very simple. It’s usually an impellor and a pully wheel on a shaft, with a housing and a pair of hose flanges in-between. They typically fail when the bearings that hold the shaft in-place wear down, and the pump assembly is no longer water-tight. When it’s working correctly, it pulls coolant from the heat exchanger (the radiator) and pushes it into the engine. From the engine, the coolant returns to the radiator, and the process continues as long as the engine is running. In fact, it’s a little amusing that the pump is still referred to as a “water pump.” These things haven’t been circulating just water for decades now. Indeed, some car manufacturers used to require a very specific coolant formulation (e.g., GM® and “Dexcool”) to avoid damaging the motor.

Meanwhile, Back In The IT Project Management World…

The focus of most IT projects is its eventual end-goal, a computer program. Veteran GTIM Nation members know of my basic Management Information System (MIS) architecture scheme:

1. The data is collected based on some criteria or discipline,
2. it is processed into information,
3. and transmitted to its intended audience in a manner that they can readily understand and use.

The end-product of manufacturing a water pump is, of course, an in-spec water pump. But data is different. An in-spec water pump for, say, a 1998 Cadillac Deville will be an in-spec water pump for its lifetime. For IT projects, though, one of Hatfield’s Incontrovertible Rules of Management (I forget its number) is that all valid management information must have the following characteristics:

• It must be accurate,
• It must be timely, and
• It must be relevant.

Old data can, and usually does, become irrelevant. Depending on the MIS application, this exceeding of the data’s shelf life can be measured in weeks, or days – or, sometimes, just hours. So, in addition to the configuration management challenges inherent in IT work, there’s also the issue that, even when the software’s function is performing exactly as intended, as time goes by the output is not only losing relevance, it may even be becoming misleading. It’s analogous to putting the wrong formula of coolant into your radiator. The water pump may be working perfectly, but what it’s pushing along is actually damaging to your business engine.

All of which brings us back to the WBS problem I referenced earlier. If the intended outcome of the IT project is delivering valid information to decision-makers, then we’re firmly in PM space. However, if the intended outcome is to simply pump coolant between engine components process the data into information, with the actual cooling of the engine validity of that information no longer part of the final scope, we have ventured into process management space, which is very different. Without some capability to ensure that the collected data is accurate, timely, and relevant, the best processors and programs in the world are going to fail to deliver pertinent information. It would be like putting green coolant into a radiator that’s only supposed to have orange.

And that would be bad.

Back when I was in fifth grade, I was troubled by the suspicion that my homeroom teacher wasn’t assigning grades based exclusively on academic merit. In a foreshadowing of a phenomena I would encounter from then on well into college, I came to believe that she would essentially take a reading of which clique the cool kids belonged to, and grade them more leniently, with the harshest evals going to the un-cool kids, the set that I definitely belonged to. I arrived at my belief after having taken a standardized test and scoring rather highly in three of the four categories, and at-grade level for the fourth, all while struggling in this person’s class. Even in my undergraduate program there was a professor notorious for never giving a man a grade better than C, nor any woman a grade less than B. I finally learned to avoid these frauds when I could, somewhat out of a concern for grades, of course, but more because these people’s whacked-out sense of perspective and proportion pretty much precluded them from having anything useful to teach me. Then there’s also the effect of under-correction where it’s needed makes the target weaker, while over-correction will often make it stronger.

Meanwhile, Back In The Project Management World…

While I do make an attempt to not be as naïve as a fifth grader in my expectations of institutions being managed based on performance or merit, I still find it highly disconcerting when I encounter examples of this not being the case. Unfortunately, virtually everything that I’ve seen written on the topic of project portfolio management addresses things like optimal resource allocation, or how to measure the individual project’s performance, or recommended ways of capturing scope, etc. I’ve never come across any discussions that key challenges of the PM working a project within a larger program or portfolio may have less to do with cost or schedule performance – the meritorious aspects of PM, if you will – and can be more influenced by some of the more gnarly aspects of organizational behavior and performance.

So, in a meritocracy, how should projects be placed hierarchically within an organization’s portfolio? Based on Corner Cube theory[i], the optimal criteria would include:

• Asset Management: how profitable is this project? Note that the Contract Budget Base and Fee amounts are different figures.
• Project Management: how successfully is this project being executed? This matters for a couple of reasons, one, to avoid overruns or delays eating into the expected profits, and two, as an indicator of which kinds of work the organization does best.
• Strategic Management: does this project enhance the organization’s market share in a targeted industry?

At the other end of the scale, some of the sub-optimal criteria for the hierarchical placement of a given project within the portfolio include:

• Does it have a large budget? While large projects are generally good for the organization, one that is performing poorly can easily wreck its home company.
• If the project does have a large budget, is it somewhat routine work? This may be significant if there is a number of highly-placed, highly-paid managers who are not the most talented (think Maccoby archetypes Company Man and Jungle Fighter), but are nevertheless in need of a charge code. If the project is both big enough AND not requiring novel technical approaches to its problems, then it is probably safe to assign this category of manager to it.
• Is it interesting, high-profile work? The gee-whiz factor should never be underestimated when it comes to which projects are perceived to be preferable within the portfolio.

Why does it matter where a given project is placed within the portfolio’s hierarchy? By no means absolute, but generally speaking the higher-status projects have better access to limited resources and greater latitude of managerial action (these projects have an easier time of bending procedures to attain a desired end), both of which are benefits of enjoying higher visibility among the organization’s executives.

As I’ve noted in previous blogs, complaining about such deviations from a merit-based rendering of the project portfolio is most likely futile. The silver lining here is that, if the projects enjoying premium placement within the portfolio are truly there due to the sub-optimal evaluation criterion in the second set of bullets, then they are more likely to attract the (Maccoby archetypes) Jungle Fighters and Company Men within the organization, leaving the coveted Craftsmen and Gamesmen for use on the other work.

Besides, the over-appreciated but under-scrutinized projects are more likely to go off the rails.

[i] Hatfield, M. A. (1995). Managing to the corner cube: three-dimensional management in a three-dimensional world. Project Management Journal, 26(1), 13–20.

My interpretation of the famous Don Eberly quote, that politics is downstream from culture[i], is that those things which become acceptable in a nation’s or society’s culture will make their way into public policy, sooner or later. It follows, then, that if the things that said culture embraces lead to a more productive, wholesome zeitgeist, it will become more successful; and, if this culture accepts and ultimately embraces the darker aspects of human behavior, it will eventually collapse, absent some form of a great awakening and subsequent reversal. If this axiom is reliable in the socio-economic sense, I was wondering if it was also relevant in the…

Meanwhile, Back In The Project Management World…

For the purpose of this analysis, I want to define a couple of terms that get used a lot, but have such broad connotations associated with them that they’ve become almost meaningless:

1. A person is engaged in office politics when they behave in such a way as to enrich or benefit themselves while detracting from their organization’s or team members’ interests or goals.
2. Organizational Culture is that set of beliefs commonly held by the members of the organization that determine each members’ place in the hierarchy. Note that these beliefs can be (a) openly articulated (e.g., mission statements or policy documents) or (b) not acknowledged formally, but should still be considered operative (e.g., not getting drunk at the company’s Christmas Party).

Did any member of GTIM Nation snicker at that last example? I actually worked for a large and (for a short time) successful, but ultimately dysfunctional company that would celebrate large project proposal wins with an open bar caterer for the Friday afternoon following the announcement. No other event would warrant this kind of celebration. This was a heavily project-centric organization, and the message that this particular aspect of its corporate culture was sending was clear: winning more project work is the ultimate good, far better than actually performing well on existing work, or mentoring younger workers, or anything else. So, at the only Christmas Party that I attended for this company, there was a disc jockey (a person who plays records in lieu of a band), some meatballs on toothpicks, cubes of cheese, crackers … and an open bar for the entirety of the party. I’ve never seen so many people unfit to drive in one place at the same time. And yet, since this type of behavior had all but received a green light from the organizational culture, it carried with it no political repercussions.

This particular company was out of business within a decade of this party.

Of course, one of the most (if not the most) common and effective tactics that those who engage in office politics employ is calumny against their perceived rivals. Here is where this all gets interesting, because the person who is actively engaged in office politics cannot do so safely if they are perceived as doing it. Nobody likes a (Maccoby archetype) Jungle Fighter, so they must do the office politics stuff in a way so as to not appear to be doing office politics. This is where we circle back to the concept of office politics being downstream from organizational culture: if the target of the office politician’s defamation or slander is actually at variance with the openly articulated (2a above) organizational culture, it’s easy to make such a variance known. It can be openly pointed out at a project review, or other meeting-type venue. But if the target hasn’t done anything “officially” wrong, what’s a Jungle Fighter to do? They must attempt to create a narrative that the target has done something that’s inconsistent with the informal set of rules employed by the organizational culture (2b above). Make no mistake – a sufficiently politically-savvy Jungle Fighter can still make really bad things happen, even within this relatively restricted arena. Look how much death and misery just one Iago did in Othello.

So, what can be done in organizational culture to dissuade such negative outcomes from this type of office politics? Two tactics can be very effective:

• Introduce (or maintain), either formally or informally, a strong resistance to ex parte conversations. I once worked with a manager who would insist on bringing in to the conversation any third-party being discussed. This brought the then-routine practice of engaging in calumny to a screeching halt, at least within his organization.
• Conduct yourself in accordance with your organization’s stated rules, of course, but moreover behave in ways superior to the unspoken code, as you learn what those standards are.

These modifications to the corporate culture won’t guarantee you safety from the office politics swirling around you. They will, however, make you a less tempting target for the Jungle Fighters, as they will be losing both their favorite weapon and likely targets.

And you just might end up making the corporate culture better for everybody.

[i] Eberle, Don, Building a Healthy Culture: Strategies for an American Renaissance, ed. Eerdmans, 2001; pp. 75-100