Game Theory in Management

Project Managers, by definition, grapple with obstacles to completing their defined scope, within budget and time constraints, virtually every working day of their lives. I won’t expand the definition to “problem solvers,” since that’s what every working person on the planet does, but I will point to a specific pair of problems that seem to confront PMs all the time, but are truly insidious in that they don’t necessarily present as obstacles to achieving project objectives. In fact, these barriers I want to discuss come across as the exact opposite, as if they’re there to help.

They are not.

When I was working my first book, Things Your PMO Is Doing Wrong (PMI Publishing, 2008), I had some conversations with the excellent Bud Baker, Professor of Management at Wright State University, about a management phenomenon known as the “silent veto.” This is where an organization is attempting to advance a certain capability maturity, and the existing personnel claim to be on-board with the initiative, but when it comes time to actually implement the new aspects of the business model they simply don’t contribute. The implementation grinds to a halt, and those responsible for getting that particular job done suffer the consequences. Bud pointed out an even more insidious variation, the “slow roll.” This is where the members of the organization tasked with performing the tasks involved in such initiatives aren’t really in a position to be as blatantly non-contributing as the silent veto-ers (such as in the military), so they claim up-front to be totally copacetic with the efforts, and even actually contribute – just not enough to achieve success. The slow-rollers gain a sense of how much effort is behind the initiative, and will mete out their backing efforts at the precise rate needed to appear to be helping, but not enough for project success. After too much time has elapsed in pursuing the new objectives, frustration sets in, funding is withdrawn, and those responsible for getting that particular job done suffer the consequences.

Next up is a business model pathology largely attributable to our friends, the Asset Managers, and has to do with a claim to duplicating effort. As I have written in this blog previously and extensively, the Asset Managers’ overriding theme of “maximizing shareholder wealth” is so intellectually vacuous that it astounds me that it’s still being taught as supposedly advanced business schools, but it is a prevalent presence in most organization’s management culture. The way it tends to impact PMs specifically has to do with specific functions needed for specific project work. Say your project has an extensive number of items requiring inventory, and the spreadsheets aren’t doing a sufficient job of keeping everything straight. These items are already being tracked by the general ledger, since they had to be procured in the first place, so that your need for enhanced inventory management has nothing to do with the balance sheet. But, when you arrange to purchase an off-the-shelf inventory system, somebody pops up and states “You can’t do that. We already have an inventory system, and we don’t want to duplicate effort.” Is this extant inventory system available to your project team right now? Is it less expensive than the alternative? Can it easily and quickly isolate the inventory germane to your particular project? Will an additional system actually harm the organization’s overarching Management Information System Program? Unless the answer to every single one of these questions is an unqualified “yes,” the “can’t duplicate effort” objection is irrelevant and invalid. Why not duplicate effort? If the project can afford it, whom, exactly, is being harmed?

The reason I’ve tagged these two phenomena with the “insidious” label is because they pretend to help your project while doing the exact opposite. The slow-rollers will point to any effort that they’ve put in to the achievement of project goals as proof that they are contributing, all the while knowing that they’re not doing enough, in time. The can’t-duplicate-effort crowd will insist that their position is entirely reasonable, common sense-driven, and even obvious to everyone involved, since, in this mindset, duplicated effort equals wasted effort. But the project that has been completed with absolutely no waste doesn’t exist, and to pretend otherwise is nothing more than managerial kibbitzing. Imagine trying to estimate resources where absolutely no “duplication of effort” takes place, where every single activity had exactly zero overlap from function to function. Even attempting to eliminate any form of redundancy is virtually guaranteed to generate functional gaps, schedule delays, and overruns.

These two tactics don’t help, they hinder, and those who perpetrate them are naïve. Or insidious

The famous television drama Dallas had a reboot, starting in 2012 and lasting for three seasons. It brought back three main characters from the original series, Sue Ellen, Bobby, and, of course, J.R. Ewing, some familiar characters (Cliff Barnes), and adult versions of J.R.’s and Bobby’s sons, John Ross and Christopher, respectively. I think part of the reason that the original version was so successful had to do with the steady and predictable nature of the inter-character conflicts. J.R. was the perennial villain, but it was actually pretty easy to root for this character to prevail against the always irksome Cliff, the constantly righteous Bobby, or the equally-villainous-but-not-as-clever Jeremy Windell, head of rival WestStar Oil.

But the reboot didn’t maintain this predictability. Characters who were introduced early in Season 1 who presented as clear-cut protagonists would later become extreme antagonists (Christopher Ewing’s fiancé), and vice-versa (Bobby’s wife’s ex-husband). Keeping track of who was aligned with (or now set against) whom became a dizzying affair (pun intended), as the network among the known characters seemed to endure major re-alignments, and on a consistent basis.

Just one year prior to the Dallas reboot, the ABC network launched a series entitled Revenge. Loosely based on Alexander Dumas’ book The Count of Monte Cristo, Revenge took place in The Hamptons, and followed the attempts of the suddenly-wealthy Emily Thorne to extract revenge against the people who betrayed and conspired to murder her late father. I must confess that I was among this show’s early enthusiasts, until something unusual began to happen. Characters who presented as clear-cut protagonists would swerve into the antagonist’s category, and back again. Keeping up with who was allied or opposed to whom became a dizzying affair. As plot lines began to hemorrhage plausibility trying to keep up with the making/maintaining/breaking/re-establishing alliances among the characters, ratings suffered. Both the Dallas reboot and Revenge were cancelled in 2014.

Meanwhile, Back In The Project Management World…

GTIM Nation is aware of the axiom “Quality, Affordability, Availability: pick any two.” When an organization seeks to set up or renew its Program Management Office (PMO), it’s often due to a need or problem that requires a response, or at least the creation of an organization that’s capable of providing a specific remedy. I would venture a guess that, in most cases, the PMO’s genesis is rooted in an unfortunate tendency for the projects in the portfolio to overrun, come in late, or both. The PMO gets set up and, with the introduction of some basic Earned Value and Critical Path Methodology systems, managers are suddenly making much more informed – better – decisions, and the frequency of late and over-budget completions is reduced, or even eliminated, or at the very least everyone has a legitimate early-warning when things are about to head off of the rails. In other words, a quality PM service has now been provided. And here is where the trouble often begins.

Whispered criticisms of the cost of the PMO become spoken complaints in the board room. The PMO Director will usually put up a decent initial defense, but our friends, the accountants, will continue to increase pressure to “reduce costs.” At this point the PMO Director has a choice: either reduce his talent pool, or make them less available for the level of demand, all to make the PMO more affordable. In essence, the Asset Managers have made one of the decisions key to the PMO’s long-term strategy, that it must be “affordable.” Unfortunately, the high-level talent that led to the portfolio’s performance turnaround rarely want to be seen as “affordable.” They expect to be paid commiserate with their contribution and, if they’re not, will leave. Make no mistake: setting up a training program to help move entry-level Project Controllers to mid-level, and mid-levels to advanced, is not an automatic solution. Such programs are not cheap.

What’s the solution? Admittedly painting with a very broad brush here, my recommendation would be: establish which two of the Quality-Affordability-Availability triad will serve as the PMO strategic foundation, and stick to them. Know that whichever aspect is the one not central to the strategy will become the focus, not of criticism, but of condemnation:

• The affordable, available system will be condemned for not being good enough;
• The affordable, quality system will be condemned for the waiting period for implementation;
• The quality, available system will be automatically condemned by our friends, the accountants, for costing too much.

But you, PMO Director person, must stick to your strategy. Know that these condemnations are coming your way, and be prepared to counter them. Otherwise, you run the risk of trying to correct the condemnation du jour, losing strategic direction and integrity, and ultimately getting cancelled.

And not even setting up the “Who shot J.R.?” cliffhanger will save you.

Yeah, I know PMI® would just assume that only people of good character and are willing to abide by its code of ethics should receive the Project Management Professional certification, but hear me out on this. While Vader’s appearance, sounds from his labored breathing, and expertise with a light saber are all captivating aspects of the character, when we actually look past these visually amazing distractions we are presented with direct knowledge of his “scope” in each of the three original movies in the initial trilogy:

• Star Wars (later re-titled A New Hope) – retrieve the stolen plans to the first Death Star.
• The Empire Strikes Back – capture the Millennium Falcon, with its crew and passengers alive.
• The Return of the Jedi – capture Luke Skywalker, and deliver him to Emperor Palpatine.

In previous blogs I have made the distinction between Project Management, Asset Management, and Strategic Management, so:

• Asset Managers seek to “maximize shareholder wealth,” and their primary information source is the general ledger.
• Project Managers seek to execute their defined scope and accomplish it under the customer-driven parameters of cost and schedule. Earned Value and Critical Path Methodologies drive their information streams.
• Strategic Managers seek to maximize market share in whichever industry their organizations belong.

It seems to me that, in virtually every line of dialogue emanating from Darth Vader, he clearly places himself into the PM bin. For example, when he boards Princess Leia’s starship and is informed that the plans to the Death Star – which he knows have been transmitted to the ship – aren’t on board, he immediately surmises that the plans must have been put into one of the escape pods that had been ejected during or immediately after the battle. What would each of the management types have said at this point?

1. “Perform an evaluation of the Return on Investment for the effort of sending an entire battalion of the Empire’s best men to locate one specific escape pod. If the analysis returns a number greater than one, go ahead and do it. Otherwise, it won’t be worth it.”
2. “She must have hidden the plans in the escape pod. Send a detachment down to retrieve them. See to it personally, Commander.”
3. “I’m just not seeing how retrieving those plans will translate into more star systems joining our Empire.”

Before you write down your selection’s number, consider which response is most closely aligned with the scope statements for each movie from the first bulleted list, and then proceed to mental exercise number two.

In The Empire Strikes Back, Vader is determined to capture Han Solo’s ship, the Millennium Falcon, along with its passengers and crew. When the fleet of Imperial Star Destroyers – rather large, ponderous ships – find her, she escapes into an asteroid field. Newly-minted Admiral Piett informs Vader that the fleet dare not follow the far more nimble Millennium Falcon into the asteroid field, due to the excessive damage they can expect to endure. Again, which statement is most closely aligned with the Project Management approach?

1. “Thank you for that insight, Admiral. Our people are our greatest asset. Could I trouble you to perform another cost-impact analysis of having the fleet enter the asteroid field?”
2. “Asteroids do not concern me, Admiral. I want that ship, not excuses.”
3. “I’m sure the Emperor wouldn’t want to risk half the fleet in an endeavor that won’t add to the number of star systems under his purview.”

Write down your answer, and proceed to mental exercise number three.

In Return of the Jedi, Vader receives a prophecy from Emperor Palpatine himself, that (spoiler alert!) Vader’s son, Luke Skywalker, will seek Vader out, somewhat undermining Vader’s proposed scope of tracking down and capturing Luke himself. Nevertheless, Vader begins to search for Luke and, just as Palpatine had foretold, is surprised when Luke surrenders himself on the forest moon of Endor. Vader takes possession of Luke’s lightsaber, and, after ordering the guards to leave them alone, has a conversation with Luke where Luke urges Vader to abandon the dark side, and join the Rebellion. Again, which response is most consistent with a PM approach?

1. “After all of the assets we’ve spent leading up to my presenting you, captive, to the Emperor, based on the invalidity of the Sunk Cost fallacy, I’m going to let you go now.”
2. “You don’t know the power of the dark side. I must complete my scope obey my master.”
3. “Yeah, I’m still not getting how this is going to add to the star system total. Is it happy hour yet?”

Since GTIM Nation is known for its management acumen, I’m going to go ahead and predict that everybody’s answers are all twos, proving that Darth Vader was clearly PMP® material.

He may have even ended up writing a blog for ProjectManagement.com, under the pen name “Michael.”

Ancient medicine was pretty scary, but we really don’t have to look too far into history to see some terrifying stuff done in the name of making us better. Bloodletting was a common practice for hundreds of years, for example. As late as the 1830s, France imported over forty million leeches per year for just this purpose[i]. I don’t mean to pick on the medical community – the capacity for a group of self-proclaimed experts to develop a certain way of doing business or performing a task (ProjectManagement.com’s theme for September – the ways of doing business part, not the self-proclaimed experts stuff) and asserting this method as optimal, even in the face of data that challenges or even completely overturns that certain way, is boundless. It’s just that this tendency among members of the medical community has an eewwww factor that’s missing from (most of) the conversation over on the management science side.

Meanwhile, Back In The Project Management World…

In the Project Management world, there are very few widely-experienced management problems that have the exact same optimal strategies as the preferred remedy. When Consolidated Aircraft corporation first started manufacturing their famous PBY Catalina flying boat, they didn’t have a water tank large enough to test the fuselage/hull’s watertightness, so they simply filled the interior with water and checked for leaks from the outside. Indeed, I would speculate that the majority of human advancement has come about due to some person coming up with a solution to a problem that was not only novel, but initially perceived as absurd. Bouncing back to medical community analogies, Penicillin was originally called “mold juice.” Can you imagine what must have been the reaction in 1929 when Alexander Fleming announced that he thought it would be a swell idea to inject sick people with mold juice? And yet today we think of the discovery of penicillin as one of the most dramatic scientific breakthroughs in history.

In Thomas Kuhn’s brilliant book The Structure of Scientific Revolutions (University of Chicago Press, 1962) an all-too-familiar pattern emerges whenever a new hypothesis is introduced that directly challenges or overturns an existing, widely-accepted theory: almost every “expert” hates it. The tendency from the entrenched nomenklatura is to challenge, then minimize, and, finally, ridicule the new theories and those who attempt to advance them, and the reasons they tend to do so are clear. Their existing positions in industry, management, and academia are predicated on the currently-existing and widely-accepted version of things, and any attempt to undermine those theories represents a direct attack on them personally. Among this blog’s favorite challenges to widely-embraced management science champions are:

• The Asset Managers’ notion that the point of all management is to maximize shareholder wealth. What actually goes on during the merger process provides more than enough data to dismiss this old canard, yet it persists.
• The Communications crowd, who loves to insist that PMs need to communicate project status openly and often with anyone who has a claim to being a “stakeholder.” Since the stakeholder moniker explicitly does not exclude those who wish to see your project fail, this is clearly, ahem, sub-optimal.
• The “Bottoms-Up” Estimate at Completion (EAC) fans. Simple Earned Value calculations offer a quicker, easier, and more accurate EAC than the re-estimators can offer, at any level of the Work Breakdown Structure. Unfortunately, the widespread adoption of this alternative lacks the appeal of its archaic rival.
• The overuse of the Return on Investment (ROI) calculation, particularly when selecting which projects to pursue for a given portfolio. There are simply too many parameters to identify, much less quantify in getting this figure to an accuracy level that could be considered even remotely reliable, and yet, this, too, is taught far too often in today’s business schools.
• And then, of course, are our old friends, the risk management (no initial caps) crowd. Two ironclad rules are all that’s needed here:
  1. The future cannot be quantified, and
  2. Gaussian Curves do not change the validity of ironclad rule #1.

And yet risk management (no initial caps) remains a multi-billion-dollar industry to this day.

Still, all of this points to the beauty of the free enterprise system on the management sciences. If it works (and is legal), then the marketplace will reward the consensus-challenging ideas with on-time, on-budget projects and portfolios. If it doesn’t, then those who have embraced the poorly-thought-out notion (or adhere to the obsolete ones, once the competition has moved on) have a choice: either abandon their current business model and embrace a better one, or else turn to the PM dark side (what is the PM dark side? I’ll go over it in my next blog. Darth Vader would be proud.)

[i] Retrieved from https://allthatsinteresting.com/bloodletting on September 6, 2021 15:16 MDT.

One of the main reasons that the United States declared war on Great Britain in 1812 had to do with the impressment of American seamen. So desperate was the Royal Navy for crews that they resorted to intercepting American-flagged shipping on the high seas, and would essentially kidnap sailors to help man their vessels. To be fair, such actions weren’t that different from the nominal recruiting techniques for actual subjects to the Crown, as many a young man living in a deep-water English port would abruptly discover. But the young United States was rather put off by this, and decided to push back in dramatic fashion. The War of 1812 would, somewhat uncharacteristically for the time, result in no transfer of land ownership either way, but did succeed in gaining some measure of relief from the practice of “recruiting” American seamen to man British vessels.

Meanwhile, Back In The Project Management World…

Much of the discussion of the word “inclusion” in a business sense has centered on the idea that a deserving person has been unfairly excluded from some organization or team, but what about the opposite scenario? Let’s start by focusing on this term’s main denotative meaning, to wit:

in-clu’sion, …n., …1. Act of including, or state of being included.

This is the definition from Webster’s New International Dictionary, Unabridged, originally published in 1934, with new words added in 1939 and 1945. The thing weighs 15.8 pounds, which by itself speaks to its authority. Based on this definition, let’s employ one of the Game Theorists’ favorite tools, the Payoff Grid, as it applies to inclusion/exclusion in the formation of Project Teams:

If Project Team member X should not have been made part of the Team, and hasn’t been, then everything’s okay. Similarly, if they should have been included, and have been, it’s also okay. Much of the literature on the subject of inclusion focuses on Scenario A1, so I won’t bother to add to that volume of analysis.

But I believe a significant percentage of us PM-types have found ourselves in Scenario B2, due to an acquisition, merger, or changing out of an executive team. These times of organizational upheaval are almost always accompanied by a change in management strategy and business philosophy in addition to the transformation of the organization’s executive lineup, and those changes commonly create issues far more significant and long-lived than can be resolved through a nominal Tuckman Forming-Storming-Norming-Performing cycle. For example, should the new executive team arrive with something they view as a strong PM culture, they may be given to viewing any deviation from their business world view in the new organization as an indicator of backwardness, or lack of a key capability. Even in those circumstances where the newcomers’ business model could use some tweaking to make it compatible with the host organization, attempts to articulate the case for such an adjustment may well be viewed, not as an insightful attempt to help, but as a sign of disloyalty to the new management structure. This, in turn, can lead to a whole plethora of additional business model pathologies, including:

• An “us versus them” view among the newcomers and extant personnel,
• Promotions and raises based on clan identification/membership, rather than merit,
• …which, taken together, breeds mistrust within the Project Teams affected,
• …causing disruptions in vital communications avenues at crucial times in the Projects’ life-cycle,
• …leading to poorer performance than had been realized prior to the management change-up,
• …exacerbating the whole “us versus them” view.

GTIM Nation is familiar with the old saw “Affordability, Availability, Quality – pick any two.” As a bit of extension,

• An affordable good or service that’s available immediately is unlikely to be of high quality;
• A high-quality product that’s available right now is not likely to be cheap, and
• A high-quality product that’s affordable will almost always involve a lead time to acquire.

Now imagine two organizations within the same industry, suddenly brought together under the same Organizational Breakdown Structure. In addition to the asset managers seeking to eliminate redundant functionality or facilities, it’s highly likely that these two organizations came by their market share via different business models with respect to the axiom cited above. What’s basic to one org is dopey to the other, and vice versa. What’s the impressed seaman suddenly included PM to do?

Of course, all such occurrences come with a vast array of relevant parameters, making a one-size-fits-all response impossible. But if I were to recommend a broad-brush strategy, it would be this: focus on your Project Team, and its scope. “Nothing succeeds like success” goes the old saying, and those Project Teams that bring in their scope on-time, on-budget can only be ignored by the most clannish of executive teams.

For those who are not in a position to establish relative worth through performance, consider that it could be worse. The Royal Navy didn’t ban flogging as a disciplinary tactic until 1880[i].

[i] Retrieved from https://militaryhistorynow.com/2012/06/29/this-is-gonna-hurt-military-punishment-throughout-the-ages/ on August 30, 2021, 14:10 MDT.