Game Theory in Management

GTIM Nation knows of my fondness for Thomas Kuhn’s seminal work, The Structure of Scientific Revolutions (University of Chicago Press, 1962), where he points out that our perception that science advances rather evenly is misguided. Kuhn writes that, rather than a steady progression towards more and more sophisticated levels of reliable theories, that scientific advancement typically follows these Phases:

• Phase 1 is indicated by a state of competing theories, none of which appears to explain all of the available data.
• Phase 2 is characterized by the conduct of experiments, typically to test various aspects of the existing paradigm. As more data is accumulated, certain results will present as being difficult (or even impossible) to explain in the current paradigm, necessitating the creation of cycles and epicycles (addendum or adjustments to the current theory) in order to maintain the consensus theory’s place.
• When enough anomalies to overwhelm the adjusted paradigm are documented, a somewhat chaotic environment ensues, where alternatives vie for preeminence.
• When an alternative appears to explain the anomalies, as well as a predominance of the data used to support the previous theory, a paradigm shift occurs (as often as this term is thrown around in business settings, it’s noteworthy that it was first coined in this work).
• Phase 5 is characterized by scientists solving problems within the context of the new paradigm, until the anomalies start to mount up.

Of course, the term “management science” is something of a misnomer, since few theories under this category can be empirically tested in an experimental setting, which is why such clearly flawed theories such as “the point of all management is to maximize shareholder wealth” are taught in supposedly top-tier business schools to this day. Indeed, in the management world, while the final arbiter of success is whether or not the organization continues to exist as an economic entity, there are a multitude of other measures that indicate just how much of a success or failure the organization enjoys or suffers. In my previous writings I have theorized that these parameters fall under the categories of Asset, Project, and Strategic Management, with the measures of success quantified so:

• Asset Management is based on the performance of the organization’s assets, and has many measures of success, perhaps none as succinct as the Profit-and-Loss statement.
• So too does Project Management, which focuses on delivering on the customers’ expectations of Scope, Cost, and Schedule. My favorite is the Cost Performance Index.
• Strategic Management is all about market share. Accuracy of this figure is somewhat difficult to attain, since its denominator is the total size of the industry or market where the organization does its business.

While an indication that an organization has absolutely cratered in any one of these three is almost always fatal (in a non-monopolistic or government-influenced industry), I think it’s fascinating that, should any one of these three management arenas indicate distress, the other two can be leveraged to compensate. For example,

• If the org’s assets are performing poorly, the organization may be delivering a higher quality product/service at that price point than appropriate, or making it more immediately available than the existing price structure would support.
• If the project teams are failing to deliver on-time, on-budget scope, then spending more for better performing assets may be in order.
• If the organization’s market share is too low, better project delivery or advertising – both of which cost money – may be the solution.

This is where the diversity-crushing aspects of the management science world come in to play. Which canned strategies lead to “success” or “failure,” besides being highly contingent on the very definitions of those words, will also turn on the particulars of a myriad of different configurations, placements, times, and situations. Spending money on better PM performance will work in many situations, while in others a concentration in Strategic Management would be a better choice, and the number of parameters that would go in to informing such decisions is flat-out unknowable, much less quantifiable. Sure, many scenarios can be safely assumed to call for specific techniques, such as the need for a Work Breakdown Structure for medium-to-large projects. But, other than the commodities/stock traders’ mantra of “Buy low, sell high,” the number of axiomatic, canned strategies that can be reliably employed across a broad swath of industries is next to nil.

Meanwhile, Far Away From The Project Management World…

This is not the management world described in most business schools, where professors tend to posit a whole host of analytical techniques and management strategies as broadly, if not universally, applicable. As in The Structure of Scientific Revolutions, the commonly-held paradigm attracts almost all of the analysis data to support its core, or its cycles and epicycles. Unlike TSOSR, when observable management phenomena, both successes and failures, seem to challenge if not overturn aspects of the commonly-accepted paradigm (cough, maximize shareholder wealth, cough), these are largely ignored, and the common paradigm remains intact – the very definition of a monolithic, non-diverse body of knowledge.

If only someone with academic standing could develop a rival body of knowledge, based on Project Management…

In the Star Trek original series episode Friday’s Child, Captain Kirk, Commander Spock, Doctor McCoy, and Lieutenant Grant beam down to planet Capella IV in order to negotiate mineral rights with the planet’s inhabitants, a tribal people with an aggressive, warrior culture. The Enterprise contingent is quickly reduced by one, as Lieutenant Grant instinctively draws his phaser weapon upon seeing a Klingon among the Capellans, prompting one of their warriors to throw a kleegat at the unfortunate officer (and, yes, he was wearing a red shirt). This kleegat weapon bears a striking resemblance to a table saw blade, and the Capellans throw them much like we humans would throw a frisbee, except overhanded. As it turns out, the unfortunate red-shirt’s instincts were correct: the Klingon is present to help stage a coup d’état on behalf of Maab, who seeks to control the planet’s Ten Tribes in place of the current Teer, Akaar.

Meanwhile, Back In The Project Management World…

We PM-types have lots and lots of tools at our disposal, so many, it seems, as to obfuscate why we’ve been hired by our organizations in the first place (cough, risk register, cough). Rather than mock the use of the particularly superfluous ones, I’d rather focus on the over-engineering of one of the more fundamental ones, the Earned Value Management System (EVMS). In many business environs the EVMS actually bears the title of “Cost Processor,” though that’s not really its function. Costs are collected by the General Ledger, which leads me to the first of the invalid but commonly accepted business practices, that of attempting to understand cost performance as a function of spending. The way (not how much, mind you, but how) that an organization – including Project Teams – expends its resources is important to Asset Managers, since spending behavior often determines tax rates. It has nothing to do with Project cost performance, as the following mental exercise clearly demonstrates.

Imagine you are the PM of a $100,000 (USD) project, and in your winning proposal’s Basis of Estimate (BOE) you have bid $75K in labor, and $25K in equipment. At project completion you have spent $25K in labor, and $75K in equipment so, by Project Management standards, you’re fine, right? I mean, you came in on-time, on-budget. Obviously, you had to make several major changes in management strategy in order to get to an acceptable PM outcome, but that’s what Project Management is all about. If it could be done successfully using a template or robot, there wouldn’t really be a need for even the Project Management Institute®, amirite?

Don’t believe it for a second. Those “analysts” who pore over the spending reports are completely freaking out at this turn of events. You’ve overspent on equipment! And underspent on labor! This is a disaster, in their eyes. The insistence that project spending needs to mirror the original BOE or else the project is a failure has to be one of the most intellectually vacuous notions permeating the business world, and yet it will not go away. I think it stems from the concept that all management information dealing with costs simply must come from the General Ledger, where deviations from plan represent the only way of assessing cost performance from that particular source.

The other dopey notion I want to address has to do with the belief that EVMSs simply must have such features as an automated link to the General Ledger, Critical Path Scheduling package, or risk management (no initial caps) documents, or a dozen other aspects that really have nothing to do with its core function, that of reliably quantifying actual project performance. As I’ve mentioned many times in this blog, probably the most valuable pieces of PM information – at this rate of performance, how much will my project cost at completion, and when will that happen? – can be accurately (within ten points) derived from three data points. How much will it cost? Divide cumulative percent complete into cumulative actual costs, and there’s your answer. How long will it take? Take the same cumulative percent complete, and divide it into cumulative duration. Oh, sure, you can have an extremely sophisticated EV package, that can do all sorts of gee-whiz analyses, many of which I’m convinced are unnecessary, just as a wood working shop can have a variety of table saws with different blades installed for specific effects.

Or, you can just take the table saw blade, call it a kleegat, and throw it at anyone who’s threatening your life. It really doesn’t need to be installed on a powered-up machine to be planetary-government-changingly effective, just as EV information doesn’t need to have all the extra stuff attached to it to be operant. It just needs someone who knows how to throw use it.

“If you can’t explain it simply, you don’t understand it well enough” is a quote commonly attributed to Albert Einstein, though its authenticity is somewhat in doubt. Not to challenge a man whose very name is synonymous with “genius,” but I think there’s another possibility when it comes to reasons why people don’t explain things simply: they don’t want to. It could very well be that these people understand it all too well, and are deliberately choosing to obfuscate. Unfortunately, such people are not rare in the realm of Project Management.

The most dramatic and far-reaching implications of this tendency towards obfuscation has to do with the development of the Scope Baseline. Back when I was training new PMs on basic concepts, I liked to define the “project” as existing off into the future, with its only present-day artifacts consisting of:

• The Schedule Baseline describes the project in terms of units of time,
• The Cost Baseline describes the project in resources required, and
• The Scope Baseline documents the project using words to describe its intended end-state.

The Schedule Baseline can be documented in extremely precise terms, as can the Cost Baseline. But Scope? Imagine the amount of latitude a PM would have if the Cost Baseline was only defined down to the nearest $1M (USD), or the Schedule to the nearest year. Absurd, right? For some reason, having Scope defined at a proportionally higher level doesn’t seem to set off the nonsense detectors the way the other baselines do. As any seasoned (and quite a few newbies) PM can tell you, vaguely-worded Work Packages present a remarkable vulnerability for that deadliest of project pathologies, scope creep. From the customers’ point of view, imprecise wording in the WPs provides an avenue for under-performance, the bane of client representative PMs throughout history. With the stakes of mis-using smart-sounding-but-utterly-nonsensical terms so high, what can we do in PM space to provide early detection when such an affliction is headed our way?

While use of the most common corporate word-salad terms may work for things like company mission or values statements (if you haven’t seen Weird Al Yankovic’s video on the topic, you should), they’re highly detrimental for any statement of scope, whether in Work Packages, Control Account Plans, WBS Dictionaries, or (especially) Baseline Change Proposals. But rather than assert that GTIM Nation should set an extreme hair-triggered response to these terms, I thought it would be better to make a game of it, similar to this famous strip by Scott Adams, with a singular twist:

• If 1 – 2 of the terms from the table show up in a BCP, the Baseline Change Control Board members should roll their eyes (and reject the BCP),
• If 3-4 of the terms appear, question the legitimacy of the author to “do” PM (and crumple up the BCP, laughing as you throw it in to the trash can from across the conference room), and…
• If more than 5 of the terms appear, call out “Bingo!” (then roll up the BCP, place it into the body of a model rocket, go outside where the launch pad has been prepared, and set off the model rocket engine).

Here’s my recommended grid:

As for the use of these terms in a presentation slide deck, I believe they should only be considered ludicrous if they are paired up, such as “leverage scalability,” or “meaningfully seamless.” Another consideration for presentation slides should be the use of text ovals/circles/squares that have ill-defined lines connected to other text ovals/circles/squares. When these kinds of presentations show well-defined relationships, such as is represented by an organization chart, I have no problem with that. It’s only when those lines take on vague characteristics that my baloney detector goes off, such as those slides that conflate lines of communication, process flow, programmatic or organizational hierarchies, and the role of various functions or groups (“quality” comes to mind). Such disjointed presentations point to an incoherent strategy or technical approach, if not deliberate obfuscation.

Think I’m exaggerating? Let’s do a little thought experiment, where we replace a key word or phrase in a famously inspirational quote with a less-precise one, and see what that does to its context.

“Give me liberty, or give me some severe affliction.”

“…that if the British Empire and its Commonwealth last for a thousand years, men will still say, ‘This was their finest early-evening.’"

“Mr. Gorbechev, stop maintaining this wall.”

In closing, I would urge GTIM Nation, as well as all PMs everywhere, to refuse the use of vague language in constructing Scope Baselines or articulating business strategies. I think they should holistically leverage scalable transitioning symmetry to do something else.

Arthur Conan Doyle’s Sherlock Holmes once commented to Dr. Watson that a person should be able to conceive of vast oceans teeming with life from simply observing a glass of water. Of course, had Victorian England’s favorite fictional detective had access to an electron microscope, he would have realized that the glass of Victorian-era well water was a vast ocean teeming with life.  And so it is with the main information tools of the PM trade, Earned Value and Critical Path Methodologies. Well, perhaps not exceedingly large environments teeming with life, but certainly much more useful information can be gleaned from these information streams than just that which appears named in a column heading of a Cost Performance Report (CPR), Format 1. The basis for gleaning this bonus information has to do with the fact that, while Project Management theories, techniques, and practices may come and go, many of the human elements remain the same. And, since PM will always have to do with actual people, these aspects of human nature will be having an outsized influence on cost and schedule performance for far longer than the theory-generators will be around.

Meanwhile, Back In The Project Reviews Conference Room…

Imagine participating in the next round of Project Reviews as a member of the organization’s Project (or Program) Management Office, or PMO. For this particular mental exercise, let’s posit that the portfolio is comprised of around twenty projects, each in the $1M to $5M range, and represented at this Review by its PM and Project Controls Analyst. To get through the entire portfolio’s performance and complete the meeting within a couple of hours, each project has five minutes to present (1) its current and cumulative cost and schedule performance, (2) a brief variance analysis if things are going badly, (3) planned corrective actions (if necessary), and (4) at-completion estimates, both in cost and schedule. Prior to the pandemic, the act of reading the room was fairly straight-forward. According to lifesize.com, between 70 and 93 percent of all communication is non-verbal.[i] With the PMs and Project Controllers actually in attendance, all the PMO staffers had to do was to note things like how people were dressed, how they carried themselves, their tone of voice and body language, etc. But with the advent of widespread virtual meetings, the act of reading the room to glean additional insights of the true health of the projects in the portfolio became much more difficult. If the attendees are using Zoom filters, it can get even harder, and even stretch into the realm of the unreal (“I am not a cat!”). Add to all of this a few tenets of basic PM human nature, such as:

• The PM rarely likes being there. He’d rather be off doing that PM stuff rather than explain to his superiors how he’s been performing, especially if there are problems (and there are always problems),
• The PM is usually convinced of his ability to correct his issues, and would rather not have any outside interference while doing so,
• Based on the first two bullets, few PMs have any incentive for early reporting of aspects that could threaten cost or schedule performance, even if the EVM and CPM systems have provided early detection of the same,

…and the PMO staff members find themselves at a distinct disadvantage. What’s a PMO to do?

Fortunately, a good deal can be gleaned from the Earned Value information, as shown in the following table.

I could go on (and often do), but GTIM Nation sees my point. The data tell a story, one that was formerly enhanced by direct interaction with the principals, but can now be gleaned from the values in the CPR.

Even if the presenting PMs look like cats.

[i] Retrieved from https://www.lifesize.com/en/blog/speaking-without-words/ on July 12, 2021 16:20 MDT.

The assertion inserted into the titular question is absolutely consistent with the Superman mythology. Kal-el was born on the planet Krypton, which orbited a red star. The people of Krypton were pretty much like you and me, unable to fly from place to place, lacking extreme strength, and speaking modern American-English. It wasn’t until Kal-el’s father, Jor-el, placed him into a spaceship and sent him to Earth, a planet that orbits a yellow sun, that he attained his super powers, eventually maturing into Superman. Indeed, any Kryptonian who made the escape from the doomed Krypton and made it to a star system with a yellow sun would have attained such powers (e.g., General Zod, Ursa, Non, the entire population of Kandor, should they get out of the bottle), though it’s somewhat ambiguous if an Earth native would have had a similar up-power surge if they had moved to a planet with a red sun.

Meanwhile, Back In The Project Management World…

(I can almost hear Cameron thinking “how on [this] Earth is Michael going to make this transition?”) The distinction of the environments where Superman (and other Kryptonians) have their power and where they don’t will serve us well as we segue into ProjectManagement.com’s theme for July, Power Skills. You see, the PM world is very much bifurcated in a similar fashion, just with an epistemological basis instead of a cosmic one. Recall my Irrefutable Rule of Management (I forget the number), that all Management Information Systems (MISs) must have the following three characteristics in order to have any value at all:

• They must be accurate – inaccurate information is obviously useless,
• They must be timely – management information doesn’t age like wine or cheese, and…
• They must be relevant.

I’d like to evaluate these rules along with another Irrefutable Rule (again, I’ve forgotten how I numbered these things), that PM has two purposes: (1) to put into the hands of decision-makers the information they need to make, well, informed decisions, and (2) to provide something of an audit trail, so those decisions can be evaluated for efficacy by future PMs. One more item to keep in mind: MISs aren’t free, and, most often, they aren’t even cheap.

In World Number 1, those PMs (or PMO Directors, or Project Controls Specialists) who have the ability to evaluate which information streams are relevant, and which are not, have PM superpower. They can not only match the proper level of Earned Value or Critical Path rigor to the size and scope of the project, but they can also go light (or even eliminate altogether) superfluous systems, such as risk management (no initial caps), inappropriate levels of Quality Management, or extreme Communications Management arrangements. By doing so, they not only deliver valuable information to the decision-makers, they also avoid wasting money, time, or expertise on the marginally useful (or even useless) ones, regardless of what outside quasi-PM forces maintain. While they (generally) do not wear capes or oddly-fonted letters on the front of their clothing, they are irreplaceable in the fight to establish an appealing cost-to-value ratio in the PM information system generation and maintenance arena, and often find themselves at odds with…

Coming from World Number 2, those PMs (or PMO Directors, or Project Controls Specialists) who are more focused on fulfilling the terms of requirements (note the word – it will come up again soon), which are almost always addressed towards some sort of generic project, who insist that projects must have, say, an advanced risk management (no initial caps) capability, when, in reality, no such need exists. Nevertheless, the requirement remains, and must be enforced, else some “expert,” who has absolutely no idea of the nature of the specific scope being executed, will maintain that some form of PM transgression has occurred, and will inflict whatever damage such ones can wreak. Caught in such an environment, the relevance-detecting PMs lose their superpower, and are forced to waste time, energy, and budget on non-essential pursuits. They become frustrated, weak, and suffer extreme pain as they slowly begin to glow green, having been imbued with the specific radiation generated from Kryptonite, as they slip nearer to…

Ha, ha! Just kidding about that last part. But those PM-types with the relevance Power Skill will become frustrated, more so if some entity either within the organization or from some outside agency performs some sort of review or audit, and begins to pepper them with extraneous or immaterial corrective actions. At that point, it will make no difference if the PM-type was born with the relevance Power Skill, or attained it based on the environment where they work. They will no longer be super.