Game Theory in Management

In my previous PMO-themed blogs for January, I focused on common problems in setting up and staffing the Project Management Office. While taking the wrong approach in addressing these problems will certainly lower the chances of the PMO being successful, doing all of them right by no means guarantees success. There’s still more enemies out there, and young PMOs will often make mistakes in dealing with them.

For the sake of this discussion, I would like to make some classifications. The previous blogs’ points concerned issues internal to the PMO. There are two other types of problems – (1) those that are external to the PMO itself, but internal to the organization, and (2) those that are external to the organization. This week I’ll address problem type #1.

Keep Your Head On A Swivel

“Just a minute on those classifications, Michael!” I can hear my readers say. “Are you implying that there are people within my organization – my very company – who represent an existential threat to the attainment of the PMO’s objectives?” My answer: no, I’m not implying it. I’m stating it out loud, directly, even screaming it from the rooftops. In an organization of, say, 100 people, there will be at least five who are happy, if not eager, to see your PMO fail, and be replaced with their pet management information stream.

It’s not (necessarily) personal. From The Godfather movies, if you will recall, two axioms make multiple appearances: “Keep your friends close, and your enemies closer,” and “It’s business, not personal!” As for the first quote, it has a certain intuitive value to it. But consider: why would anyone want to keep their enemies “close”? Certainly one reason is that, if your enemy does not consider you to be a threat, you will be in a much better position to harm him or his agenda when the time comes to do so.

Not All Your Opponents Lurk In Shadows

Now back to your organization. Very few business schools teach Corner Cube Theory, which holds that Asset Management, Project Management, and Strategic Management are different by type, and not by degree. They use different methods to attain different goals, and make use of very different information streams to do so. Rather, most business schools teach that the point of ALL management is to “maximize shareholder wealth,” with the main (if not exclusive) information stream to be utilized originating in the general ledger. There are even project management advocates who believe this tripe, and it’s a forgone conclusion that most “educated” business-types believe it uncritically. Then along comes your little PMO, generating schedule and cost (gasp!) performance information, steering decisions and influencing executives, and the only thing they need from the general ledger is the monthly actual costs. That’s it?! What about depreciation? What about return on investment? What about the make-or-buy formulae? What about…

All useless to the PMO. Well, that’s not what their business professors told them the real managerial world would be like. Going through business school they may have never even heard of the utility of Earned Value or Critical Path Methodologies, and now these PM-types are on the brink of an epistemological take-over? Not on their watch! So, they’re going to be opposed to your agenda, but they really can’t come right out and articulate that fact. Instead, they will make the following assertions as you roll out your implementation plan:

• “Doing” PM is too difficult and onerous (if these critics have a point here, go back and re-read my previous two posts). Done right, of course, PM is neither. Indeed, the formula of dividing the estimated percent complete into the cumulative actual costs delivers an Estimate at Completion figure with an accuracy level the accountants can only dream of, and that formula is about as simple as it gets.
• If you get past the “It’s too hard” argument, next comes the “If it’s as easy as you say, it can’t possibly be valid, or valuable.” This argument has some on our side to blame for it, since the risk managers will insist on a rigorous risk analysis (difficult and irrelevant), the communications specialist will insist on “engaging all stakeholders” (difficult and dangerous), the quality engineers will want to do fishbone diagrams (difficult and subjective), and even the cost estimators themselves will babble on about master resource dictionaries and confidence intervals (difficult and just plain dopey, respectively). Once your PMO begins to generate usable Variance at Completion (VAC) information for both cost and schedule, and it’s proved to be accurate, these arguments will fade.

And This Is Just The Beginning

Unfortunately, it doesn’t end here. However, if your PMO continues to feed its client PMs and other key decision-makers the vital information they need to make the best decisions, your organizational enemies will need to go further and further out on that management theory limb in order to discredit you.  So far, in fact, that they may well simply do themselves in by exposing their needlessly adversarial agenda.

Then, the next enemy steps up, and we start all over again.

Lagniappe

I’ll be doing a webinar for ProjectManagement.com, on the topic of Game Theory (one of the comments on a previous blog suggested it, and I’ve been trading communications with ProjectManagement.com about getting on the webinar calendar). It’s currently scheduled for March 16. Keep visiting the website for details.

For those of you who are contemplating getting into the columnist/blogger business, I have a little bit of advice. Writers who address consistent themes – Project Management, for example – will often start out writing pieces while being motivated by the desire to communicate something. Whether because they have come across some valuable insight that they’ve never encountered in the literature previously, or are grappling with a blatant example of business model pathologies interfering in the way things “ought” to be run, or even for pure catharsis, entry-level technical authors will often write as if they need to get something off of their chests. It’s not necessarily a bad thing, but the more seasoned writers are usually motivated by something else.

It’s All In The Motive

That something else is a sense of what their target audience wants to read. Back in 1997, when I first started writing my column for PMNetwork, the Variance Threshold, I began by poking fun at accountants and protestors, people who often made the typical PM’s job more difficult. I had never seen an article or column in a PM trade journal that dared to satirize these professions, and thought it was long overdue. Based on reader response, I was correct.

Meanwhile, Back In 19^th Century Italy…

Vilfredo Pareto (1848 – 1923), the great Italian engineer and philosopher, is famous for the “80-20 rule,” or the principle that 80% of observable results tend to be attributable to 20% of causal agents (e.g., 80% of the foot traffic in your house tends to be on just 20% of the carpeted area; 80% of a company’s revenue will often be from just 20% of its customers). But he also theorized that people tend to arrive at their conclusions and beliefs through emotional or prejudicial means, and then, only later, assemble the verifiable facts that support these conclusions in order to give the semblance of having arrived at their beliefs logically.

Okay, my readers may well be asking, all this about writer epiphanies and Italian philosophers is very (yawn) interesting. What does it have to do with Project Management? Well, I’ll tell you.

Why Is Your PMO Here?

Rookie Project Managers can be under the delusion that they’ve been hired for their level of expertise, gained through education, certifications, or experience (what there is of it). This is not so. PMs are hired to deliver a specific scope on-time, on-budget. Your education, certifications, and experience are only signals to your employer that you have a better chance of delivering than candidate PMs who do not have such things, or at least these things in the quantity or quality you have. To be blunt, you are not being paid for your opinions per se; you are being paid to deliver your project on-time, on-budget. If you fail in this regard, having the most erudite opinions, articulated at John Milton-levels of fluency, and including quotes from Vilfredo Pareto, will mean exactly nothing. Conversely, if you do consistently deliver projects on-time, on-budget, then you could have no notion of who John Milton or Vilfredo Pareto were, spend a significant amount of time quoting Homer Simpson (“D’oh! D’oh!”) and you will be hailed as a managerial genius. It’s just the way our PM world works in the free, competitive marketplace.

It’s Your Motivation, Writ Large

Which brings us back to my previous two blogs, about fake experts and setting up your PMO. PMO directors are not paid to remind everyone else in the organization what a swell idea PM is, and how everyone needs to do it. Rather, PMOs exist in order to supply PMs with the information streams that provide timely, accurate, and (most importantly) relevant information they need in order to make informed decisions that lead to delivering their projects on-time, on-budget. It’s not about what you want to impart – it’s all about what your customers want to hear. Besides, what you want to impart may very well be based on your feelings, or prejudices. Indeed, I would go so far as to say that those PMOs that indulge in eat-your-peas-style hectoring about the need to engage in certain irrelevant or marginally informative processes and practices will usually fail, while those who enthusiastically pursue the mission of providing timely, accurate, and relevant information in the most economic way available will dramatically increase their PMO’s chances of success.

Don’t take it personally – I’m sure people’s opinions matter a great deal to others in a wide variety of venues. It’s just that Project Management isn’t one of them.

As I discussed in last week’s blog, fake experts are a definite problem, but they’re not the most difficult barrier in front of successful Project Management Office (PMO) implementation. I asserted that the most difficult issue before the PMO director is obtaining the support of the people from whom you need regular data feeds in order to create and maintain your portfolio management information system. In getting this participation, several common mistakes are made by the average PMO – it’s your job to avoid these mistakes. But first, you must avoid self-inflicted errors. Here are a few of those.

Another Quick Elimination Round

The Management Information System (MIS) experts have an expression: begin with the end in mind. If you, as a newly minted PMO director believe that your end-game is to have many (if not most, or even all) of the people in your organization convinced of the benefits of “doing” project management, and simply await your insight as to how best perform PM, then you have lost already. It’s pointless to examine how you came to believe this myth – the fact that you have arrived in such a position is ipso facto evidence of your inadequacy. Do yourself and those around you a favor, and resign. Get a job as an entry-level scheduler, and begin your education anew.

For the rest of us, who are unimpressed by process per se but do know how to deliver results, there’s hope. Going back to the “begin with the end in mind” motif, what are the legitimate ends we seek? Well, we don’t debate the efficacy of project management theory. It’s pointless to do so. Rather, we seek to demonstrate its utility in the starkest fashion available. Those who already appreciate PM will outperform those who don’t, if given the opportunity. So, let’s give them the opportunity.

“Iceberg, Right Ahead!”

The PMO director is best served by asking the people who need to know the cost and schedule performance information of the projects within their portfolios what it is that they need to know in order to make informed decisions. I worked for a rather large organization that did a lot of project work, and a newly-installed CEO had the foresight to ask his program and project managers to tell him what is was that kept them awake at night. The majority of respondents replied that it was the fear that they were sitting atop a project or program that was getting into real cost/schedule performance trouble, and no one would tell them about it. Either because the information streams that would raise flags didn’t exist; or, if they did, the lower-level PMs had convinced themselves that they could manage their way out before the project neared completion, this was the thing that robbed them of their peace of managerial mind.

Offer your program/project managers a suite of report formats, and let them choose what they want to see in order to make them confident that the disasters-in-the-making are being identified early and accurately. Some of them may select traditional formats, such as Gantt Charts or Cost Performance Reports (CPR) in Format I. Others may opt for something more intuitive, such as a histogram that compares the calculated Estimate at Completion (EAC) with that project’s budget at completion, revealing those projects most likely to overrun, come in on-budget, or underrun.

It’s Really Not That Hard

Once the formats have been selected, boil down the data requirements to their bare minimum. Getting all huffy about how the project teams MUST provide a long list of items proving they are obeying procedure is a sure symptom of PMO failure. For many reports – even the traditional ones – much valuable information can be gleaned from nothing more than a time-phased budget (based on the Work Breakdown Structure), the monthly cumulative actual costs, and an estimate of the percent complete as of the end of the reporting period. This drives many process-oriented PM “experts” crazy, but it’s true. And, most importantly, such an approach will establish that basic PM techniques in cost and schedule performance information stream creation will alleviate that which keeps the key decision-makers up at night (literally). It’s those times that the information streams that the new PMO needs to establish get larded down with unnecessary requirements that participation from your key data feeds dries up, and rarely returns.

And yet, many PMOs make this exact error. I wonder if their leaders failed to read my blog from last week, and have too many fake experts on board.

As December’s theme of Human Resources transitions to January’s of Project Management Offices (PMOs), I thought I’d blog about their point of intersection: as you align the personnel who are to populate your PMO and, by extension, feed your PMO the data it needs to perform portfolio-wide analysis, what are your biggest barriers to success? If you answered “acquiring the talent I need, and placing it where it can do the most good,” then go to … the back of the class. Well, the back might be a bit far, but talent acquisisiton isn’t your biggest problem. It’s a problem, and I’ll address it – it’s just not your biggest.

Can We All Agree On One Thing?

I’ve always been fascinated by the phenomena captured by Hatfield’s Incontrovertible Rule of Project Management #14: you can put 50 PM experts in a room, and they will not agree on the color of an orange. It follows, then, that if there is such a disparity of opinion about what makes up the optimal approach to performing project management, there will also be little agreement about what sort of talent is required for the successful implementation of a PMO. So, all these so-called experts will invariably disagree about the makeup, approach, and performance parameters of the PMO. How can the fakes be distinguished from the legitimately helpful experts? Here’s a quick list. If the howling debaters exhibit any of the following, suspect them immediately.

• They insist on a robust risk management program, prior to any other information stream,
• They are wedded to a specific piece of software as THE answer, and insist all PMO participants work with that platform,
• They insist on using the PMBOK Guide® as a PMO implementation guide (don’t get me wrong – I’m a PMP® myself. It’s just that using the PMBOK Guide® as a PMO implementation guide is like using the Encyclopedia Britannica as the main source for a school science project),
• They keep referring to how things were done in their previous (famous, of course) organization, regardless if that organization is well-known for its PMO efficacy, or the circumstances that led the person to leave that organization in the first place.
• They don’t defend their position using evidence or logic, but on the alleged strength of their resume.

Who’s Left?

Let’s return to that room of 50 PM experts. If half of them disagree with the (right) half on the previous points, there will be no more than two at the end of the evaluation (rounding up). To specifically identify the true talent among those two (or to winnow down the field in one fell swoop), ask them if a “bottoms-up” estimate at completion (EAC) is preferable to a calculated one. If they answer in the negative, that’s the person you want setting the technical direction of the PMO.

Next Up: THE Problem

Now, on to the main barrier to PMO implementation success. As I discuss in my first book, your biggest problem isn’t selecting the optimal critical path scheduling software, or cost processor, or setting up an adequate training program, or establishing relations with stakeholders, or any of the other commonly-held “musts” involved in doing a PMO. No, your biggest problem is obtaining the level of participation your information systems need to generate value. Any true portfolio management information system will require timely and accurate data input from each of the participating projects. If any of the projects you are counting on for participation elect to opt out of the system, your PMO is doomed.  In order to maximize your PMO’s chances for success, you absolutely, without fail, must…

Look at that! I’m out of space for this week. I’ll cover the tactics that will amp-up your PMO’s chances of success next week. If you can’t wait until then, click on the hyperlink and order your own copy of Things Your PMO Is Doing Wrong (PMI Publishing, 2008).

I once worked for a company whose CEO had a philosophy about employee attitudes that was remarkably telling. It was that every employee should come to work every day at least a little bit scared. I remember hearing about it, and at first thinking it was a bit creepy, but the more I thought of it the more I could kind of see his point: it’s easy to imagine a complacent workforce being or becoming a poorly-performing workforce.

But upon further review, I think my initial reaction was the correct one: it is a creepy philosophy, particularly for an upper executive to have. But this blog isn’t about feelings of creepiness in evaluating business models, so I’ll be a bit more precise. The notion that an organization’s employees need to be consistently and acutely aware that their jobs may be in jeopardy in order for them to perform optimally is a sure sign of poor leadership – tyranny, even – and organizations so afflicted will almost always under-perform their confident rivals. Here’s why.

The easiest and most obvious piece of evidence (Exhibit A) has to do with our own experiences. Recall instances where you were enthusiastically pursuing an activity or task. Compare that to an activity that you didn’t want to do, but had to. It’s been my experience that, in the case of the former, I brought my best effort forward; but, in the latter circumstance, I did just enough to get a pass from the person who had forced me to do the chore. Of course there are many gradation levels in-between, but by invoking these extreme examples you see my point. To put it in the lexicon of my cited CEO, the workforce that arrives every morning at least a little bit scared will usually be out-performed by the workforce that shows up every morning at least a little bit enthused.

Exhibit B has to do with Hatfield’s Incontrovertible Rule of Management #12: The manager-leader must have three characteristics to succeed:

1. He must have the optimal (or near-optimal) technical approach to addressing the problems before the organization. People tend to avoid following the inept.
2. He must genuinely care about the personnel on his team. If the team perceives their leader does not care about them personally, they will tend to not care about him, or his technical agenda, either.
3. The manager-leader must have so much confidence in his technical approach that he is willing to carry it out alone, if necessary. The example I like to give here is, if George S. Patton were to be parachuted in to Europe in 1943 by himself, he would begin attacking Nazis right away, and not wait for everyone (or anyone) else to lend him support.

Notice than invoking fear in one’s own team is not included in the three necessary characteristics. Shorter version: are there successful teams comprised of non-anxious members? Of course there are. Are there failed teams comprised of highly anxious personnel? Of course. Therefore, team anxiousness cannot be the sine qua non of successful performance.

Then why did this CEO believe to the contrary? Consider this definition of “tyrant” from Dictionary.com:

2. any person in a position of authority who uses power oppressively or despotically.[i]

Now consider how much easier it is for “any person in a position of authority who uses power” to ignore Hatfield’s Incontrovertible Rule of Management #12. They don’t have to do due diligence in keeping up with developments in their field of expertise, since their frightened team members will obey direction even if it’s the wrong approach. The tyrant need not care about his team members personally since, again, they will obey the direction given out of fear, if nothing else. And, ironically, tyrants tend to behave in such a pathological manner because they, themselves, are not afraid, having been exempted for various reasons from the negative consequences of their poor decision-making.

And that, ultimately, is why tyrants make such poor leaders. Once their people begin arriving to work afraid, even to a small degree, the tyrant has insulated himself from criticism, even in the instances of the most obvious of errors. Besides making the organization so led miserable, this insulation is a virtual guarantor of management failure.

[i]Retrieved from http://www.dictionary.com/browse/tyrant, December 26, 2016, 11:03 MST.