Game Theory in Management

Now, before GTIM Nation emails Cameron McGaughy en masse demanding that I report to Occupational Medicine for drug screening and/or psych evaluation, let me explain this blog’s title. I’m a firm believer in Matrix Management, the organizational structure that acknowledges the inherent conflict of interest between Project Management and Organizational, or “Line” Management, and sets up the business model to avoid errors that would be expected to happen without such an acknowledgement. To engage in a bit of hyperbole, Project Managers don’t really care if the PMO’s printer is rented or purchased, or the increase in the rate of vacation accumulation between employees with less than ten years on the job and those with more. They do care very much about delivering their Projects’ scope on-time, on-budget, and orient their decisions towards that end. Again exaggerating, the Asset Managers don’t pay much attention to the success rate of the PMO’s portfolio – they’re more interested in the most efficient use of the office equipment budget, or the renumeration structure that both attracts and retains talent for the organization. Different goals, different Management Information Systems informing their decisions. It’s only natural, then, that different people be named managers in pursuing these often-competing goals, otherwise the inherent conflict of interest will skew many decisions and aspects of the business model towards error.

Here's where Matrix Management can get complex, and interesting. Many, if not most of the Project Team will be dedicated to your Project full-time. The rest of the Team may be working multiple projects, depending on their specialty. That being the case, the latter category of Team members will inevitably prefer some project work (and managers) to others, which is where making your Project the most attractive comes in to play. In this game, your Project has three images to maintain:

• Those in the Project Team will have a front-row view to how you handle them, as well as the technical challenges of the Project itself.
• Others within the organization who are not part of your Team will also form an opinion about how you are doing (based on your Cost/Schedule performance data presented in the Project Review Meetings), and also what it’s like to work on your Team (based on what they hear from your Team members).
• People outside the organization who are aware of your Project, including your customer, will also form an opinion of your management skills. Sometimes to find fault, other times to create an assessment of their competition, or even to poach your undervalued talent into their organization.

It’s this three-faced dynamic that led me to the analogy of the Dating App. The dating game isn’t that far removed from the PM-as-image-setter game: in both cases, we’re trying to put the best light on a given set of facts, knowing that, should we deviate from reality, downstream negative consequences inevitably await.

To really spice things up, let’s bring in the Maccoby Archetypes.[i] I find the most insufferable of these to be the Jungle Fighters, relying as they do on tactics that have nothing at all to do with actually contributing to the Project Team in order to get ahead within the organization. As I mentioned in last week’s blog, this type is also particularly adept at glomming on to Projects they perceive as winners (“swipe right”), and distancing themselves from the losers (“swipe left” or “ghost”), regardless of their actual level of contribution. These people are real – I once was given an extremely difficult task with a hard deadline from a new PMO team that had been grafted onto my organization. The person it should have gone to, an organizational superior (naturally), avoided me almost the entire period of performance … until it started to become apparent that not only would I pull it off, I would do so rather well. Once that happened, he started hovering over me, right up until I hit the “send” button on transmitting the deliverable. Afterwards he went back to leaving me alone.

My advice if you find your project on a dating app is attracting a lot of scope-adjacent people, looking to associate themselves with your soon-to-be-realized success? Don’t reject, or “out” them. It’s unlikely that would do any good, and might make you look bad. Simply let them bask in your Project Team’s reflected glory, and be confident that those truly in the know are fully aware of what’s happening.

Then ghost them.

[i] [i] In The Gamesman, The New Corporate Leaders (Simon and Schuster, 1976), the brilliant Michael Maccoby posits four corporate personnel archetypes: The Craftsman cares deeply about his output, but not so much about the organization around him; The Company Man tends to assume the persona of the organization around him; The Jungle Fighter gets ahead through calumny and other cloak-and-dagger tactics; and The Gamesman sees his renumeration not as food on the table or a roof over his head, but as tokens in some grand game being played.

There may well be an unwritten rule that any blog entitled “Game Theory in Management” can only go so long before using the Game Theorists’ favorite analytical tool, the Payoff Grid. Add to that ProjectManagement.com’s theme of career advancement, and a natural fit pops to the surface. It seems to me that, when considering career advancement within Project Management, the two main issues are (A) is the person within the field seeking advancement actually worth said advancement?, and (B) are they actually progressing within the PM realm? Based on these two questions, the Payoff Grid presents so:

Let’s address the way-it-should-be scenarios first. If you’re good at PM, and you’re advancing within the industry satisfactorily (1B), then this analysis won’t apply to you individually, but may have a significant bearing on you as part of an organization, which I’ll cover presently. Similarly, if you are new to PM, or not very good at it (2A), it’s truly appropriate that you are not advancing in the industry until such a time as you improve the quality of your contribution(s) to the nominal Project Team. Which brings us to the two dysfunctional scenarios, 1A and 2B. I think that, when addressing the subject of career advancement within Project Management, the natural implication is that there’s a large population of PMs in Scenario 2B, and there very well may be. But if that is the case, then I believe that a primary driver of that state of affairs is the population in Scenario 1A. Here’s why.

Permit me to state the obvious: those who don’t do PM very well advancing in the organization is a bad thing. Besides bringing with them, ahem, sub-optimal ideas for incorporation into the organizations’ business models (cough, risk management, cough), their inability to significantly (or even noticeably) improve their Project Teams’ capacity to deliver scope on-time, on-budget will place, not only them, but PM writ large square into the cross-hairs of our friends, the Accountants’, favorite Team-defunding analysis method, the Return on Investment. Why waste all that budget on a group of people adhering to the PM discipline when they have little to show for it, or not enough to justify the original PMO expenditure?

Then we have the propensity for poor Project Management to have a delayed effect on the projects’ outcome. A PM who sets up an invalid Work Breakdown Structure (WBS) at the beginning of the work probably won’t experience the skewing effect on that project’s Cost and Schedule performance measurement systems until close to the end of the project, or until after it’s too late to easily remedy. With detection of backward PM skills somewhat detached from the most likely outcome, it becomes a bit easier for inept PMs to escape the consequences of their poor decisions.

Let’s not forget that the two least desirable Maccoby Archetypes[i], The Jungle Fighter and the Company Man, have special skills in distancing themselves from the project-failure consequences of their actions. Jungle Fighters are, by their nature, adept at hovering close to Projects on a trajectory towards success, while subtly distancing themselves from those headed south, their actual level of genuine participation notwithstanding. And Company Men are pre-disposed towards an attitude that completing the Project on-time, on-budget is only a desirable outcome if it can be established that they had followed all of the organization’s rules and policies. Organizational loyalty is often the coin of the realm in newly-formed PMOs, with genuine talent taking a back seat, so that successful Project completion while outside the confines of the rulebook can be twisted into a career-limiting event. It’s both an attitude and naturally-following defense, with the result being the same as the Jungle Fighters’ – it’s rather difficult to hold them accountable for their poor PM choices.

So, yeah, if you are genuinely good at doing PM, but your career trajectory is lagging behind where it could be reasonably placed, you have every right to be frustrated. But I would assert the causal element behind such frustration should not be automatically imparted to PM’s techniques not receiving traction within the business world in general. I think that a not-insignificant factor lies in those PMs who are getting ahead, but shouldn’t.

To paraphrase Pogo (Walt Kelly), we have met the enemy, and some of them are us.

[i] In The Gamesman, The New Corporate Leaders (1977), the brilliant Michael Maccoby posits four corporate personnel archetypes: The Craftsman cares deeply about his output, but not so much about the organization around him; The Company Man tends to assume the persona of the organization around him; The Jungle Fighter gets ahead through calumny and other cloak-and-dagger tactics; and The Gamesman sees his renumeration not as food on the table or a roof over his head, but as tokens in some grand game being played.

The Battle of Jutland was an epic naval engagement that occurred from May 31 through June 1, 1916, between the English Royal Navy Grand Fleet and the German High Seas Fleet in the North Sea waters around Denmark. Over 240 ships were involved in what would become the largest naval engagement of World War I. Despite its massive scale, Germany was unable to break the blockade imposed by the British, and the significantly reduced fleets returned to their home ports with the status quo largely unchanged. There is a distinct possibility that Jutland is the most analyzed naval battle in history, but an American journalist working for the New York Times summed up the battle as “The German Navy has assaulted its jailer, but is still in jail.”[i]

I just love it when seemingly complex and highly layered events, literature, or ideas can be reduced to their basics. From the website Awkward.com comes this distilled version of Jane Eyre:

Jane Eyre

By Charlotte Bronte

Ultra-Condensed by Samuel Stoddard

(People are mean to Jane Eyre)

Edward Rochester

I have a dark secret. Will you stay with me no matter what?

Jane Eyre

Yes.

Edward Rochester

My secret is that I have a lunatic wife.

Jane Eyre

Bye.

(Jane Eyre leaves. Somebody dies. Jane Eyre returns.)

The End[ii]

My super-sensitive blogger’s ears can hear GTIM Nation say “But Michael! If large-scale historical events and instances of classical literature can be so reduced, doesn’t that imply that otherwise complex and layered theories within the Management Sciences can be, too?” To which I reply, yes, yes they can. Naturally, my mind turns to one of my favorite targets, the risk managers (no initial caps).

Of course, modern risk management (I’m just going to start using the acronym nic, so I don’t come across as redundant) is a massive industry, with piles and piles of literature describing its preferred techniques within the PM environment. And yet I believe that the whole shebang as it applies specifically to PM can be reduced to the following central question: If something goes wrong, who is going to pay for it? I’ll explain.

Consider the Firm Fixed Price (FFP) contract. The customer pays for the successful completion of the scope, by a specific date, for an agreed-to price. The contractor is on the hook for anything that goes wrong, whether it be weather, poor performance, force majeure, whatever. While risk managers (nic) may be very active in developing the analysis that helps inform whether or not the contractor should pursue the work in the first place, they really have no role post-contract award. The central question has already been answered.

But when we move into the other types of contracts, specifically the Cost-Plus variety (Cost Plus Fixed Fee, Cost Plus Award Fee), the central question is suddenly thrust into confusion. This is where the generation of post-project adjustments or adjudications occur, since such conflicts don’t arise if the project is successfully delivered on-time, on-budget. Something went wrong, and, unless the central question has been answered in a way that’s amenable to both parties, some form of conflict is inevitable.

In those cases where something has gone wrong, but the project is still in process, Change Control becomes the arena for discerning the answer to who pays, which is why Baseline Change Control is often such a formal process. For those of you fortunate enough to have not endured a Baseline Change Control Board proceeding, the main issues almost always revolve around (1) what went wrong?, (2) by how much (specifically, the cost and schedule impact), and, perhaps most importantly, (3) who’s to blame? Because if the contractor is performing poorly, or has selected a manifestly improper technical approach to accomplishing the project’s scope, then there’s really no case for even asking the client to pay for the reversal, even if the Contingency Reserve has been funded (NOT an automatic, by the way). The two most common ways by which the contractor asserts that it is appropriate to either tap the Contingency Reserve or request more budget is to assert that the setback was caused by the customer adding scope (scope creep), or point to any entry in the risk register (nic) that documented that the thing that went wrong was predicted (albeit with Gaussian hedging), and therefor falls under the “known unknowns” rubric. Itself reduced, it’s another way of the contractor saying “See! I told you this might happen. Now you have to pay for it!”, which is an additional indicator that all of risk management (nic) within the PM realm can be reduced to the question “If something goes wrong, who is going to pay for it?”

While the preponderance of the risk management (nic) industry would doubtless object to my summation, I don’t mind. I wouldn’t imagine Charlotte Bronte fans would be okay with Mr. Stoddard’s synopsis, either.

[i] Retrieved from https://strategyinhistory.com/the-battle-of-jutland-the-use-and-mis-use-of-sigint/ on 19 December 2023, 19:36 MST.

[ii] Retrieved from https://awkward.com/enjoy-these-condensed-versions-of-classic-books/ on 19 December 2023, 20:13 MST.

I’m really looking forward to an Artificial Intelligence (AI) – enhanced future. No, not the one where skeletal androids hunt down desperate enclaves of nuclear war survivors. I’m looking forward to a future where a goodly percentage of the management sciences precepts that have populated college-level textbooks and have been informing countless business model formations are subjected to millions upon millions of simulated transactions in a virtual free-market environment, and shown to be either valid… or not. Certainly the creation of such a free-market environment model that captures most of the necessary parameters and process representations would be a huge leap forward (note that I did not say “captures all of the necessary parameters.” That’s impossible.). But at some point a reliably scalable model will either be developed, or discovered already in-place somewhere, modified for a specific industry, locale, or business environment, and the simulations will begin showing which parts of the management sciences are reliable, suited for use in the real world, and which are, shall we say, sub-optimal (cough, risk management, cough).

Last month in this blog I discussed some of the limitations of AI that would prevent it from, well, creating a dystopian future where skeletal androids hunt down desperate enclaves of nuclear war survivors (https://www.projectmanagement.com/blog-post/75600/how-to-know-if-your-ai-assisted-pm-software-is-getting-ready-to-take-over-the-world). Central to this notion is the fact that AI can’t randomly create a strategy and simulate its execution if that strategy is not a possibility in the first place. Your hexapawn robot can’t generate a take-over-the-world strategy if that isn’t a legal move in hexapawn (spoiler alert! It isn’t.). GTIM Nation will recall my observation that there are three distinct types of management, each with its own goals, methods, and information systems:

• Asset Management, dedicated to “maximizing shareholder wealth,”
• Strategic Management, oriented towards maximizing market share with respect to the competing organizations in the field, and
• Project Management, whose goal is to meet (or exceed) the customer-specified parameters of scope, cost, and schedule.

Of these, Strategic Management is probably the most wide-open. Sure, there are regulations on what one can or cannot say in a television or radio commercial, but the decision of where to spend your advertising or hostile takeover dollars is largely up to the organization itself. The Marketer’s Bible: Your Guide To Marketing, Sales, Influence & Persuasion, Public Relations and Internet Marketing, by Richard C. Wilson, is 654 pages, and, based on the title alone, sounds like it's at least somewhat comprehensive. I’m pretty sure it does not have the force of law behind it. You can buy it and use its insights, or choose not to. It’s entirely up to you.

Similarly, the PMBOK Guide®, at just 250 pages (Seventh Edition), which Amazon says is #1 in Business and Finance[i], also does not have the rule of law behind it. Sure, the PMP® recert committee might look at you sideways if you are known to be in blatant violation of it, resulting in your project coming in way late and over budget, but it’s not like PMI® has an enforcement arm looking for such things (at least not that I’m aware of).

Generally Accepted Accounting Principles (GAAP), and its overseas counterpart the International Financial Reporting Standards, are entirely different critters. I tried to do an internet search on the size of the GAAP, and came up dry, but I’m fairly confident that the page count of its combined codex is wayyyy more than the PMBOK Guide® and The Marketer’s Bible combined. Not only that, but, in many instances, GAAP absolutely does have the force of law behind it. The accountant who sets up his organization’s chart of accounts in clear violation of GAAP is risking real legal trouble.

It's due to this reason that, while AI may have a profound effect on Project and Strategic Management, I would expect its impact on Asset Management to be rather muted. The GAAP codex is so massive and fixed that I would be very surprised if there were that many opportunities for even the creation of multiple various asset management strategies within GAAP’s confines to be tested for efficacy in millions of simulations. Indeed, the opposite may be true: due to the Asset Managers’ dubious ability to precisely value an investment when employing the Return-on-Investment formula, AI may actually increase the odds of returning a recommended strategy that would hinder the organization’s ability to advance in either PM or Strategic Management.

As an additional bonus, since the Asset Managers’ approach tends to dominate college-level business scholarship, AI-led advances in Project and Strategic Management may cause the gap between what’s taught in business schools and what works in the real world to grow – think Rodney Dangerfield’s character Thornton Melon in the movie Back To School. And when it does, it should be something to behold.

That’s why I’m looking forward to it.

[i] Retrieved from https://www.amazon.com/Guide-Project-Management-Knowledge-PMBOK%C2%AE/dp/1628256648/ref=asc_df_1628256648&mcid=356fda33ffbb3b53b427853a04ccc3fa?tag=bngsmtphsnus-20&linkCode=df0&hvadid=80264466333902&hvnetw=s&hvqmt=e&hvbmt=be&hvdev=c&hvlocint=&hvlocphy=&hvtargid=pla-4583863992928250&psc=1 on December 10, 2023, 10:08 MST.

Project Management disasters are often compared to train wrecks, mostly, I would imagine, because of their commonalities: the horrific results are often foreseeable, could have been avoided with some common sense, they have significant consequences, and they’re almost inevitable, in that, as long as there are trains running and projects to be managed, there will be train wrecks and massive overruns and delays. To carry this metaphor a bit further, what should one do if they were to find themselves in a passenger car on a train that was headed off of the rails, or on a project that was headed for a disastrous end?

I’ve had this type of conversation often with a brilliant friend and colleague – I’ll call him Doug, ‘cuz that’s his name – and from these discussions it appears that there are basically three alternatives:

• Rush to the locomotive, and try to convince the engineer to switch tracks or stop the train,
• Rush to the caboose (do they even have those anymore?), line up some pillows or padding against the fore bulkhead, and brace for impact, or
• Exit the train (Impossible, you say? I’ll point you to the opening scene in Indiana Jones and the Last Crusade, where a teenaged Indiana Jones does just that).

A fourth alternative, to do nothing and hope for the best, was excluded from our discussions for not being viable, even though I’m sure a plurality (if not majority) of people choose it.

Of course, many factors can and will influence both the choice of alternative and its timing, including:

• the proximity in time and space to the actual crash,
• the perceived receptiveness of upper management to entertaining strongly urged suggestions to modifying or abandoning the current course of action,
• the ability to remain within the organization while minimizing the personal impact of a project disaster,
• and the availability of workable exit strategies.

Sometimes the alternative selection and timing is obvious. If the project is headed for a terrible end, in the near-term, management is impervious to entreaties to change their course of action, there is no place within the macro-organization to insulate you from the project disaster’s consequences, and another perfectly acceptable position has been offered to you, the choice (exit) and timing (now) is pretty clear. More often, though, to the aware PM-type, the clues that things are going to go south in a big way present themselves much earlier, if more subtly.

It's been my experience that, much of the time, the primary determiner for which alternative to choose has to do with the perception of how receptive the engineer would be to taking advice or technical direction from someone perceived to have a lesser expertise in train driving. In some cases, access to the train’s engineer highly restricted, if not impossible. But these characteristics in and of themselves provide clues. If upper management is impervious to Project Team members’ urgings to update or abandon the technical agenda, it’s typically an indicator that the placement of the personnel within the PMO isn’t based on merit. Weak managers, who’ve attained their senior-level positions within the PMO based on something other than capability, are terrified of being challenged, especially and particularly when it comes to setting the technical agenda. I wrote one of my PMNetwork columns (The Variance Threshold) about an organization that was so entrenched in their ossified business model that an underground newsletter aping the format of the official company one was published, mocking the entire executive suite for their absolute refusal to listen to employees’ inputs or feedback. When the conductor/engineer is so insulated from the people on the rest of the train that he can’t even hear their warnings about the upcoming crash, forget about trying to get to the caboose to ride it out. Get off the train. Alternatively, if the PMO execs aren’t weak, it might be worth your while to get to them and describe, in objective terms (see last week’s blog), the nature of the problem, why it may have gone unnoticed thus far, and what to do about it. If they listen, you and the rest of the Team win. If they don’t, well, that’s another clue for you.

Now, I can hear GTIM Nation saying “Michael, where do the risk managers (no initial caps) fit into this over-extended analogy?” I’m glad y’all asked. The risk managers would be one of those guys back at the control center, placing a call to the engineer, so.

“There’s an 18.3 % chance you will have a crash.”

“Should I slow down?”

“I didn’t say that. You have a schedule to keep.”

“So, what am I supposed to do with that little estimate?”

“Do with it what you will. It came from a super computer running a kajillion Monte Carlo simulations, taking into account…”

“But you’re not recommending any specific course of action?”

“Right, but you’re not listening to the amount of really sophisticated stuff that went into…”

(Hangs up.)

In this way, the risk managers (no initial caps) can lay claim to some level of accuracy when it comes to predicting the future. If the wreck occurs, they can say that they warned as such. If it doesn’t happen, they can say that they never claimed that it would probably happen, just an 18.3% chance. Neat.

Ultimately, of course, it’s up to you to know if, upon attaining a high level of confidence that a wreck is in your short-to-mid-term future, you want to attempt to change the course of the train, insulate yourself from the effects of the wreck, or get off. Just keep in mind, if you do have such confidence that it’s going to happen, staying put and hoping is probably not the optimal approach.