Game Theory in Management

Prior to revealing the adventures of Stanly Raspberry in last week’s blog, I was discussing the inherent difficulties of consulting from the point of view of comparing and contrasting those consultants who were very familiar with a certain repeating problem, but may have little or no idea of how the client organization works, or its weaknesses, with those consultants who were very familiar with the organization, but in a bad position to advise against deeply-held, ingrained management pathologies for fear of losing the business. This week I would like to explore the former category a bit further, since that is where we will discover the optimal consultant.

Consider your family doctor. You see her whenever you are moderately or severely ill. Is she a consultant? Well, she certainly provides a service, one that can’t be performed by just anybody. On the other hand, does she ever, herself, consult a consultant? Well, yes, when her patients have, say, a heart condition, or cancer. In that case she would employ a specialist on your behalf. Now think about the characteristics of the doctor your family doctor is consulting: your family doctor sees you, over and over, for a variety of ills. The consultant will probably only see you once, for this particular type of problem. Assuming the consultant is successful in the prescribed treatment, he will, in all probability, never lay eyes on you again. I’m thinking that this is a trait of true consultants everywhere: they know the problem, and only incidentally interact with those with the problem.

Of course, the project management world is a bit different from the health care industry, but the nature of consultants is something of a constant – which raises the question: What problems would bring a project-performing organizations to bring in a consultant? I’m thinking one (or both) of two reasons: there aren’t enough projects (or customers willing to award project work to the organization), or the projects that the organization already has aren’t performing well. Let’s take them in that order.

When the proposal backlog is thin, or the win rate is on a downward trajectory, who’s responsible, and what do they need to know? The responsible parties are the strategic managers (or those who perform that role), and they need to know about the competition, what they’re doing, how they’re doing it, what their market share is, and why. Only with this information in hand – and, by implication, the existence of the management information systems that generate this information – can they make the informed decisions that can reverse the decline of the proposal backlog and/or contract win rate. And now, ask yourself:

Does any of this information come from the general ledger, or from a risk analysis?

Rather than have my wonderful readers go to the proverbial back of the book, I’ll give the answer up right here and now: no, nein, nix, no no Nanette, nyet, and, well, no.

Okay, what about the other consultant-inducing problem, of poor-performing projects? In these cases the decision-makers need to know how those projects are performing, both with respect to time (schedule) and cost (budget). “Aha!” say the accountants. “That cost and budget stuff – we’re all over that!” Well, not actually, not in project space. The general ledger – the chief (only?) source of management information at the disposal of the accountants – doesn’t really do cost performance. Oh, it can tell you how much you’ve spent, and even compare that to what you were planning on spending. But that’s not the same as actual performance. To get that, you must be able to ascertain how much progress was actually attained against what was actually spent, and how much progress was actually attained against what you had planned to attain. Then – and only then – can an informed decision be made based on project performance.

Soooo… the accountants can’t provide this information, for the reasons just stated. The risk managers can’t provide this information, either. They can only tell you the estimated odds of bad stuff happening.

The obvious conclusion to be derived from our little mental exercise is that the ultimate consultant seeks out data, processes it into information, and provides that information to strategic and project managers on market share and project performance that enables the overcoming of whichever problem the organization is facing. They do this because they’ve done it before, and know which information streams are relevant, and which are superfluous.

And in neither case do accountants nor risk managers qualify.

It was the same dark and stormy night from the last adventure. I was sitting at my desk, staring at the words on the glass panel of my office door, yrrebpsaR ylnatS, eyE etavirP, when a weasel-like shadow moved across it. I knew in an instant who it was: my landlord, Fair Et Weaselhead. He opened the door and walked in.

“You’re three months in arrears in your rent, Raspberry.”

“Yeah, you keep reminding me.”

“And I’ll keep reminding you until I get my money. What’s your problem, anyway?”

“The other business-oriented consulting detectives are getting all the clients these days … I’m not sure why.”

“Maybe they’re better than you.”

“Maybe they can charge less because their landlords aren’t setting their rents too high.”

Just then she walked in.

She was about six feet tall, with long black hair, wearing a double-breasted jacket over a black pleated skirt. Through her pince-nez-styled sunglasses, she looked over the both of us.

“Is this a bad time?”

I answered “no” at the same instant Weaselhead answered “yes.”

“Which of you is Stanly Raspberry?”

“I’m Raspberry.”

“I may have a job for you, if you’re interested.”

“He’s interested!” exclaimed Weaselhead.

“What’s your fee?”

“His retainer is $900, which just happens to be the value of three month’s rent.”

She sat down in the cane-bottom chair, took out her check book and a fountain pen, and began to write.

“Make it out to Fair Et Weaselhead” Weaselhead demanded.

After she tore the check out of her book, Weaselhead snatched it, and darted from the room.

“Okay” I began, “I guess I’m your man. What’s the problem?”

“My name is Dee S. Tress, and I’m the head of the Project Controls group for Acme Corporation. About six weeks ago we hired a consultant from Monolithic Corporation…”

“From who?”

“It’s ‘from whom,’ and you heard me. Anyway, my company’s principals mean well, but they’ve gone soft on the need for project management information systems, and instead are listening to the risk managers’ nonsense. This Monolithic guy is just selling them more of the same, and I’m powerless to stop him.”

“What’s he doing right now?”

“Giving his final report to the management team.”

“Can you get me into his office?”

“Sure.”

“Let’s go.”

 *  *  *

Dee took me to the temporary office the Monolithic consultant had been using. I looked over his desktop and bookcase.  “Hmmm….” I said.

“What is it?” Dee asked.

“Look at these books – Walden II by Skinner, and The Critical Chain by Goldratt. Very telling.”

“How so?”

“Both books use the same device, of advancing a dubious near-science proposition through a fictionalized setting.  The authors adapt a theoretical approach to a problem and, rather than collect evidence and provide legitimate analysis, they make up characters and settings where their theories are ‘tested.’ And – wouldn’t you just know it – they work like a charm!”

“But by making a management science point in a fictionalized setting, isn’t that what Michael is doing right now, in this blog posting?”

At this point both Dee and I looked up at Michael, through the computer monitor. He leaned over the keyboard, and shouted “Get back to work!”

Dee continued: “Those two books, weren’t they best-sellers, with wide-ranging effects on their respective fields?”

“Yeah” I responded pensively. “Yeah.”

“What does that tell you?”

“That your Monolithic consultant isn’t about conducting a proper review of Acme’s projects’ audit trail, but would rather construct a narrative that sounds plausible enough to get him invited back, while, essentially, flattering your superiors.”

“You know,” Dee realized, “he did seem remarkably uninterested in the project managers’ view on what was wrong, and spent all of his time with the accountants and risk managers!”

“Dead giveaway. Where is he right now?”

“Down in the basement – the Hatfield Conference Room.”
“The who conference room?”

“It’s named after an obscure ProjectManagement.com blogger.”

“Let’s go.”

*  *  *

As we entered the conference room, the Monolithic consultant was just wrapping up.
“…and that’s how the brilliant, insightful risk managers saved the corporation, charging only a fraction of the value they brought. The End.”

The Acme executives stared at the consultant, enraptured. The room exploded into applause, as the CEO exclaimed “Well done, very well done indeed! Can you come back and perform another ‘analysis’?”

“Oh yes, please do!” the other managers cried out, in unison.

“We’re too late” I whispered to Dee.

“What can be done?” she asked, her eyes welling with tears.

“We have to get the truth out there … how are you at writing blogs?”

As I’ve begun to explore in my previous post, the consultant/client relationship is fraught with danger. Last week I discussed the difficulties inherent in assuming that any consultant – almost by definition a newcomer to the macro organization – could possibly attain the inside knowledge needed to successfully analyze the managerial pathologies buried deep within the client’s business model. Now, I’m going to turn my acerbic gaze at the other end of the board room table, to the client. Even in those cases where the consultant hired is perfect, and perfectly candid, there’s a very real barrier to the recommendations actually being implemented: it’s the inner child.

In 1964 Eric Burne published his best-seller Games People Play. In it, he asserted three crypto-Freudian aspects of the persona: the child, the adult, and the parent. He also postulated that, when we interact with others, these three aspects can align – my adult, for example, engaging my readers’ adults – or else they can clash (risk managers attempting to write like adults, for example), leading to interactional conflict.

Burne also theorized that we run scripts in our heads, a kind of on-going narrative. In my (not-yet bestselling) second book, I took that idea a step further: I maintain that we actually have three scripts, or one narrative fulfilling three purposes:

·         The child narrative tells us who we are to ourselves,

·         The adult narrative guides how we interact with others, and

·         The parent script pushes us on how we ought to view ourselves and interact with others.

Of the three, the child narrative is most difficult. I believe that we all maintain some delusions in our narratives. Sometimes they’re small and inconsequential (my second book will start selling like gangbusters here, real soon). Other times they’re not so small, or inconsequential. To what we should aspire is not that difficult to change; how we ought to interact with others, while a bit more uncomfortable, can stand correction. But who we are to ourselves – that narrative is extremely painful to change, even in the least little bit.

So, you’re the perfect consultant, sitting across from the client at the conference room table. You have been called in to review the business and its functioning, and report back to your customer on why the organization is highly vexed by a particular problem, or set of problems. Here’s my question:

Is it reasonable to assume that what you have to say will not be painful to hear?

The organization is the sum total of the decisions of its members. Those members with higher levels of responsibility make the choices that have the most far-reaching effects, and the CEO, by extension, has the highest level of accountability for those instances where pathologies have been allowed in to the business model. When significant delusions fuel the narrative that tells the organization who it is to itself, and those delusions are brought before the cold analysis of the outsider, the result is not unlike dropping metallic sodium into rain puddles.

I read a quote recently, and I’m sorry that I can’t accurately attribute it. It may have come from the limitless Jonah Goldberg. A paraphrase is “The truth does not illuminate. It enrages.”

It follows, then, that the consultant has some choices, none of them particularly appealing. She can tell the truth, fulfilling her original charter and accomplishing the mission put before her, but risk enraging the client beyond any possibility of call-back. She can fudge on the truth, taking the politically expedient position that infuriating her client will only lose future business, while making a somewhat less-robust report on the true nature of the difficulties she has analyzed, and hope for future opportunities with the same client.

Or she can lie outright, pinning the blame for the vexing issues on the known enemies of the organization, both internal and external, confident that, by reinforcing the organization’s leaders’ child persona, she will be invited back for more “analysis” work.

Given these options, it’s easy for my dear readers to assume they would make the right choice, being so positioned. But keep in mind – we’re not dealing with the client’s parent, or even adult narrative here. It’s the highly emotional, irrational child’s, and appealing to its sense of proportion is risky, at best (Hey! Maybe the risk managers can compute the odds here!).

I thought I’d kick off this month’s theme – consulting – with a seemingly obvious question: what does the central setting of the 1960s television series Star Trek, the Starship Enterprise, look like? Of course I know that the fictional Constellation class starships are probably the most recognizable examples of spaceship architecture in the universe (get it?), and I would bet real money that more people could recognize the Enterprise on sight than the historic Apollo 11 command module (Columbia). So, what’s the big deal, right? Doesn’t everyone know what the Starship Enterprise looks like?

Well, yes and no. This became an issue to me one year ago, when my family bought me a large, lighted model kit of the Enterprise, and I set about doing the research to get it exactly right. The first place to look, of course, was the eleven-foot model that DesiLu studios used in the filming, which is now (like the Columbia, actually) on display at the Smithsonian’s National Air and Space Museum. What a lot of people don’t realize is that the eleven-foot model is actually unfinished on the lower left side – no lights, no decals, no weathering. They just never shot her from that angle (there’s actually an electrical cable duct-taped to the outer edge of the port engine’s support). So, I asked my family if I should imitate that aspect of the model.

“Of course not.”

“Why not?”

“Because that wouldn’t be on the real thing.”

“The ‘real thing’ doesn’t exist.”

“You know what we mean.”

But once I decided that the eleven-foot shooting model wasn’t the “real thing,” then that threw open the doors as to what did look like the real thing.

Some years back an effort was undertaken to re-do the special effects, backgrounds, and music of Star Trek (the Original Series), which included a new version of the Enterprise, this one digitally rendered (how ironic is that? A digital version of a thing is closer to reality than the tangible version!). In the episode Court Martial, references are made to “pods” on the Enterprise which, when the ship was in danger, could be jettisoned, but only after its occupant had been given an opportunity to evacuate said pod. The eleven-foot model had no such pods, but the digital version did – they were little, lit, blinking half domes, positioned on either side of the aft part of the lower hull.  Add to that the impulse engines – located at the aft part of the saucer section – appeared to be lit from the set of the interior of the engineering section, the digital Enterprise would show them as being lit on exterior shots. But the eleven-foot model never showed them as such.

If you think I’m overstating the “real” appearance debate by pointing out the finished/unfinished lower hull, pods/no pods, and lit impulse engines/unlit ones, I assure you this is only the beginning. Trekdom was positively in conniptions over the extent of the weathering on the latest refurbishment of the eleven-foot model. Think about that – how does anyone intelligently debate the manifestations of corrosion of materials that have not yet been invented when they are exposed to environments that have not yet been encountered?

Soooo … what does all of this have to do with consulting? Consider what represents the demand for a consultant’s services: the organization is facing a problem that it perceives will need additional resources to overcome. Think about the subject and object of the previous sentence as being on opposite sides of an equation: organization versus problem. It’s a rare problem that is resolved identically by every organization that encounters it. So, where does that leave the consultant? Does it not imply that, prior to any actual contribution to problem resolution, this newcomer to the organization has to have a grasp of the inner workings of the client, including which management pathologies have been integrated into the business approach, as well as the strengths and shortcomings of each and every major-level decision-maker? Is it not at least a possibility that, even if this particular consultant has seen the hiring organization as often as Star Trek reruns (possibly in the hundreds), some fairly relevant aspect of it – like not being finished on the lower left side – has escaped notice, because it was never viewed from that angle? And, finally, does this relationship not also imply that the consultant knows how the “real” organization is supposed to function?

All of these questions should at least give pause to those who hire consultants with the expectation that their investigations and reports are beyond reproach. And, yes, I did include the lit impulse engines and blinking pods, because that is how the real thing appears.

I have often stated in previous postings how the worst 20% of managers, in command of 80%of the information they need to obviate any given decision, will consistently outperform the top 80% of managers who have access to only 20% of the relevant information needed. So, what happens when those bottom 20% managers are in command of that coveted 80% of the information? Well, usually, success … but not indefinitely. What derails them? In my experience, the most common element is … hubris.

These bottom 20% of managers likely don’t know the real reasons they came to their success, and will often attribute it to their own (non-existent) talent. Much like lottery winners who delude themselves into believing that their new wealth was somehow merited, low-talent managers will indulge their conceits at the expense of their associates, almost always with wrecking-ball-like results.

Take the hiring process. Once an organization has experienced success, the temptation on the part of poor management is to mis-identify how they became successful in the first place, and further mis-identify the causal factors as having something to do with them, personally. They then tend to hire those like themselves, objective measures of merit be damned. Once the realization that advancement within the macro organization is being based on something other than actual accomplishment, several other pathologies are introduced into the business model, including:

·         Morale plummets,

·         The best decision-makers are displaced from positions where their decisions matter, to be replaced with the poorer decision-makers,

·         Everyone in the organization instantly recognizes that all of that fluff in the organization’s mission statements and strategic plan, about how the execs care about their customers and their people are their greatest asset, blah blah blah, is exactly that: fluff.

·         A cynicism sets in, where the rank-and-file treat any communication from the executives with skepticism at best, derision at worst.

As these organizational behavior and performance pathologies become more commonplace, the threat is that the organization will enter into a self-defeating cycle – a tailspin, if you will, that makes the adoption of the tactics needed to maintain the organization as an ongoing concern more and more difficult to uncover, much less implement.

I’m sure most (if not all) of my readers have experienced involvement in a failing enterprise at some point in their careers, and it’s a thing to behold. The pettiest, most irksome of managerial personality traits, once attached to the business model, become amplified into company-busting anvils raining down on the office roofs of the executive suite. But let the aware reader beware: the existence (if not prevalence) of poor managers is pretty clear evidence that there’s something going on behind the scenes that protects these guys from receiving the comeuppance any other employee would receive for demonstrating a pattern of poor performance. And that “something” almost always has to do with the existence of agendas that are being pursued that are not articulated in the company’s official mission statement – in other words, politics.

And just to be clear – I have never encountered the management blogger, author, or columnist that can provide intelligent insights that are broadly applicable on the subject of office politics. Why? Because political, sub-rosa agendas are secret for a reason. By definition, they run counter to any of the precepts of management science theory.

And they also keep the lowest 20% at the top of their games.