Game Theory in Management

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

Meanwhile, Back In The Project Management World…

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

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

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

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

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

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

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

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

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

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

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

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

I’m not sure that everyone is aware of the impressive Project Management-themed movie from 1966, Fantastic Voyage. It had a large special effects budget, extensive world-wide release, and introduced American movie star Raquel Welch. The plot centers around a technology that miniaturizes matter at the atomic level, but only for one hour (who knew sub-atomic physics could be so punctual?). A scientist has discovered how to make the effect permanent, but has suffered an injury resulting in a blood clot in his brain during an assassination attempt. The clot is inoperable from the outside, so a five-person crew is loaded into a small submarine, miniaturized, and injected into the scientist in an attempt to dissolve the blood clot with laser rifles from the inside. The sub and its crew are made so small as to evade detection by the scientist’s immune system; however, once the miniaturization effect begins to wear off, they will become visible to the scientist’s white blood cells, and can be expected to encounter a fate that oddly resembles being consumed by a giant glob of shaving cream.

“Perhaps, Michael” I can hear GTIM Nation say, “Fantastic Voyage is not recognized as a Project Management movie because it has little to do with PM and is, in fact, just a good old-fashioned 1060’s-style science fiction romp,” to which I say “au contraire! It has some extremely useful PM insights, needing only a prescient reviewer like me to point them out!”

Take, for example, the fact that, even with a five-member Project Team crew, one of them, Dr. Michaels (the medical chief and circulatory specialist, no less) turns out to be a traitor. Here we have an extremely important, potentially world-altering project, with a Project Team hand-picked for their technical acumen, and even here we have a (Maccoby archetype) Jungle Fighter, in a key technical position. I have addressed this phenomenon in a couple of different ways in this blog, one using the Maccoby archetypes (Craftsman, Gamesman, Company Man, and Jungle Fighter), the other taking a more Gaussian Curve angle. This take involves the recognition that, for any given novel technology or PM strategy,

• A small percentage of the organization/Project Team will readily accept the approach,
• A larger percentage – about one standard deviation from the mean on the left side of the bell curve – will accept the approach, but only after having been convinced of its efficacy.
• Another standard deviation to the right of the mean will maintain a high level of resistance, and must be (almost literally) dragged kicking and screaming into the realm of contributors.
• Finally, a remnant will never be truly on board with the stated technical agenda, even if they maintain a façade to the contrary.  The earlier the PM can identify this type and get rid of them, the better the chances of attaining the scope, on-time and on-budget.

In the movie, Dr. Michaels isn’t identified as the saboteur until very late, and nearly succeeds in killing the patient (wait – don’t doctors take some kind of oath?). So late, in fact, that the miniaturization effect has begun to wear off, and Michaels, trapped in the relatively exposed pilot house portion of the submarine, is drowned in a huge glob of shaving cream dissolved by a now-aware white blood cell.

The next PM lesson apparent in Fantastic Voyage has to do with the aforementioned introduction of Raquel Welch. She would go on to star in many other movies, becoming something of an icon. What does this have to do with PM? Well, if in a five-person submarine crew Project Team you can have a Jungle Fighter/Traitor, it’s also extremely likely you have a future star, perhaps even a (Maccoby archetype) Gamesman. This person doesn’t need special attention to execute the current project’s scope; however, if you anticipate that this person will be with the organization for future projects, it’s probably a good idea to help guide them in the more nuanced aspects of Project Management. There will be lots of times that the scope must be suddenly and radically changed, and these types’ presence on the Project Team is your best guarantor of being able to still come in on-time, on-budget.

Perhaps the most useful PM insight that Fantastic Voyage brings has to do with the whole too-small-to-be-noticed-by-the-white-corpuscles business. One of the most damaging organizational behaviors to attempts to mature a given capability is the slow roll/silent veto treatment. This is where members of the organization claim to your face that they are on-board with your initiative, but simply don’t show up when their actual participation is required. This is one management pathology that should be considered big enough to merit a response the moment it’s encountered, even if it appears small. Most of the time, simply noticing it and calling it out is sufficient for eradication.

By observing and calling out this behavior, you’re actually doing your contrarian a huge favor. After all, you wouldn’t want them attacked by a huge glob of shaving cream…

Karl Landsteiner performed the seminal work in blood typing at the beginning of the 1900s, and would receive the Nobel Prize in medicine for it in 1930[i]. His discovery of the different plasma types would allow for safe transfusions, which is critical in many medical procedures. The first successful human-to-human transfusion had occurred in 1818[ii]; however, without the ability to screen for type, there was always a risk of a transfusion reaction which, in rare instances, can be fatal[iii] -- except, interestingly, in the case of A, B, or AB patients receiving O-type blood. Anybody can receive that type without the risk of a transfusion reaction.

Meanwhile, Back In The Project Management World…

In the Program/Project Management world there are many instances where an existing program, portfolio, or facility will change management teams, with the highest level execs often invoking the metaphor of “bringing in new blood.” Even in organizations where this isn’t done wholesale, the introduction of a new executive, or Chief Executive or Operations Officer (CEO/COO), will almost automatically entail a different management philosophy, driving a change in technical agenda or implementation strategy. Unless the outgoing CEO or management team is retiring, there’s a reason for their departure, and fully acceptable performance probably isn’t it. But if the organization is figuratively bringing in new blood, how does anyone know if these new approaches are compatible with the existing organization?

Whether the evaluation for compatibility is being done on a person (via the job ad/resume collection/interview process) or a team (via the Request for Proposal/evaluation/contract award process), the people making the decision almost always look for a history of similar work having been successfully conducted in the recent past. I believe this skirts past another, critical parameter: were the candidates’ previous organizations analogous to the new one(s)? The new exec/management team will arrive at their new assignment with their own extensive stacks of education and experience, technical approaches and implementation strategies. It’s basic human nature to expect that those approaches and strategies that worked previously will work in the novel environment to which they are being transferred and, if they don’t, well it’s likely to be a fault of the existing organizational/facility personnel, or culture. Re-evaluating whether or not the previous success of the particular blood type technical approach is counter-indicated for the new patient organization is usually not a consideration. Of course, there are far too many parameters to establish one reliable standard or Litmus Test for whether or not the new technical agenda is incompatible with the existing organization. There are, however, a couple of clues that can help indicate when that’s the case.

Clue #1: look for the phrase “culture change” in any of the communications of mission statement, objective, or goals of the new line. The use of this phrase points to a canned approach which has probably already been determined a priori, and it’s up to the organization to accommodate this method. Also, use of this phrase is an indicator that the aspects of the various PM business models that could serve as alternatives have not been vetted, and the advancement of the Project Management capability may be seen as an organizational behavior and performance issue.

Clue #2: GTIM Nation knows of my fondness for the Maccoby Archetypes, The Gamesman, Company Man, Craftsman, and Jungle Fighter. Of the four, The Gamesman is the only type that has a high probability of readily recognizing when a canned strategy is unlikely to succeed, and pivoting to one that has a better chance. Craftsmen care deeply about their output, but are not otherwise known for embracing the kind of risk inherent in changing a traditional technical approach broadly. If the new person/management team is comprised mostly of Company Men, forget about it. These are far more comfortable with a failed outcome as long as they can establish that they had done everything by the book. And Jungle Fighters? Puh-leeze. They wouldn’t recognize a novel-but-optimal technical approach if it fell out of the sky, landed on their faces, and started to wiggle.

If your organization is suffering from symptoms of frayed leadership style, inchoate technical agenda communications, or a reversal in PM capability maturity, it may be suffering from Technical Agenda Transfusion Reaction. I wonder if we could persuade PMI® to open an emergency room at the Newton Square facility…

[i] Retrieved from https://www.thoughtco.com/karl-landsteiner-4584823 on 9 August 9, 2021, 11:51 MDT.

[ii] Retrieved from https://www.redcrossblood.org/donate-blood/blood-donation-process/what-happens-to-donated-blood/blood-transfusions/history-blood-transfusion.html on 9 August 9, 2021, 11:55 MDT.

[iii] Retrieved from https://ashpublications.org/blood/article/113/15/3406/24952/Transfusion-related-mortality-the-ongoing-risks-of on 9 August 9, 2021, 12:02 MDT.

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.