Game Theory in Management

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.

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

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

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

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

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

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

Here’s my recommended grid:

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

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

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

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

“Mr. Gorbechev, stop maintaining this wall.”

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

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

Meanwhile, Back In The Project Reviews Conference Room…

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

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

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

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

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

Even if the presenting PMs look like cats.

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