Game Theory in Management

I really like Jon Taffer’s style.

Star of the Spike Network television show Bar Rescue, Taffer is an expert at converting bars on the verge of bankruptcy and ruin into vibrant, successful enterprises. If you are wondering why the work of PM consultants rarely involves the kind of drama that could serve as the basis for a television series, at least part of the reason involves Taffer’s approach to his consulting business. I’ve seen several episodes of Bar Rescue, and in each the following aspects of Taffer’s approach manifest:

• He’s obviously a subject matter expert,
• And is crystal clear in his analysis, even to the point of enraging his clients.
• On those occasions where his clients are sustaining some sort of managerial pathology, and attempt to defend it and state their intentions of keeping such poor strategies in place, I have never seen Taffer back down, and acquiesce to the client…
• …even if it means that he’s released from performing the consulting work.

Conversely, I have never seen a project management consultant consistently engage those tactics. On the contrary,

• I have seen many a consultant insist on implementing some strange information system “remedies,” including comparing line items in the basis of estimate (BOE) to line items in the actual costs listing from the General Ledger,
• But will couch their analyses in terms that allow them to soft-sell their assertions should the client become visibly upset, much less enraged.
• These same consultants will immediately back off as soon as their customers begin to defend the very practices that are clearly leading to their problems.
• Especially if the consultants think they may be released from the job.

Another consultant whose style I admire is the fictional character Yoda, from the Star Wars films (specifically, I through III, and V through VI). Consider how his approach is similar to Jon Taffer’s:

• He’s obviously a subject matter expert, as evidenced by his abilities with a light saber, even given his diminutive stature,
• And is clear where he stands with respect to the issues, if you get past his odd syntactical style.
• On those occasions where he encounters those who are either weak in the ways of The Force, or else are committed to the Dark Side, he is unequivocal in his position, even if the last hope for that galaxy far, far away is at the point of exhaustion and doubt,
• And does not change, even if the rest of that same galaxy is arrayed against him.

Is everyone here seeing a pattern? The problem, as I see it, is that profoundly vapid management techniques are being introduced into the popular PM codex because some truly goofy PM-types will hire some truly renowned consultants to throw their weight behind some truly vacuous techniques, and those techniques suddenly become mainstreamed. It’s analogous to a situation where Manhattan bar managers suddenly decide to replace olives with avocado pits in the drinks that would normally be served with olives, and other bar owners across the country followed suit, without even asking for the evidence that that’s a good idea. Or, if youths showing an early capacity for channeling The Force were to spontaneously decide that the ability to play ping pong was a critical skill to acquire, and began devoting energy and time to that end. The external witnesses to this might scoff at its absurdity, but I can guar-an-tee that many of the PM practitioners reading this blog are completely okay with the notion that project management, done “properly,” must needs include a Monte Carlo analysis for the risk portion of their major projects.

So, in addition to last week’s blog’s criterion for real consultants versus the pretenders, we can add one more: like Jon Taffer and Yoda, the real deal never backs down from what they know to be the right way of doing things. That means that there’s only one question you consultants need to ask yourselves:

Are you so sure of your technical approach to PM problem-solving that you’re willing to be exiled to a swamp planet if your ideas are rejected by the galaxy around you?

Lagniappe

I will be presenting some of the ideas from my third book, The Unavoidable Hierarchy, at the dinner meeting of PMI's Rio Grande Chapter this Thursday, in Albuquerque, NM. The meeting is held at the Sandia Resort, starting at 6:00 MDT, with the presentation at 7:00.

Like stand-up comedians who spend too much time ridiculing television commercials, I don’t want to fall into the trap of making fun of consultants too often. True, they’ve been known to be wrong.

And can be arrogant towards the existing project team members.

And usually waaayyyyy overpriced.

And, if they stick around too long, become ipso facto evidence of executive ineptitude.

Some also have the unfortunate tendency to describe their time with your project team as one of their saving a woefully backward organization from ruination, due to their timely expertise, don’t you know.

But other than that…

Now that I’ve written the previous paragraph out, I’m not so reluctant to fall into the making-fun-of-consultants-too-often trap.

I’m not really worried that my friends who make their livings as consultants will be upset with me. They generally do not read this blog – they’re too busy consuming guidance-themed drivel that can be translated into eat-your-peas-style hectoring, on those occasions where they deign to stay current with PM literature at all. That’s how they make their money, generally speaking. I’ll explain.

Of course there are real value-added consultants, but there’s also the mock-worthy variety. How do you tell the difference? Check the following table:

Also consider the function your consultants fulfill. Anybody can sit around and offer up criticisms of the management decisions that have gone before. Hindsight is, as they say, twenty-twenty. It’s so easy, in fact, that people outside the project team should have to pay the PM for the luxury of doing so while everybody else pretends to listen to what they have to say.

But the ultimate consultant acid test will reveal the real deal, if you have one. Recall Hatfield’s Incontrovertible Rule of Management #11: the 80^th-percentile best managers who have access to 20% of the information they need to obviate a given decision will be consistently out-performed by the 20^th-percentile worst managers who have access to 80% of the information they need. This being the case, the consultants worth their weight in budget underruns will seek to set up and maintain such systems, without an iota of excess cost or difficulty.

And that’s how you tell the pros from the consultants.

When we left our hero last week, the secret conference room full of PAIN operatives had just erupted in a sound that can be best described as what would happen if somebody told a really funny joke at a Darth Vader impersonators’ convention. In the middle of the laughter, a man disguised as a waiter leaned over to my side.

“What are you doing here?” he whispered.

I looked up into the eyes of Cameron McGaughy, ProjectManagement.com’s managing editor.

“Cameron?! What are YOU doing here?”

“ProjectManagement.com has its ears open to these kinds of things. Anyway, the theme for March was supposed to be global communications. So, let me ask again – what are you doing here?”

“Well…” I whispered, “This kind of guidance issuance has an impact on how PM techniques are transmitted around the world, so there’s that.”

“You’re on pretty thin ice here, Raspberry, but carry on. We’ll see how this ends.”

As the laughter died down, the chairman continued.

“As we continue to insist on these line-item comparisons between budgets and actuals, the original baselines will be turned to rubber, engendering endless debate about supremacy of policy preferences. The confusion emanating from these debates will cloud the issue for years!”

I held up my hand.

“Do any of these documents you’re issuing actually add to the practical use of Earned Value techniques?”

Gasps again erupted from the participants, this time moving enough air to disturb some of the papers on the table before them.

“Why would you ask that, Max? Aren’t you on board with our true purpose?”

“Oh, yeah, sure I am. It’s just that I was told that we had to maintain some sort of veneer of valid management science advancement.”

Again the room began murmuring, with an occasional “Oh, yeah” and “he’s right, darn it” becoming audible.

“That’s true” the chairman responded, “but highlighting the divide between practical application and what we’re presenting as true goes too far.”

He continued “So we are on an acceptable pace to attain our final goal.”

I hoped someone would pipe us and ask “That being?”, but nobody did. However, another attendee did ask “Okay, boss. But once we’ve attained that goal, who’s going to maintain the ‘you’re doing it right’ versus the ‘you’re doing it wrong’ ledger? Our friends over in software development blew up our previous attempts when they came up with that incredibly practical ‘agile’ and ‘scrum’ business, and it’s taken this long to get back to where we are now.”

That’s when it hit me: the purpose of this little council was to create a codex of project management rules and regulations that would provide these so-called experts with the ability to demand adherence to process, and eschew practicality in application.  If it worked out, they would be empowered to forever say “you’re doing it wrong,” and point to some part of this codex to back them up.

In short, they wanted to entrench process over actual performance as the key to “proper” PM.

Along about this time I felt a small gap in-between my upper lip and fake mustache. Fearing that my disguise was beginning to fail, I decided to speak up one last time.

“We should arrange for Monolithic Corporation to make that determination.”

“We all agreed to not mention any company names” began the poorly-shaven fellow next to me. “Hey! What’s this?”

He then grabbed my fake mustache, and pulled it off my face. This time, the attendees gasped so loudly that loose papers leapt off of the table and were plastered onto their faces.

“Raspberry! Get him!”

In the time it took for the attendees to get their loose papers off of their faces, I sprinted down the hall and up the secret staircase. Charlie Gumshoe was waiting in the car just outside.

“Did you get it? Do you understand what they’re up to?”

“Yes, and yes. And you’re never gonna believe this…”

Situation: Dark and stormy night.

My mission: infiltrate the Project Association for Industry Non-Autonomy (PAIN), in order to glean their motives in churning out so many suspect guidance documents on project management information systems.

My name: Raspberry. Stanly Raspberry.

Duhh duh DUH duh. Duhh duh DUH duh DUHHHHHH……

The story you are about to read is not true. The names have not been changed, since they were made up in the first place.

Duhh duh DUH duh. Duhh duh DUH duh DUHHHHHH……

“That wig and fake mustache make you look like Geraldo Rivera” snarked Charlie Gumshoe, my contact within the force.

“Then why didn’t you do this disguise-and-infiltrate business yourself?” I asked.

“You know that officers of the force can’t do that, Raspberry – we need a free lancer, like you.”

Charlie was driving me to the facility where the key players from PAIN were scheduled to meet.

“Remember” he began, “only a few of these guys have ever met face-to-face. We ‘borrowed’ your entry credential when one of their members from Las Vegas turned up in the hospital, and told us what was going on when he was under anesthesia.”

“Then why do I need a disguise?”

“Because some of them might readily recognize you – we understand Monolithic Corporation has a heavy presence there.”

I might have known Monolithic had their meddlesome hands in this.

“Don’t forget” Charlie continued, “you’re Max from Las Vegas, but we’re not sure which interest you represent. Since all of these attendees consider themselves experts in the field of project management, only speak up if you are completely confident you have the intellectual high ground. Otherwise, just listen. We need to know why they are issuing all these guidance documents, some of which we believe have some instructions that make little practical sense. We just can’t figure out why any organization would go through all this trouble to issue shaky guidance.”

Charlie pulled up to what appeared to be an abandoned factory.

“This is where they’re meeting?”

“It’s the address on your invitation.”

I stepped out of the car, and walked through the door on the front of the shattered facade, as if I had been there before. Rubble was strewn about the puddle-ridden floor, but an exit sign on the far side of the room was brightly lit. I strode towards it, and noticed a device that looked very much like a badge reader. Checking my credential, it had a magnetic stripe – so, I used it.

The floor beyond the exit sign seemed to fall away, revealing a staircase going down to a basement. I walked down the stairs with a rising sense of apprehension. At the bottom of the stairs was a dimly-lit hallway, which terminated at a red door. I walked through the door.

Inside was an advanced-technology conference room, with a large C-shaped table. In the middle of the room, surrounded by the table, was a metal sculpture of what appeared to be seven or eight binders, each overflowing with pages, stacked atop each other.

“Max! We’ve been waiting for you! Now we can begin!” said the portly speaker, who took his seat at the top of the “C.”

“Our last issued guidance document mandated that cost performance systems compare the line items in the Basis of Estimate with their counterparts in the general ledger, as part of ‘cost performance management.’”

“Excuse me” I interjected, “but isn’t that just comparing budgets to actuals? And isn’t that automatically not ‘performance management’?”

There was an audible gasp from the participants.

“Why wouldn’t you want to know that?” demanded the poorly-shaved fellow sitting next to me.

“That’s not the issue. Whether you are comparing cumulative budget to cumulative actuals, or period line-item budgets to period line-item actuals, that’s certainly not Earned Value Management, and therefore not performance measurement.”

Angry-sounding murmuring erupted among the attendees.

“But it does amp up the number and difficulty of approved processes, does it not?” asked the portly chairman.

“Oh, right!” I exclaimed, feigning enthusiasm, while realizing that I might be hearing clues about PAIN’s ultimate goal.

The chairman continued. “That, combined with our push to have Estimates to Complete constantly re-estimated, and then time phased, allows us to demand that same comparison on a month-by-month basis! No contractor performing project work can ever avoid a reportable deviation from such an analysis!”

At this point the room erupted in a sound that can be best described as what would happen if somebody told a really funny joke at a Darth Vader impersonators’ convention. In the middle of the laughter, a man disguised as a waiter leaned over to my side.

“What are you doing here?” he whispered.

Terrified that I had blown my cover, I turned to see that it was…

Wow, look at that! I’m out of space for this week. Tune in next week to see the amazing conclusion of Stanly Raspberry and the Procedure Conspiracy.

Think back to what you’ve read about traveling “medicine men” in the United States, circa 1870 to 1900. These men made a living by being able to mimic the true medical professionals of the day, and selling concoctions that looked, smelled, and tasted like how they thought medicine should look, smell, and taste. Of course, they could not be honest about their compounds’ true ingredients if they were to extract money from gullible audiences.

But that’s kind of the point, isn’t it?

As an aside, I’ve always wondered: doesn’t the alleged existence of “snake oil” – the clichéd main ingredient of these concoctions – imply the presence of a “snake press,” much as the existence of olive oil implies an olive press? And, if so, how hard would you have to press a snake to extract oil from it?

Meanwhile, back in the PM world…

A self-appointed guidance-generating organization recently issued a document (I don’t want to name the organization or guidance document directly, ‘cuz then I’d have to scale back the tone of my condemnation, and where’s the fun in that?) on Earned Value Management Systems, and one of their legitimate-sounding diktats ideas is that the Estimate at Completion (EAC) should be derived by re-estimating the project’s remaining work, and adding that figure to the cumulative actual costs. I simply have to ask: is this legitimate management science, or is it quackery?

The alternative method for deriving the EAC is to calculate it, with the most common formula being to divide the Budget at Completion (BAC) by the Cost Performance Index (CPI), so:

EAC = BAC / CPI

There are other formulas, but we’ll use this as the basis for comparison. Is it accurate, and can its accuracy be shown scientifically? Yes, and yes. Dave Christensen, Ph.D. has written several papers on the topic. Pulling data from real-life projects, Dr. Christensen has established that the calculated versions of the EAC are consistently accurate to around 10% of the projects’ final costs. For the record, one professional society has published data showing that a detailed cost estimate, produced by a professional estimator using off-the-shelf software, is accurate from 25% to 15% of the projects’ final costs. At this point it must also be noted that calculating the EAC is far easier than having to create a detailed re-estimate the remaining work. For those who object that the estimate of the activities’ percent complete – the basis of the CPI figure – is subjective, I would counter that every single line item of the new estimate is at least as subjective. In addition, the calculated EAC feels no pressure from upper management to make their at-completion forecasts palatable, unlike the re-estimated version. To sum up:

So, what gives?

Why would the more difficult, less accurate, and politically-prone version of a critical project performance parameter get the nod over its clearly superior alternative? When one considers the history of how poor hypotheses become embedded in a body of knowledge, the management sciences appear to be particularly vulnerable with regard to this very sort of issue. I will also point out that, once a profession begins to base their standards on this sort of expert speculation rather than methods that have established their superiority in multiple real-life projects, it virtually invites an invasion of poor guidance.

But that’s kind of the point, isn’t it?

Perhaps the experts pushing this kind of management science hypothesis can also let us know the exact pressure needed from the snake press to produce usable snake oil. I mean, if we're just speculating, why not?

Lagniappe

My webinar on the 16^th could have gone better. My stupid computer crashed three times, and needed a few minutes each time to re-boot and get back to the chat room. In a way, it was a left-handed blessing, in that it forced me to focus my ideas into a suddenly-reduced time frame. The gracious and professional Stephen Strickland (the host) said it went well, but I’m not looking forward to the attendee evals. Next time will be better, I promise.