Game Theory in Management

My regular readers are aware that I often invoke the brilliant Thomas Kuhn, author of The Structure of Scientific Revolutions, who evaluated the way that scientific theories replace their obsolete predecessors. One of the examples Kuhn offers up has to do with cosmology, specifically the way that the Copernican Model replaced the Ptolemy version of the way the Solar System operated. Ptolemy, in the first century A.D., theorized that the galaxy revolved around the Earth, and cosmologists in-between the first century and 1543 (and for a while thereafter, embarrassingly) held to that model. However, when data started being collected that challenged the Ptolemy model, additional assertions were added to the Ptolemy theory, known as “epicycles,” that appeared to explain the anomalous data within the then-accepted theoretical framework.

Part of these epicycles involved the observed behavior of the planet Mars. In order for the Ptolemy model to be correct, Mars would have had to perform a little mini-circle in addition to its nominal orbit, essentially executing a figure-8 as a normal matter of course. Why an orbiting body would behave in such a fashion was never really adequately explained, for the simple reason that it couldn’t. Mars didn’t do a figure-8, commonly-accepted theories notwithstanding.

With the invention of the telescope in 1608, it wasn’t long before Copernicus’ model, of the Solar System’s bodies orbiting the Sun, was perceived to do a far superior job of explaining the known data. The movement away from the Ptolemy model towards the Copernican version was a “paradigm shift,” a term coined by Kuhn.

Meanwhile, back here in the PM world, the longest-held overarching theory in management science is that the point of all management is to “maximize shareholder wealth.” To that end, there are several anomalies in management information, such as the notion that the data coming from the General Ledger is all that’s needed to manage a business, or that Gaussian Curves have some utility in quantifying the way the future unfolds. Project Management, as a discipline, represents a paradigm shift in the management science world, but has yet to be as widely accepted as it should. For example, pick up any college-level business school text on the topic of quantitative analysis in business. I can almost guarantee that it will not include methods for taking into account Earned Value or Critical Path-generated information streams; instead, they invariably predicate their entire analysis techniques on information from either the General Ledger, statistical analysis, or both. In essence, they want us to believe that Mars executes a figure-8.

But the most pernicious aspect to these epicycles lies in the fact that their proponents got us, the PM aficionados, to adopt them in the first place. Neither the general ledger nor statistical analysis has anything to do with assessing project performance – as stated previously, those pieces of information are derived exclusively from Earned Value and Critical Path methodologies. Performing regression analysis on a project’s spending behavior to estimate at-completion costs, or using a Monte Carlo simulation to determine probable end-dates, are epicycles of an obsolete theory, that the best methods for generating the information streams that guide decisions towards that end are predicated in generally-accepted accounting principals, or GAAP, or else in statistical analysis techniques. Somehow, though, both techniques made it into the PM codex, where they absolutely do not belong. Real PM-types know perfectly well how to calculate at-completion costs and probable project end-dates, and they have nothing to do with risk management, nor GAAP, period. To be blunt, they’re not our epicycles. We PM-types know how to derive projected at-completion costs and end-dates, and shouldn’t have to account for the flaws inherent in rival management science theories.

In short, we know Mars doesn’t have a figure-8 orbit. Why doesn’t everyone else get that?

In Stan Lee’s Marvel Comics universe, the X-Men are people who usually look like the rest of us (in Mystique’s case, literally), but are actually endowed with various superhuman abilities stemming from being born with a genetic mutation. There are mutants other than the X-Men, some of whom follow Magneto (who can manipulate metal without touching it) and represent the X-Men’s ideological adversaries, and some mutants who are un-aligned and just go about their lives.

And then there’s the rest of us, who have to endure seeing projects that took millions and millions of dollars and represent iconic aspects of American life – like the White House and the Golden Gate Bridge – ripped to pieces by the mutants who are trying to decide an argument  about an appropriate equilibrium point in human/mutated-human relations. Due to an entirely understandable reluctance to see iconic American structures ripped to pieces, considerable effort is expended in the X-Men universe to devise a method or machine that can reliably detect mutated humans, so that the mutants can be readily identified and dealt with, one way or the other.

Meanwhile, back here in the project management world, we see epistemologically similar conflicts, where certain long-held precepts about PM are challenged, or overthrown, by technical approaches that look like traditional PM, but have really been modified to fit specific types of project work. The modified versions appear to be in compliance with the PMBOK Guide®, but are actually different, and often times far more powerful – so powerful, in fact, that they threaten to shred some of the more traditional models. In our universe, there is also considerable effort dedicated to ascertaining which management approaches are consistent with basic PM precepts, and which represent something outside our codex, and need to be identified as such, les they infiltrate and blow us up (in the arena of competing management science hypotheses, of course) with their circumstance-specific greater power.

As it turns out, my second book, the one this blog is named after, happens to address this very issue, that of which easily-articulated tests could be employed to ascertain those management information systems that are effective, and for which purposes, and which, well, aren’t. The underlying theory behind this mutant-identifying machine (strikethrough) information stream validator is predicated on the idea that all project management information systems exist to answer at least one of the following questions:

1. Is the product or service being provided that which was originally agreed to for the price?
2. Once the project or activity is completed, is there an audit trail that allows a reconstruction of the decision-making process?
3. What is the cost and schedule performance of the work as it’s in-process?

Depending on which of these questions is important to the contractor or customer, the available PM techniques can be abandoned, or embraced.

Take #1, whether or not the product or service is what was negotiated for the price. The variations of this are those times where either (a) the product/service is sub-standard (quality management, scope definition), or (b) the contractor attempts to increase the price for the same amount of work (change control/configuration management). In those instances where there is little chance of the product/service being sub-standard or a price increase (e.g., contractual delivery of a commodity), then all that PM stuff about quality and scope can be abandoned safely.

Number two is obviated by the use of firm fixed price (FFP) contracts. Using these types of contracts means that there’s no valid use for all of the basis of estimate detail, variance analysis reports, change control justifications, and schedule analysis that are often demanded from projects by the customer(s). Which leaves us with…

Number three, the ability of PM techniques to report on cost and schedule performance as the project is on-going. In the cases of Scrum or Agile, the latitude to jettison the PM artifacts of the other two information demands allows a streamlining of the technical approach. Note that, in Scrum/Agile, one of the first things abandoned was the formal change control process, which existed in the first place to address issue #1 – something that has considerable more latitude in, say, software development projects than it would in the construction of an iconic bridge linking San Francisco to Marin County, or an executive mansion for the President of the United States.

Yes, in the mutant (strikethrough) hybrid world of PM, some icons can be (cinematically) blown to smithereens. Knowing the conditions that need to be in-place prior – that’s the superhuman power.

It was relatively late in the morning when my friend Sherlock Holmes[i] emerged from his bedroom and into the sitting room at 221B Baker Street.

“Was that the post I heard earlier?”

“Yes,” I replied, “it was addressed to the both of us, so I went ahead and opened it. It appears to be an interesting case.”

Holmes sat down in his familiar chair, put his feet upon the ottoman, then closed his eyes as he placed his fingertips together, resting them on the bridge of his nose.

“Pray, read the letter, Watson.”

“It’s from a fellow who’s responsible for a large military project, and he needs to know about his performance.”

“Did the project come in on-time, and within its budget?”

“That’s just it, Holmes … the project isn’t finished yet.”

“This is hardly worthy of our time, Watson. All he has to do is compare his progress against his objectives to where he had planned to be, and then compare a monetized version of this progress against how much he’s actually spent, and those two figures should give him a fairly accurate idea. In fact, this solution is so straight-forward and easy, I’m rather surprised this PM did not go to that fellow in the United States – what was his name again, Raspberry? – for a solution.”

“Stanly is already engaged; besides, this fellow is here in the UK.”

“Very well, send along the answer I just articulated, and be done with it.”

“But that’s just it, Holmes” I started. “His support staff keeps telling him that he ought to use other comparisons to determine his performance.”

“What devices is this Project Manager subjected to that he’s expected to use to determine such things?”

“He includes a list here: statisticians tell him the odds of something bad happening.”

“Irrelevant – nothing more than quantified worrying.”

“The accountants project his costs based on the rate he’s spending now.”

“Without an assessment of his percent complete” Holmes replied, “that is also irrelevant.”

“His communications specialists monitor the number of stakeholders he has engaged.”

“Also irrelevant, and maybe even harmful. What are the criterion for these ‘stakeholders’?”

“He doesn’t say.”

“Are there any more?”

“Yes, one – this PM has estimators who are constantly re-estimating the cost of the remaining work.”

At this, Holmes suddenly sat upright, dropped his hands and opened his eyes.

“This is the worst of all!” he cried. “It’s not only irrelevant and inaccurate, but it takes time and energy to develop, and replaces its valid counterpart!”

“Valid counterpart? What do you mean?”

“An accurate assessment of at-completion costs and dates is probably the most valuable information that a PM can access, but you can’t get a precise figure by constantly re-estimating the cost or schedule baseline. Every last one of the data items that goes into such an ‘estimate’ is entirely subjective, and the more subjective data you allow into the analysis the less reliable the final product becomes – the very definition of a rubber baseline. They’re irrelevant and inaccurate clues. The at-completion data must be provided based on objective data, otherwise it’s worthless. Small wonder our PM is in the dark about how his project is performing.”

“But Holmes, if he has all of these so-called experts feeding him irrelevant and inaccurate information, and he needs to know his performance and valid at-completion dates and costs, what is to be done?”

Holmes reclined back in his chair, and again closed his eyes with his fingertips resting on the bridge of his nose.

“Reply to our intrepid and grasping PM that he need only divide his percent complete into his cumulative actual costs, and he will have a valid, accurate, and easy to employ estimate of his costs at completion. Have him do the same with his cumulative duration, and he will know within ten percent his projected end date.”

“What if such an analysis returns that he is doing poorly?”

“Then more robust project controls techniques are called for to isolate the issues. But that wasn’t what this fellow asked of us – he only requested to know how he was performing, and what I just told you is the way to ascertain that.”

“Are you sure?”

“Completely. Those data elements are almost exclusively objective in most cases, and only mildly subjective in others. Their results will tell him the answer to his original inquiry.”

“What should he do with all of his other so-called experts? They’re certain to impugn your intellectual integrity.”

“He should tell them to report back to Moriarity that their attempts to hopelessly complicate basic performance measurement on this particular project have come to naught.”

[i] Sherlock Holmes and Dr. Watson were characters developed by Sir Arthur Conan Doyle – I’m just borrowing them for this blog.

In a variation of the question in the title, Adele Tartaglia, in an excerpt from her book appearing on SelfGrowth.com, wrote this:

The “I’d rather be right than happy” attitudinal stance in life seems at first like conceit or egoism when it actually stems from the complete opposite as do most behaviors overtly appearing like self aggrandizement. All are based on deep insecurities, worthiness issues, self doubt, and self abnegation.[i]

Ms. Tartaglia does not appear to consider whether or not her assertion is right, or actually based on deep insecurities, worthiness issues, self doubt, and self abnegation, so I will save such an evaluation for some time when I’m feeling a bit more esoteric or combative.

Now, compare and contrast this assertion to the ideas that Thomas Kuhn advanced in his classic The Structure of Scientific Revolutions, where he describes the cycle that generally greets all new scientific theories, especially those that represent a dramatic challenge to the ideas that are in wide acceptance at the time of the new theory’s introduction. Consistently the new theories, and the people who develop or support them, are sharply criticized – ridiculed, even – until such a time as the evidence supporting the new theory becomes virtually unavoidable. As the majority of scientists in the field begin to abandon the old theories and embrace the new, a Paradigm Shift occurs (Kuhn actually coined the term), and the “new” theory becomes the baseline – until still more evidence comes in that appears to challenge the existing ideas, and the whole cycle begins again. But note the reception that the person advancing the “right” idea encounters – rejection, ostracism, extreme criticism. And these are in circumstances where the science can be demonstrated to be valid using hard data, and reproducible in an experimental setting.

I understand very well that, when we discuss the so-called management sciences, a great deal of subjectivity has suddenly been injected into our experimental evaluations. In the macro economy (or even in the micro economy, if we are honest with ourselves) there are simply too many parameters or data elements to be able to precisely define or measure the dependent variables that drive a particular outcome. In simpler terms, we never really know all of the causal factors that went in to our successes, or failures. There’s simply too much going on to recognize, much less quantify into reproducible causality loops in an experimental setting. With nothing less than the optimal way of conducting management at stake, such an environment invites the introduction of unsupported (indeed, unsupportable) theories as legitimate management science – and when I say “unsupported,” I mean ideas that often represent examples of openly fraudulent analysis techniques. Examples include:

• Risk Management, especially when they pretend to be able to quantify the future;
• Communications management, particularly when they advise PMs to willy-nilly “engage stakeholders,” even those stakeholders who may be opposed to the project;
• Asset managers who insist that a project’s at-completion costs can be accurately estimated from the data in the general ledger.

I could go on (and often do), but you see my point. Many of the things the PM community writ large accepts as valid practices or techniques really aren’t, and to challenge them in the least bit often means making the choice between being right (because the ideas being challenged really are silly), or being accepted by one’s peers who have embraced the popular “wisdom,” and can probably be counted on to react as other science advocates do when commonly-held notions are challenged, or even overturned outright.

So, when the PM practitioner considers the path forward, and the implications for career advancement (ProjectManagement.com’s April theme), the question remains – would you rather be right, or accepted?

[i] Tartaglia, Adele, “’I’d Rather Be Right Than Happy’ Identity, A New Solution,” from SelfGrowth.com, retrieved from http://www.selfgrowth.com/articles/i-d-rather-be-right-than-happy-identity-a-new-solution on 23 April, 2016, 14:44 MDT.

Okay, maybe you can’t get a leg up on how to buy a winning lottery ticket using PM techniques, but the similarities between what Project Managers do and betting on unique future events unfolding a certain way are myriad. I got to thinking along these lines when I was asked what would I do if I were to win the lottery, specifically, would I go on working?

The more I thought about it, the more I came to recognize the parallels I alluded to in the first paragraph. I’m pretty sure that, should I come into fantastic wealth after buying a $2 lottery ticket, I would not continue working my present job (sorry, Cameron). It’s not that I don’t enjoy my work, or that I think I’m not very good at it. It’s just that project management tends to be pretty stressful. It’s axiomatic that something will not go as planned on every single project, leaving it to the PM to take the actions necessary to ensure the eventual outcome remains relatively as-predicted, even in ever-changing (or even chaotic) environments. Our friends, the asset managers, are comparatively free of such chaos as they execute their duties. Budgets, accounts receivable and payable, payroll – these business transactions are carried out in a highly formulaic fashion. It’s so formulaic, in fact, that in many instances it’s illegal to carry out such duties in anything other than the proscribed, mandated fashion.

PM, on the other hand, and as I’ve said multitudinous times, is a completely different animal. By definition a “project” is a unique endeavor, with identifiable beginning and ending dates. Being as it is a unique endeavor; the lessons learned from previous experiences may or may not be applicable. Some elements are universally analogous, sure, such as breaking the work down into sub-components (a Work Breakdown Structure), identifying the resources needed to accomplish the scope (a time-phased budget), and some sort of identifiable duration (a schedule). Go much further past that, though, and the universal truisms – and, therefore, reliably repeatable guidance – become far more rare.

But that doesn’t stop a plethora of self-identified experts from trying to push their ideas as universally applicable in the PM realm, no siree. Take, for example, our friends the communications specialists. If I’m subjected to one more article or talk about how all PMs are somehow duty-bound to “engage stakeholders,” I think I will communicate my opposition to such drivel by imitating the sound my Collie makes when he’s throwing up on the carpet at 3:00 a.m. Bonnie Cooper, writing on the Corporate Education Group website, states “One of the most critical aspects of project management is doing what's necessary to develop and control relationships with all individuals that the project impacts.”[i] Now, I’m sure Ms. Cooper is a very nice person, but this statement raises a few questions, to wit:

• Is it even possible to identify all the individuals a given project impacts?
• How do you “control” relationships? Anyone who even thinks this is possible has clearly never owned a pet cat.
• On what basis do you assert that developing and controlling these relationships is “one of the most critical aspects” of PM? Can you point to a study where identical (or even similar) projects were undertaken, with relationship development and control present at a robust level on Project A, while absent on Project B, where Project A significantly out-performed Project B, with this stakeholder engagement stuff being the proximate (or even material) cause?

But it all sounds so great, doesn’t it? I mean, by controlling the relationships with everyone who’s affected (not “impacted,” unless the result of your project comes in to kinetic proximity to others) by the project, you can, to at least some degree, control the way the future unfolds, right? By spending energy on “stakeholder engagement,” doesn’t that lessen the chances of adversarial relationships spontaneously erupting, and thereby endangering your project?

Short answer: well, umm, not necessarily.

If Project Management techniques, such as risk, quality, or communication management, could alter the way the future unfolds, then, taken to their extreme, wouldn’t there be examples of their ability to do so in such a way as to represent extreme success, similar to winning millions off of a single lottery ticket? There aren’t, and they can’t. What they can do, however, is to better prepare the PM practitioner to deal with the way an uncertain future does unfold, and that increases your odds of success to something a bit better than one in 292,000,000.

[i] Cooper, Bonnie, “What You Must Know About Stakeholder Management,” retrieved from http://www.corpedgroup.com/resources/pm/WhatMustKnowStakeholder.asp on April 16, 2016, 2:00 p.m. MDT.