Game Theory in Management

It continues to be a good 2020 for our friends, the risk managers. While they still haven’t earned initial caps status when I refer to them, I am continuing the trend from the last couple of weeks’ blogs and averting my poison-pixel gaze, and towards another one of my favorite targets, albeit one that I don’t pick on too often. I’m talking about another set of friends, the quality managers (who have been granted initial cap status previously, but no more). Why are quality managers deserving of GTIM Nation scrutiny? Well, it all starts with their pronouncements.

Recall my oft-repeated axiom of management, that of Quality, Availability, Affordability: pick any two. Anybody with any significant amount of management under their belts will recognize this as being absolutely true, and really not worth debating, like the assertion that pro wrestling in the United States is far more staged theater than competitive sporting event. Ah, but not our friends, the quality managers. I have yet to meet one that isn’t convinced that the tactics, procedures, and management approaches germane to quality management should absolutely be embraced and executed, the sooner the better, cost is irrelevant, by every organization and project team in existence, and to fail to do so is akin to chargeable management malpractice. This attitude becomes all the more remarkable when one considers how the American National Standards Institute (ANSI) develops standards on various management science topics. When PMI® asked me to participate in the ANSI Standard that they were then developing for Earned Value Management Systems, this participation included a trip to Pennsylvania to attend various workshops to help train authors to properly contribute to an ANSI Standard. Aside from the tutorials involving copyright infringement and general writing style, an actual representative from ANSI hosted a workshop on content. I’ll never forget one of this fellow’s guidance recommendations: we were told to write in such a way that no one who could be considered an “expert” in the field we were writing about could disagree with the verbiage we were providing.

It was at that point that I began to doubt that the eventual product would actually advance the practice of Earned Value Management. Why? Because in order to get the document to a point where no one would disagree with it, it would have to be content-reduced to such an anodyne state that nothing even coming close to insightful would pass the no-expert-disagreement test. It’s as if no one even considered that this race to the lowest common denominator would naturally steer content in the opposite direction of genuine quality. With such parameters in place, creativity (ProjectManagement.com’s theme for February), ironically enough, didn’t have a place in the document-creation cycle. This isn’t the way to generate quality anything. Quite the opposite, it virtually guarantees that any management science-themed standard attaining the ANSI approval imprimatur would be extremely weak sauce, promising to not offend any palate exposed to it. So, I asked myself, if this approach extended to ANSI documents about quality management itself, would they be as insubstantial? Well, I checked it out, and they did not disappoint.

The document I’m referring to is entitled “Quality Management Principles,” by the International Organization for Standardization (ISO), located in Geneva, Switzerland.[i] This is, by any professional standard, a poor-quality document. It’s essentially 20 pages of a priori assertions, sentences phrased in the weak passive voice, and sometimes a priori assertions phrased in the weak passive voice. I do not know if ISO operates under the same “no expert should disagree” theme that ANSI appears to follow, but I do know from my days as an advertising agency apprentice what a “posinon” is. Short for “positive, inferential non-statement,” a posinon is a rather irksome aspect of many an advertising campaign. “Coke is it!” is a classic example.[ii] They don’t really assert anything that can be evaluated as True or False – they just sort of sound good, or insightful. Examples of posinons in the text of “Quality Management Principles” include:

1. “To manage an organization effectively and efficiently, it is important to involve all people at all levels and to respect them as individuals.”[iii]
2. “Enable self-evaluation of performance against personal objectives.”[iv]
3. “Manage risks that can affect outputs of the processes and overall outcomes of the quality management system.”[v]

Let’s take a look at these one by one, shall we?

1. This is clearly absurd. Does one really need to “engage” the HVAC technicians, and “respect them as individuals,” for, say, an investment brokerage firm on Wall Street to be managed “effectively and efficiently?”
2. If my personal objective is to get rich young and retire early, how does “enable(ing) (my) self-evaluation” help the organization advance its quality objectives?
3. Okay, I didn’t want to go here, and stated as such at the beginning of the blog; but it really is impossible to “manage risks that can affect outputs,” since almost anything can literally affect outputs, including such unmanageable things as the weather, chances of key operating personnel contracting influenza, and availability of goods or services from vendors trying to deal with the weather and key personnel contracting influenza.

Also, just out of curiosity, can any of these assertions be tested empirically? I mean, if an organization is successful, could it point to having “involve(d) all people at all levels and …respect(ed) them as individuals?” And, if the same organization performed poorly on a project, what evidence could be brought to show that they had failed to do such “involving?”

I could go on (and often do), but you see my point. Such posinon-premised a priori nonsense has no place in any management science codex, much less Project Management. So, my creative suggestion for improving the quality of Project Management would be to reject the quality management guys’ “guidance” until such a time that they return to real, testable premises as the basis for their arguments and conclusions.

Or they could simply claim “quality management is it!”

[i] Retrieved from https://www.iso.org/files/live/sites/isoorg/files/store/en/PUB100080.pdf on 8 February 2020, 21:16 MST.

[ii] Retrieved from https://www.coca-colacompany.com/news/history-of-coca-cola-advertising-slogans on February 10, 2020, 18:59 MST.

[iii] Retrieved from https://www.iso.org/files/live/sites/isoorg/files/store/en/PUB100080.pdf on 8 February 2020, 21:16 MST.

[iv] Ibid, pp. 7

[v] Ibid, pp. 9.

The central problem when discussing creativity in the Project Management realm (ProjectManagement.com’s theme for February) is that we’re looking at two very different sides of the same coin. On the one hand, you have the templates, procedures, and canned strategies germane to the PM universe, including Work Breakdown Structures (WBSs), Earned Value and Critical Path Methodologies (EVM and CPM, respectively), Scope Management, and all the rest of the codex in the PMBOK Guide®. As anyone who has endured the PMP® examination process can attest, these concepts are all rather formalized and structured. However, the other hand is a very different schema indeed, where it’s common knowledge among PM practitioners that the ability to bring in a project on-time, on-budget is heavily reliant on finding innovative solutions to the unexpected problems that arrive with a bang at the PM’s front door, solutions that rarely have a standardized, template response. “How shall we find the concord of this discord?” (A Midsummer Night’s Dream). I think that the central question to finding the balance between what’s regarded as standardized techniques in approaching Project Management problems and having the management latitude to do whatever the heck the nominal PM wants to do hinges on one question: Does it work?

Not to put too fine a point on this, but I would like to point out the two criteria for evaluating whether or not something can be considered scientific, even in Management Science space:

• It has to be observable. Explaining phenomena that no one can perceive is as useless as arriving at an 80% confidence interval on a risk analysis.
• It has to be repeatable in an experimental setting. Theories that “explain” one-off occurrences are always suspect.

Based on this criterion, establishing the WBS early in the project is scientifically sound. This technique has been shown to serve well as the basis for the subsequent cost and schedule baselines time and again, while project work bereft of the same is almost always given to failure for any but the smallest, simplest of projects. Likewise, both Earned Value and Critical Path analysis are pretty standard for all but the most basic projects – if you want to have a fighting chance of bringing them in on-time, on-budget, that is. Which brings us to addressing our dichotomy: when is adopting a creative management strategy, nominally at odds with the standardized approach to managing a project well, a good idea? As GTIM Nation knows, any Game Theorist worthy of the name (and initial caps) will resort to a payoff grid, so:

In Scenario 1, the “Doesn’t care enough” bin doesn’t mean that the subject PM is visibly lackadaisical. It very well could be that they are simply so entrenched in their own approaches to PM problems that they can’t be convinced to abandon said approaches. When those canned strategies actually work, then these may be successful in spite of a lack of consideration of alternate, creative tactics.

The PM who cares enough to use tools known to work, but keeps an open mind when either they themselves or a member of the Project Team suggests a novel solution or approach, is going to be highly successful. This scenario is closest to describing The Gamesman archetype from Michael Maccoby’s brilliant work The Gamesman: The New Corporate Leaders (Simon and Schuster, 1976), which, based on Maccoby’s research, consistently experiences the most success.

Now, about that “don’t be dumb” mention in the blog’s title: if the named PM isn’t sufficiently motivated to do what it takes to bring in the project’s scope on-time, on-budget, one way of avoiding the use of the PM tools known to enhance success would be to listen to the Earned Value and Critical Path naysayers, and point to a “creative” management approach that eschews these tools. Experienced Project Controls Analysts have seen this scenario play out time and again, and, yes, they think those PMs trying to pull it off are dumb. Really dumb.

Finally, if the named PM really wants to perform well on the project, but only listens to our friends the Accountants and risk managers on how to do so, then they’re not really doing Project Management at all, but pursuing an obviously deficient derivative.

And I don’t do obviously deficient derivatives in this blog.

As promised at the end of last week’s blog, I’ve finally found a purpose for risk management, though I still refuse to do initial caps when referring to it (for alert GTIM Nation members who would say “You just used initial caps in the title of this blog for “risk management,” my response is, I use initial caps for each word in my titles). Before I reveal this quirky and yet valid reason, let’s take a quick view of the epistemology of Management Information Systems, or MISs (note the initial caps).

The key valid Project Management information streams have the following things in common:

1. They provide the actual decision-makers the data they need to make informed choices on their projects,
2. They further support the creation of an audit trail, or the (truthful) narrative on how the project has been executed, and the circumstances behind that execution,
3. …and they’re deserving of initial caps (e.g., Earned Value Management System, or Critical Path Methodology).

As I have previously pointed out in this blog, risk management utterly fails in number one, and therefore doesn’t qualify for number three. How do I know this? Because of the very definition of risk management offered up by some of their leading figures.

In a point-counterpoint article I contributed to in PMNetwork magazine many years ago, my risk management counterpart defined its purview as encompassing anything that might happen to a project, positive or negative, the latter being described as traditional risk management, the former belonging to “opportunity management.” Of course, management time is finite: the management information system that doesn’t accurately differentiate between where the project is in trouble and where it’s doing fine, and thereby pointing out where PM attention is needed is, well, useless. By their own admission, risk managers maintain that their specialty’s purview covers all things, positive or negative, needing of attention or not.

I’ve addressed many of the other reasons that risk management is such a disappointment in the delivering-relevant-information department in previous blogs, but a quick recap includes:

• Risk analysis (MSWord forces the first letter in a bulleted list to have initial caps) reports tell the PM exactly what? That there’s an X% chance that something will go wrong, resulting in $Y in added costs, or Z days in delays? Is this helpful?
• Especially when one considers that each of the parameters in the preceding bullet is little more than a wild-donkey guess.
• Then there’s their insufferable tendency to couch everything in Gaussian curve terminology (Carl Friedrich Gauss was a person, so I had to use an initial cap there).

“Alright, already, we know your objections to risk management” I can hear the two or three risk manager members of GTIM Nation (note the initial caps) saying, “but you promised a valid use for us! What is it, already?” I’m glad you guys asked.

From the second numbered entry above, Project Management MISs (at this point I’m basically trolling the risk managers with the whole initial caps business) provide a type of audit trail. I would further divide this audit trail into two bins:

• It generates the historical narrative, useful for future PMs to learn how best to tackle similar projects, and
• It gives customers who have, shall we say, an exceptionally developed curiosity about the choices being made by the Project Team, their basis, sensibility, etc., a sense that they’re in the middle of the day-to-day decisions that execute the project.

It’s this second bullet where risk management may actually be indispensable. Think about it: if your customer is hovering over your project so closely that you have to process a Baseline Change Proposal just to go to the restroom, there’s no better way of getting them to ease up a bit than by showing them that you have not only considered all of their worries, but you have “quantified” them in Gaussian curve jargon, and run a series of statistical analyses that would induce granite statues’ eyes to glaze over.

“If everyone minded their business,” the Duchess said in a hoarse growl, “the world would go round a great deal faster than it does.” (Alice in Wonderland, 1865).  So, here are the risk managers, making the world go round a bit faster, and for this they deserve recognition, even in the GTIM blog. I would like to point out, though, that had the risk management community reached out to me and explained the real purpose behind their schtick being to thwart overly hoverish customers (think about it: what customer is going to needle the PM who’s just waiting for an opportunity to discuss the significance of the gap between the median and average time for a given task?), then much of the pixel ink I’ve spent making fun of them could have been saved.

On second thought, and upon reviewing some of the risk management hate e-mail I’ve received, nevermind analyzing what might have been. The odds wouldn’t be good that they would ever receive initial capitalization status.

Looking over the list of techniques, strategies, and technical skills associated with an advanced level of PM expertise can be rather daunting. The more I read on the topic of what constitutes cutting-edge Project Management the less I see any kind of consensus on what makes up the core, or foundation of the PM codex. The most advanced financiers, heads of accounting departments, and even tax attorneys can agree that their industries are predicated on double-entry bookkeeping (developed, incidentally, in Medieval times). Strategic Managers can agree with advertising agency owners and newspaper publishers that the ability to differentiate their customers/organizations’ products or services from competitors (and thereby making them more appealing and gaining in market share) is the basis for their empires. But what are the essential elements of PM? What makes it both unique and necessary? And, perhaps most critical, what’s the best approach to answering the previous two questions?

Attempting to resolve such weighty questions as posited above using a priori arguments and “experts” sitting around hotel ballroom conference tables comparing their curriculum vitae is a fool’s errand, in my opinion. It’s this strategy that so muddied the waters in the first place. What happens whenever any scholastic or management science field of endeavor expands at the rapid pace seen by Project Management is that what would otherwise be a clear distinction between core and peripheral areas of expertise becomes blurred, as such technique’s advocates vie for recognition, if not supremacy. One of the most extreme examples of this came from our friends, the risk managers, who at one time actually tried to define their purview as anything that might have an “impact” to any given project, negative or positive (the latter being re-defined as “opportunity,” and no, I am not making this up).

Okay, so if the last place we should seek an answer as to what makes up the essential elements of PM is the focus group/business school faculty lounges, what does that leave us? As counter-intuitive as this may sound, I believe that much insight can be derived from the opposite of such environs – that is, in the construction trailers and shop-floor cubicles of hard hat and safety goggle-wearing front-line PMs.

Back when I was chasing my MBA I was in a group of students evaluating the business practices of a clothing manufacturing plant in our home town. This was before I had earned my PMP®, but after I had spent considerable time performing project controls functions for United States Government contractors. These contractors were operating under the nascent PM techniques and business rules that required the delivery of cost and schedule reports derived from Earned Value Methodology analysis, including a standard reporting format known as the Cost Performance Report, or CPR. As I and my fellow graduate students were being shown the machines that would take new deliveries of cloth, cut them to specific sizes based on the style of garments (in this case, pants), transfer the cut-outs to various other stitching, riveting, button-holing, zipper-installing, etc. machines, I noticed a certain grey box with wires emanating from it had been installed on each machine. This module produced a report that monitored each step of the process. These reports showed the amount of material originally planned for the lot along with the estimated amount of time for the entire job (the time-phased budget), the amount of energy, labor, and machine time used for that particular step (the actual cost of work performed), and the actual progress being made (the Earned Value figure). Sure enough, these reports were almost identical to the Cost Performance Reports that I had been generating for projects ranging from U.S. Department of Defense radiation research work, all the way to U.S. Department of Energy environmental clean-up jobs. Amazed, I queried the manager escorting us around the manufacturing floor (who was actually wearing safety glasses).

“These reports – are they specific to this place?”

“No, they’re industry standard.”

“Right down to the calculated Estimate at Completion?”

“Sure. We need to know that to coordinate when the next lot can start, and have access to common machines or people.”

“Do these machines come with this automated report-generating capability?”

“Yeah. They all do.”

“Have you ever heard of the Cost/Schedule Control System Criterion, or the Project Management Institute®?” (Just for the record, I didn’t actually say “Project Management Institute, circle R.”)

“Nope.”

I realized then that certain aspects of PM were central to its overarching schema, and Earned Value was one of those. Given that the cause of so many project overruns and delays is scope creep, I’m willing to venture that Scope and Schedule Management (specifically, the Critical Path Methodology) are also core aspects of PM. Using our acid test, using techniques we would have been likely to discover in our front-line PMs’ toolboxes, I’m willing to venture that the following are candidates for exclusion from that core:

• Risk
• Communications
• Quality (which is almost certainly a subset of Scope; however, to the extent it can be cleaved from Scope Management, it belongs on this list.)
• Procurement

A quick note about those last two – I’m not saying that they’re not essential management elements per se. They clearly are. I’m just dubious about whether or not they necessarily belong in the Project Managers’ wheelhouse.

So, for all you Project Management technique advocates out there, anxious to alert the rest of the PM world of the efficacy of your particular practice, ask yourselves this: if you were to pitch your idea to any manager who routinely wears safety goggles, ear plugs, and a hard hat to work, would you have a reasonable expectation that they would buy what you’re selling?

Lagniappe…

Brace yourselves, GTIM Nation: I have a management science world-changing announcement. This blog has actually discovered a key reason to do risk management! Crazy, right? And that reason is…

Look at that! Out of pixel ink for this week. Tune in next Monday for the dramatic reversal GTIM has for our friends, the risk managers!

As long-time members of GTIM Nation are aware, when evaluating technology in PM I like to compare and contrast it to the uneven but dramatic changes in computer science, cosmology, or even medicine. As for the latter, I think it’s fascinating to consider that in 100 years the things being taught in schools of medicine will appear to be as backward as medical technology from 1920 does to us in the here and now. To be fair, though, I readily concede that, had today’s medical tech been described to doctors 100 years ago, they would never believe it. In 1920, Vitamin D had not yet been discovered, penicillin was still eight years away, and the first kidney transplant was 34 years distant.[i] Even though X-Ray technology had been around since 1897, it was only this year that it became a routine part of diagnosing fractures in most hospitals. MRIs are 57 years away, as is angioplasty. Performing an internet search on strange medical practices in history is to review a series of deeds that would be considered torture in 2020.

Meanwhile, Back In The Project Management World…

Circling back to ProjectManagement.com’s theme for January, PM Technical Skills, I can’t help but wonder which PM technical skills will be considered bizarre or incomprehensively backwards by practitioners in the year 2120. But here’s where the analogy to medical science breaks down: Project Management is clearly not a hard science. It deals with the unknown. Yes, much of current PM theory is highly formulated – developing a Work Breakdown Structure, for example (although, even here, I wish I had a dime for every Organizational Breakdown Structure element I’ve found in WBSs supposedly developed by people advanced in Project Management), but it’s undeniable that what real PMs do in the real world is largely dominated by dealing with the unexpected.

“Not so!” I can hear my nominal nemeses, the risk managers, say. They have built an empire on the notion that advances in Project Management technology have provided a window into what is likely to happen to a given project, should the particular management team have the insight to invest in a rigorous risk analysis. My response: really? Let’s take a look at this window into the future, provided by our friends, the risk managers, and see if it’s not analogous to what medical practitioners from 1920 believed was technically advanced.

Read a typical risk analysis report. What you will see is a series of speculations about alternatives to the planned activities in the scope, cost, and schedule baselines, expressed in terms of odds of occurrence and cost and schedule impacts, usually pessimistic. Where do these speculations come from? Almost always from members of your project team whom the risk analysts have identified as subject matter experts – in other words, your Cost Account Managers (CAMs). If you are the Project Manager, ask yourself these questions: do you ever communicate with your CAMs? Do you have meetings with them? Do they not tell you what their concerns are, especially in the near term?

To ask these questions is to answer them. The implication, of course, is that your typical risk analyst does little more than interview your very own CAMs, write down their concerns, ask them to speculate (and let’s be clear here – when these CAMs are asked to “estimate” the odds of something bad happening to their Work Packages AND the cost and schedule impact, that’s what they’re doing: merely speculating) on some parameters, and then re-state these data points in Gaussian curve jargon. Do I have to state it (again)? This is openly fraudulent management science, and I find it hard to believe that it will be well received in the decades to come.

But, for the sake of argument, and out of a sense of humility that I really have no reason to suppose that my points of view will withstand the tests of history, let’s take a moment to assume that the “information” stream emanating from the risk analysts’ reports are valid and usable. What will the future PM do with them, exactly? Let’s say that, in the most recent project meeting, you have a CAM who tells you that she’s concerned that a certain subcontractor won’t be able to deliver on-time, and any delay may impact other activities. Your Critical Path Methodology expert (scheduler) can tell you which activities are dependent on an on-time delivery, and whether or not the task in question has any float to use. What can the risk analyst tell you? That the odds of the delay were originally estimated at X percent? Or that, should the feared delay actually take place, that it could have additional speculation-derived impacts? Does this “information” really help anybody?

I think that last rhetorical question is key. Much as one would think that someone would eventually inquire if the medieval medical practice of bloodletting actually helped patients – or even a single patient – the question has to be asked: how many projects can point to their risk analyses as the proximate cause (or even material cause) of coming in on-time, on-budget? Here in 2020, we can roll our eyes at the known invalid practices of PMs from one hundred years ago, like attempting to derive project cost performance by comparing budgets to actuals. As I have outlined above, I’m pretty confident that I know what current PM practices will cause similar eye-rolls in 2120, and I’ll be interested to see what GTIM Nation thinks will qualify under this category in the comment section.

But I’m not ruling out the possibility that risk management will be in, and management blogs will be considered passé.

[i] Retrieved from https://www.infoplease.com/math-science/health/medical-advances-timeline on 11 January 2020, 21:46 MST.