Game Theory in Management

It was another dark and stormy night. I was sitting at my desk, reading the stenciled letters across my frosted glass office door, yrrebpsaR ylnatS, evitceteD etavirP, when I got a call from my point of contact at the Project Homicide Division, Cameron.

“Get down to the Monolithic Mansion Project Office – there’s been a bloody overrun. I’ve collected all of the suspects in the Hatfield Conference Room.”

“The what conference room?”

“It’s in the basement. It’s named after some obscure ProjectManagement.com blogger. Just get down here.”

I drove through the rain to the Project Office, and was escorted down to the basement conference room where the principals from the Project Team, executives from the customer’s organization, and Cameron were gathered around a large table. The room had been converted in to some sort of project “war room.” Gantt Charts on ANSI E-sized plots and those insidious traffic light charts hung on the walls, like giant garish but unframed children’s art projects. Another Gantt Chart plot was on the table, the subject of everyone’s interest. A quick glance revealed why: the bright red status bar extended well beyond the Project Complete milestone. A nearby Cost Performance Report (Format I) showed, in the lower right-hand corner, a humongous negative Variance at Completion. Yes, a gravely serious PM crime had been committed, and everyone in the room seemed to have a different opinion about who was responsible. I took a seat near the wall, and listened as Poor Initial Estimate was in the middle of a heated exchange.

“I know everyone likes to believe that I’m responsible for this project disaster, but it couldn’t have been me! I’ve been completely consistent with all the commercial project cost databases for this type of project from the get-go!”

One rather slovenly fellow was quick to respond.

“If that’s the case,” began Poor Performance, “how do you explain your presence in almost all of the Variance Analysis Reports?”

“All of you always blame me, but it’s virtually never my fault! At this point, it’s almost as clichéd as the butler committing a murder in a mystery novel! Even though I get most of the blame, it’s been my experience that it’s you, Poor Performance, who’s usually guilty, but no one likes to admit it!”

“Not so” Poor Performance began. “It’s been my experience Changing Rates is usually the culprit.”

“Which one of us?” one of a pair of pretty twins queried, “Changing Labor Rates…” with a nod to her sister, “or Changing Other Direct Costs Rates?”

“Either. Or both.” sniffed Poor Performance.

“Well, it wasn’t me” began Changing ODC Rates. “I can prove that I wasn’t a factor – none of my changes were above the inflation rate. You did adjust for inflation, didn’t you, Poor Initial Estimate?”

“Of course.”

“Well, I did change” began Changing Labor Rates, “but the Project Team adjusted the labor mix among senior and junior personnel to compensate, so it couldn’t have been me.”

“That also seems to vindicate me” added Poor Performance.

“Not necessarily” interjected Scope Creep.

“Don’t think so?” snapped Poor Performance. “What about you? Do you have an alibi?”

“Yeah” replied Scope Creep. “It’s called the Change Control Log.”

“Change Control Logs track formal changes to the baseline, which really has nothing to do with you, does it? You’re all about informal changes” Poor Performance needled.

“Nobody thinks I did it, do they?” a small child’s voice asked. She was so young and small I didn’t notice her when I walked into the room.

“No, sweetie” replied Poor Initial Estimate. “Nobody really thinks that No Risk Management Plan could ever bring down a project.”

“Then, who? The responsible party is in this room” Changing Labor Rates stated coolly.

“I think I can help narrow it down” I stated, as everyone turned to look at me.

“Raspberry! I’ve heard of you, some sort of PM Detective hot-shot.” Scope Creep stormed. “Since you’re such an expert, why don’t you tell us what happened?” he taunted.

“A little process of elimination is in order. Poor Initial Estimate is right – she couldn’t have done it. I’ve been comparing the original Performance Measurement Baseline against the estimates databases for similar work, and she’s telling the truth. The initial estimate, if anything, was a bit on the high side. Changing ODC Rates’ story is also consistent with the facts—she didn’t change significantly, and her sister Changing Labor Rates is also being truthful. Cumulative labor costs are consistent with the original estimate. That leaves only…”

“Me and Poor Performance!” spat Scope Creep.

“Do we have the minutes from all of the project review meetings?” I asked.

“Why do you want to see those?”

“Because they would show if there were ever any communications along the lines of asking for more work than what was captured in the original Scope Baseline.”

Everybody started looking at each other, nervously.

“No, we didn’t make it a point to have those communications documented” Changing Labor Rates explained.

“Then Scope Creep had the opportunity, and we know he had a motive. Did he have the means?”

Scope Creep gave Poor Performance a look that could curdle milk. Almost reflexively, Poor Performance gave a sideways glance to Poor Initial Estimate. All who saw it instantly recognized what it meant: that, if Poor Initial Estimate didn’t take the fall, things would go badly for everyone in the room. Poor Initial Estimate began, “I suppose I should have taken into account…”

“Taken into account the poor weather conditions!” interjected Scope Creep. “I just remembered that I have access to some Contingency funding that will cover this entire overrun, which means that this project has not overrun its Total Project Cost, after all. We can all go home now.”

*  *  *  *  *

As I walked out of the Monolithic Mansion with Cameron, I felt strangely ill-at-ease.

“What just happened in there?” Cameron asked.

“I’m pretty sure I know, but I’m also pretty sure it’s best left unsaid. I’m going home. I feel like I need a shower.”

According to Merriam-Webster, a “macguffin” is

an object, event, or character in a film or story that serves to set and keep the plot in motion despite usually lacking intrinsic importance.[i]

An example which is probably readily recognized by a majority of GTIM Nation would be the blue diamond in the necklace given to Kate Winslet’s character in the movie Titanic, named The Heart of the Ocean, but a better example (in my opinion) would be the Maltese Falcon figurine in the movie of the same name. In that 1941 film, while all of the characters appear to be obsessed with the location and ownership of the jewel-encrusted statue, murders actually take place, with the protagonist (the original Sam Spade, played by Humphrey Bogart) often taken to be the murderer. In fact, when the Maltese Falcon statue finally shows up, it proves to be a fake. One final example would be the Ark of the Covenant in the movie Raiders of the Lost Ark, where the actual Ark, after being intensely pursued by virtually all of the characters in the movie, ends up portrayed as being unceremoniously boxed in a wooden crate, to be relegated to near-oblivion in a massive government warehouse (which we learn later is located in Area 51, Nevada, of all places). So, just to be clear: the macguffin, by definition, lacks in “intrinsic importance.”

Meanwhile, Back In The Project Management World…

I would like to reference my three criteria for usable management information. It has to be:

• Timely (old management information has a value similar to old sushi),
• Accurate (inaccurate information is worse than useless, it’s actually misleading), and
• Relevant!

So, what we have in a macguffin is a plot device widely considered to be irrelevant, but used anyway in order to move the story forward. While macguffins can lead to wildly successful movies (Raiders of the Lost Ark earned $384M USD against a budget of $18M[ii], while Titanic earned over $2.1B USD[iii]), it would be good to remember that this is a device used in fiction.

With the use of a macguffin in fiction as a backdrop, let’s revisit some of the nostrums associated with “doing” PM “right.” Keep in mind that we’re not talking about inserting energy or conflict into a story – we’re looking at which techniques or strategies commonly associated with Project Management actually improve the odds of bringing projects in on-time, on-budget, with all of the scope particulars satisfied. I’ll score the techniques so:

• We’ll start with the Critical Path Methodology. Easily one of the earliest management techniques associated with PM, a properly-done CPM network will alert you to problem activities within your project and, just as importantly, inform you which tasks are doing fine and do not need extra attention. Score: Notamac.
• Next let’s look at communications management. Much of the theory here involves “engaging all stakeholders,” which I contend is not only to be avoided, but positively counter-productive. A far more relevant application would be to develop a “zipper plan,” so named because it identifies whom within your Project Team should serve as the voice for specific stakeholders on the outside based on their areas of expertise. Since zipper plans are fairly easy to establish and execute, they provide a nifty technique for ensuring consistency in project communications. Score: Heart of the Ocean.
• What kind of a management blogger would criticize Quality Management? Well, my kind, for one. In those instances where scope delivery with even the mildest of variances from requirements or parameters could have a devastating effect on customers, sure, use all of the fishbone diagrams and “Five Why’s” analyses that you want. I am of the opinion, however, that such projects represent a distinct minority in the PM community, whereas the push for enhanced Quality Management implementation is becoming a majority opinion. Again, if you need it, use it, by all means. But if you don’t, well, don’t. Score (assuming you don’t really need it): Maltese Falcon.
• GTIM Nation veterans probably know what’s next: our friends, the risk managers. Risk analysis techniques require significant investments in time, energy, and expertise, and not just from the analysts loading the decision-tree or Monte Carlo analysis software. These analysts invariably need considerable access to the Project Teams’ subject matter experts, in order to assemble the various alternate scenarios, along with these scenarios’ cost and schedule impacts and odds of occurrence. Even if the data collected is reliable (highly unlikely, given the amount of pure speculation involved) and the analysis techniques sound, the ultimate product is simply a series of things the PM should worry about, tripped out in Gaussian curve jargon. If the risk analysis highlights a possible negative-impact scenario that leads the PM to develop a Plan B that didn’t exist prior, fine. In all other instances, my opinion is that risk analysis is a waste of time. Score: Raiders’ Ark.

Now, if, upon opening the Ark in the movie, the Nazis discover both the Maltese Falcon and the Heart of the Ocean inside of it immediately prior to having their faces melted, then that would make me rethink this whole irrelevance business.

[i] Retrieved from https://www.merriam-webster.com/dictionary/MacGuffin on August 17, 2019, 19:42 MDT.

[ii] Wikipedia contributors. (2019, August 15). Raiders of the Lost Ark. In Wikipedia, The Free Encyclopedia. Retrieved 03:43, August 18, 2019, from https://en.wikipedia.org/w/index.php?title=Raiders_of_the_Lost_Ark&oldid=910923959

[iii] Wikipedia contributors. (2019, August 17). Titanic (1997 film). In Wikipedia, The Free Encyclopedia. Retrieved 03:45, August 18, 2019, from https://en.wikipedia.org/w/index.php?title=Titanic_(1997_film)&oldid=911224908

A quick internet search on the topic of quotes about attitude returns hundreds of examples, the majority by famous people, including:

• Milton Berle
• Maya Angelou
• Oscar Wilde
• Benjamin Disraeli
• Albert Einstein
• Johann Wolfgang von Goethe
• Epictetus
• Confucius
• Antoine de Saint-Exupery
• Bruce Lee
• Abraham Lincoln
• Mark Twain
• George Bernard Shaw
• Sylvester Stallone
• Leo Tolstoy

…among many others[i]. Virtually without exception their common thread is the idea that the value of a good attitude is widely under-appreciated, particularly when it comes to achieving a desired goal. My favorite, one that seems to encapsulate the others rather nicely, was from W.C. Fields, who said “Attitude is more important than the past, than education, than money, than circumstances, than what people do or say. It is more important than appearance, giftedness, or skill.”[ii] This quote of his replaces my previous favorite one from him, “Always carry a flagon of whiskey in case of snakebite and furthermore always carry a small snake.”[iii]

Circling back to ProjectManagement.com’s theme for August, Career Development, I can’t help but to wonder if the difficulties we PM-types are experiencing at the macro level – frustrations in advancing Project Management maturity and lack of widespread acceptance of its precepts as fundamental to business models – aren’t being caused (or at least abetted) by problems at the micro level, namely, how newly minted PM-types develop their careers. So, if there were one extraordinary scalable causal element common to both these problems, what would it be? I’m thinking it’s attitude.

Meanwhile, Back In The PM Seminar World…

Plucking two of the pieces from the W.C. Fields quote above, consider: “Attitude is more important than … education, …or skill.” Besides the extremely valuable opportunities for networking among attendees, isn’t the primary purpose of professional seminars to advance education, or skill among practitioners? Even the exhibitors’ hall is full of people who, yes, want to sell a product, but do so by educating passer-by on how their product or service can help them in their pursuits. And yet, if we are to take W.C. Fields’ quote at face value (or the myriad other similar celebrities’ or famous thinkers’ assertions), almost all of the paper presenters, all of the vendors in the exhibit hall, all of the time and effort spent in developing specific learning or coursework tracks, all of them ought to be considered subordinate to attitude.

This may be where the general thrust of common PM advancement initiatives could use a dose of perspective. I’ve related previously the story of a young Earned Value Management System auditor, who complained that the EV system in use did not calculate the Budgeted Cost of Work Performed (BCWP) by dividing cumulative actual costs by cumulative budget. The system admin stated flatly “That’s because that’s not the way you calculate Earned Value.” The auditor exploded. “Do you know PMI®? I’m a PMP®!”, as if that was supposed to stop all conversation that held to the contrary. This episode showcases a tendency for at least a few of those who become highly educated in certain aspects of Project Management to assume an attitude of superiority towards other management practitioners, and to proceed as if that command over the PM codex imparts a certain value to them over and above other members of the organization. I believe that, to the PMs who have been assigned their projects by virtue of being subject matter experts in the area of the pursued scope, this kind of attitude can be highly off-putting, and can easily have a dampening effect on the acceptance of both the PM techniques and the person hired to execute them. Just to be clear: I’m not saying this tendency is by any means germane to the Project Management industry. The disconnect between academics and real-world practitioners within the same subject, the so-called Ivory Tower effect, afflicts virtually all courses taught at the University level, save perhaps the hard sciences.

I’m thinking that the counterproductive aspects of the toxic PM practitioner’s attitude have to do with the perception that they are in command of special, exclusive knowledge, and ought to be both respected and paid well to pass this knowledge along to the project teams (or seminar attendees) who seek it. I’m also thinking that, for the sake of the widespread acceptance of PM theory and the advancement of new practitioners’ specific careers, the opposite attitude, that of enthusiastically using PM techniques to advance the project teams’ goals, regardless of their level of appreciation, is not only appropriate, but sorely needed.

Now, if GTIM Nation will excuse me, my small snake (“Malfoy”) seems to have escaped his carrying pouch…

[i] Retrieved from http://wisdomquotes.com/attitude-quotes/ on August 11, 2019, 11:27 MDT.

[ii] Ibid.

[iii] Retrieved from https://www.brainyquote.com/quotes/w_c_fields_102057 on August 11, 2019, 11:39 MDT.

Many, if not most (or all) large organizations that perform a significant amount of project work will have some group or team that’s supposedly in charge of the institution’s Project Management capability. Sometimes it will bear the formal title of Project Management Office, or PMO; other times, it won’t, but will still fulfill the same basic function. These organizations will typically pursue a wide variety of techniques or capability advancements traditionally associated with PM, including:

• Procedure or policy-writing,
• Training,
• The selection of the preferred Critical Path Methodology software,
• The selection of the preferred Earned Value Management software (I do wish people would stop referring to the EVM software as the “cost processer.” That’s not what an EVM system does.)
• The development of templates (often in a word processer package) for the basic PM baseline documents, such as Work Packages, Variance Analysis Reports, or Control Accounts,
• Endless process diagrams, indicating how the overall system is supposed to function,

…among others. And, to be fair, these are the obvious ways that the PMO will seek to expand its influence, and bring the organization’s Project Management capability to a point where most (if not all) projects can be reasonably expected to come in on-time, on-budget, and without claims against for failure to deliver the contracted scope.

But is this the way it’s supposed to happen?

Clues That You May Be Doing It Wrong…

Here are some signs that the PMO is doing the whole strategy implementation game wrong:

1. You still have a significant number or magnitude of overruns or late completing projects.
2. Medium-sized projects’ managers put significant effort into avoiding compliance with the organization’s guidance on PM, especially the ones that prescribe a certain level of robustness.
3. Small projects have their costs “managed” by information that comes solely from the general ledger.
4. This one is key: the existence of “shadow organizations,” or small teams of PMs or project controls professionals who do not belong to the PMO, or institutional PM organization.

Any of these conditions should be taken as ipso facto evidence that your PMO’s strategy is failing, and in need of immediate correction. But where to begin to assess the errors in the existing strategy?

…And How To Get It Right

Fortunately, GTIM Nation has the inside track on this. Recall an axiom I often return to, that for any organization that’s providing a good or service, Quality, Affordability, Availability: pick any two. In other words,

1. A quality service that’s affordable will usually require a wait in line;
2. A quality service that’s available right now isn’t going to be cheap, and
3. An affordable service that’s available right now isn’t going to be advanced, or robust.

It’s been my experience that those setting up or revamping an existing PMO will almost never consider this axiom. They blast ahead, confident in their ability to fulfill all three aspects. When confronted with any (or all) of the numbered phenomenon, they invariably attribute it to recalcitrance on the part of the organization, rather then their own selection of a non-viable PM advancement strategy.

However, if you, as head of the institutional PMO, encounter one or more of the numbered symptoms listed above, it’s almost always attributable to an unmet demand for PM information systems or services that are not predicated on the institution’s notions of what constitutes “quality.” The PMs are seeking an approach based on Strategy C above – at least from the institution’s perspective. Not to get back on an all-too-familiar soap box here, but there are numerous aspects of Project Management that are associated with a more robust capability that are, in fact, not only failing to advance PM, but are often guilty of detracting from it. Examples include:

• Quality Management, particularly at the “Six Sigma” level;
• Communications Management, especially the whole bit about “engaging all stakeholders,”
• The notion that the PMO must be able to prove a positive return on investment (ROI) in order to establish its worth or viability, since (a) ROI as applied to PM is an irrelevant metric, (b) it’s impossible to accurately capture the needed parameters, and (c) the very effort of pursuing that figure is evidence that the people running the PMO don’t understand what it’s for, and…
• …of course, risk management.

The remedy? Make available a simple Earned Value Management System, shorn of the extraneous attributes (among others) above, with a minimum of data collection needs. Put it in place, and quietly provide its critical cost and schedule information to the projects’ decision-makers. Don’t breathe a word about what the PMO or institution believes the system should do, or contain. Let the PM dictate every last characteristic.

Then step back and, with a little patience, watch the surprise overruns and shadow organizations simply fade away.

As we wrap up ProjectManagement.com’s theme for July, Strategy Implementation, I would like to reference a couple of things for this week’s blog: last week’s blog, where I discussed the optimal technical approach for implementing a given strategy, and my favorite go-to structure for organizational behavior and performance issues within the project team, the one presented in Michael Maccoby’s brilliant book The Gamesmen (Simon and Schuster, 1976). A quick refresher of the worker archetypes Maccoby posits:

• The Craftsman cares a great deal about his output, but not so much for whom he works.
• The Company Man tends to assume the persona of the team around him.
• The Jungle Fighter gets ahead through calumny and deceit, avoiding blame for his errors while taking the credit for the successes of those around him.
• The Gamesman (after whom the book is titled, obviously) doesn’t see his paycheck as the roof over his head or food on the table; rather, he sees it (and other perks) as analogous to prize pieces in some grand game he’s playing. Because of this, this type tends to be more comfortable taking risks, while becoming masters in the industry in which their “game” is being played. Due to these two characteristics, this type tends to be the most successful.

From last week’s blog, I passed along some lessons from Game Theory, that to advance a capability (in our cases, Project Management) the approach must have the following elements to maximize the odds of success:

• The new capability must be falling-off-a-log simple for the project team members to perform.
• If you are counting on active participation from the project team to make your advancement happen, you must be in a position to recognize and respond to any participant who’s not, well, participating.
• If the team members from whom you need participation are feeding you poor data, they’re still golden. Better quality data can be taught – participation can’t.

Finally, Hatfield’s three critical elements of managerial leadership will come in to play:

• The manager/leader must have the optimal technical approach to resolving the project team’s problem.
• The manager/leader must care about each and every member of her project team. If you don’t care about them, how can they be expected to care about you, or your technical agenda?
• The manager/leader must be willing to execute the selected strategy, alone if necessary. The image I like to use is that of U.S. General George S. Patton. If he were to be dropped into the middle of Europe in 1942 without the rest of the American Third Army, he could be counted on to attack Nazis single-handedly. In business, the manager who half-heartedly pursues a selected strategy will be immediately found out, and the project team will match his enthusiasm.

Meanwhile, Back In Middle-Earth…

In J.R.R. Tolkien’s classic series on the goings-on in middle earth, the character Gollum plays a major role, from being introduced in The Hobbit, all the way through to his death in The Return of the King. Gollum holds The Ring at the time of its introduction into the story line, and has become rather addicted to its powers, to the point that he refers to it as “the precious,” and becomes incredibly obsessed with re-possessing it.

From the Maccoby archetypes, it’s easy to see the Jungle Fighters as a nest of Gollums, physically unattractive and intensely obsessed with only their own self-advancement, somewhat obvious in their machinations to detract from project performance. But that’s not reality: any of the Maccoby Archetypes can be turned into detractors. From my three critical elements, the first, that of selecting the optimal technical approach, is key, for if the PM selects a sub-optimal (or even poor) strategy in pursuing the project’s scope, then:

• Craftsmen will be frustrated, since they seek high-quality output, and the sub-optimal approach won’t deliver that.
• Gamesmen will be turned from contributors to neutrals (or even detractors) for similar reasons,
• …and Company Men will tend to mirror the persona of the previous two archetypes,

…all while the Gollums Jungle Fighters will “perform” as they are wont to do. Drawing from the three Game Theory lessons from last week’s blog, it will prove virtually impossible to execute an implementation strategy that’s so easy that none of the members of the Project Team will be in a position to enact the counter-strategies of the Silent Veto or Slow Roll, should the original technical approach be seen as a poor one.

Four Maccoby Archetypes, three implementation strategy guidelines derived from Game Theory, and three Hatfield Rules of Managerial Leadership, and all have as their linchpin the need for an optimal implementation strategy, or technical approach. That’s the One Ring To Bind Them All, the “precious,” the indispensable element of strategy implementation. If you don’t have it, get it.

And if you do have it, don’t let creepy, glowy-eyed trolls thwart you by biting off your finger.