Game Theory in Management

In last week’s blog, I made the point that project management concepts aren’t that complex, and offered up some examples. I was halfway expecting some push-back from readers/commenters, but that didn’t happen. The comments (as you can see) were very positive, despite that fact that I just got done asserting that we PM-types’ jobs aren’t that advanced. Doesn’t that imply that almost anyone could do our jobs?

Life Is Tough. It’s Tougher If You’re…

Well, no, actually. The project management field is often referred to as “the accidental profession,” and lots of bad things (including death) can come from being on the receiving end of an accident. Done right, it’s tough – hence the obscene percentages of projects (particularly IT ones) that fail to come in on-time, on-budget. So, if it’s not complex, but still tough while not being (necessarily) dangerous, what makes it that way?

Well, a couple of things pop to mind right away. The first one is that we PM-types are attempting to overcome centuries (literally) of management science theoretical barriers. In this blog I have often mocked the closely-held concept of the accountants, and other business-college grads, that the point of all management is to “maximize shareholder wealth.” This single phrase is preached so often and prevalently in business schools that it’s considered axiomatic.

For those who have only recently started reading Game Theory in Management, the problem with that idea is, it’s false. And I can prove it.

Consider the hostile takeover. This occurs when one company attempts to buy up a controlling share of a competitor’s organization, with the end-goal in mind of selling off its assets and driving the target out of business. Several things to keep in mind include:

• Whenever this happens, the targeted company’s stock usually spikes in price. By definition, this represents the maximizing of shareholder wealth.
• Conversely, the acquiring company will usually take a hit on their books, either via a drop in equity or through a reduction in the assets needed to perform the takeover. By definition, this is contrary to maximizing shareholder wealth.
• Also, once the hostile takeover is successful, the sell-off of the assets of the targeted company virtually never compensates for the expenditures needed to perform the acquisition in the first place. Again, the acquiring organization is doing the precise opposite of maximizing shareholder wealth.
• Companies that become aware that they are the target of a hostile takeover will often use the tactic of taking out high-percentage loans in order to increase their liabilities (taking a “poison pill”). They do this in order to deliberately damage the assets-to-liabilities/equity ratio, which makes them a less attractive target.

The inevitable conclusion here is that, if the “maximize shareholder wealth” thing is legit, then no organization would ever attempt a hostile takeover, and no targeted organization would ever resist it. Instead, what we see over and over again is managerial behavior that is utterly inconsistent with this oh-so-sacrosanct theory.

And, in the world of management science, if your theory is being disproved by corporate behavior on a consistent basis, you might want to at least re-examine said theory, if not abandon it altogether.

Also, you business school professors absolutely need to stop teaching that drivel.

The Business School Professors Will Not Take Kindly To Being Accused Of Being So Wrong

There are many other examples (return on investment [ROI] being the ultimate arbiter of project worthiness; comparing budgets to actuals to ascertain “cost performance”; using spend rates to project estimates at completion [EAC], to name but a few), but you see my point. The asset managers have ruled the management science roost for so long, and many of their clearly backward concepts have become so entrenched, that when those upstart PM-types come along, claiming some level of business insight in the pursuit of customer-stipulated parameters of cost and schedule performance, the asset managers’ reflex reaction is to ridicule or downplay the project management aficionados’ positions.  We PM-types can’t advance our agenda because we are, in a true management science sense, rebels, positing theories contrary to the status quo, and receiving the punishments for daring to question the asset managers’ so-called intellectual authority. I simply cringe when I see some study proposing to establish the value of the project management office (PMO) based on a calculation of its return on investment! We may as well offer a scholarly research project on the value of surrendering prior to the start of the battle, to see what kind of terms we can extract from the quacks who believe they occupy the high ground.

As for the second issue that makes PM so difficult, it’s …

Look at that! Out of space again. Tune in next week, for I Said It Wasn’t Complicated, I Didn’t Say It Was Easy, Part II.

My take on ProjectManagement.com’s May theme of complexity is this: project management isn’t that complex. It’s kind of the dirty little secret amongst practitioners, but it is undeniably so.

Now, that’s not to say that the projects themselves can’t be complex. They are often obscenely so. They can involve advanced technology, never-before-seen architecture, ruthlessly dynamic environs and conditions, both natural and political, and even (especially?) labyrinthine personalities and organizational structures.

But Project Management, itself, as a discipline? Not so much.

“Are You Insane? What About…”

Take a look at the basics. Developing a Work Breakdown Structure is pretty simple. Everyone knows it’s a basic hierarchical decomposition of the project’s scope. Without fail, every single time I have seen a WBS become overly complex, it’s due to somebody shoe-horning in an element that’s not a piece of scope, usually an organizational breakdown structure (OBS) element, or a functional breakdown structure element. There’s actually a simple (get it?) test to determine if a WBS element is valid: at some point after that particular element has started work, is the question “What percent complete are you?” a legitimate one, or a dopey one? If it’s a legitimate question, you’re probably looking at a piece of work. If it’s dopey, the element probably isn’t scope. Just to reiterate – in those circumstances where a WBS is needlessly complex, it’s because somebody is doing it wrong.

“Look you here, Michael” I can hear my UK readers objecting, “the WBS is one thing – what about Earned Value Management Systems?” My response is the same: if it’s coming across as complex, it’s being done wrong.

I’ve long maintained that every PM “does” Earned Value, whether they realize it or not, and here’s the proof. If you are a PM, and your accountant comes to you and says “you’ve spent half of your budget,” what’s the first thing that pops into your mind? Isn’t it “am I half-done?” And, guess what, you’ve just performed a rudimentary EV analysis. It really is that simple. Sure, you can have a much more finely parsed project, but you’re doing the same analysis every time your accountant tells you what percentage of the budget you’ve spent/have left. If you have accomplished more than you’ve spent, you’re in great shape, and not so much if you haven’t. Oh, the actual EV reports are usually way more detailed, but that’s not the same as being more complex. The principal is rather simple, even while the resulting information can be very powerful.

“Aha! What About Critical Path?!”

Again, if it’s coming across as complex, it’s being done wrong. All Critical Path Methodology (CPM) scheduling is about is putting your subtasks in order of what has to finish before other subtasks can start. But there’s something about stating something as obvious as “you can’t start the roof before the foundation is done” as representing schedule logic (ooooh!) that makes it sound sophisticated. Again, the ordering of tasks can be more refined and detailed, and the resulting analysis results is a very powerful information stream, but to say that the concept of CPM is, itself, complex is to say more than I know. If it is overly complex, it’s invariably because the ordering of the tasks is suspect, or somebody is doing it wrong (like putting an OBS element into the WBS, maybe?).

Unconvinced? Consider the following scenario: a construction PM is meeting with her team leads, plus an additional guest: a CPM auditor.

PM: Okay, John, you and Pat can start at the same time. You too, Chris and Jake.

Auditor: You are exceeding the recommended number of start-to-start relationships in your schedule, and you can’t do that.

PM: Why not?

Auditor: Because it might distort schedule performance reporting.

PM: There won’t be anything to report if these people don’t start performing.

Auditor: Why do they have to start at the same time? Why can’t one follow the other?

PM: If they can start at the same time, why should they wait?

Auditor: Because someone speculated that too many start-to-start relationships might distort schedule performance reporting, and made a rule out of that speculation.

(Absolute silence, as everyone in the room stares at the auditor. After a couple of seconds, somebody’s pocketed smart phone emits a ring tone that, coincidentally, is modeled after the theme from the 1960s television show F Troop.)

Of course I am aware that many (if not most) of the people reading this blog are in the professions associated with Project Management, and may be misinterpreting my point here. I will clarify these points in my next post, I Said It Wasn’t Complex, I Didn’t Say It Was Easy.

Most fictional stories, plays, and movies use conflict to advance their plots. However, movies are particularly dependent on conflict expressed as physical violence to attract audiences, and these incidents of silver screen violence are usually performed by characters who are supposed to be experts in their particular martial specialty. Bruce Lee, Jean-Claude Van Damme, and Chuck Norris are just a few of the martial arts specialists whose fighting exploits have represented significant parts of popular movies. I think, though, that it’s fairly easy to forget that what we are witnessing when we see martial arts experts engaged in violent conflict on-screen is not actually a violent conflict. It is, in fact, an acted-out representation of a violent conflict. When Darth Vader extends his hand towards an unfortunate Imperial Officer with his thumb and forefinger about one inch apart , that “officer” can, in reality, still breathe, his gasping and croaking notwithstanding.  When Bruce Lee took on multiple opponents in his movies, he didn’t win because of his superior training, because he was in better physical condition, or because of his characters’ inherent virtue or the goodness of his cause. He won because the script said he was going to win.

Meanwhile, back in the world of Project Management, we’re always grounded in reality, right? I mean, if a project out-performs its scope, cost, and schedule baselines, that’s ipso facto evidence of a superior project team, yes? Conversely, when a project fails to meet its objectives within the constraints of cost and schedule targets, that project team performed, shall we say, sub-optimally, and everyone knows it, amirite?

Well, not so fast.

Projects’ cost and schedule performance measurement systems perform two functions:

• Put into the hands of the project’s (or organization’s) decision-makers the information they need to make the best choices, and
• Provide supporting evidence for the creation of an audit trail, a narrative about how the project came about, was executed, and encountered the results that it did.

It’s this second function that tends to create mucho problemas, and where the work of consultants gets pulled back into the conversation. Few “analysis” techniques are easier than going through the records of a failed project, and pointing an accusatory finger at those whose decisions led to the project’s difficulties – unless, of course, the narrative has been manipulated to deflect blame from the real perps and towards either vague, inchoate sources, or (worse) against the innocent members of the project team.

So, how does this narrative get manipulated? Sadly, there are many opportunities to do so, as indicated in Table 1.

Table 1. Some Of The Ways Charlatans Change The Narrative

It’s as if you have a room full of script writers, all with their own hidden agenda, pretending to want to legitimately contribute, while they provide inconsistent (or even conttradictory) dialogue for the same film. And – wouldn’t you just know it? – the narrative never seems to reach a conclusion on precisely who provides such dopey project management as to be avoided in future major contract awards.

In my last blog, I showed how the utilization of fear as a motivation tactic has only limited effectiveness. But I will say this for the Galactic Empire: they do have a way of keeping profoundly inept players from returning to the game.

In last week’s blog, I pointed out the consistencies in the consultants’ approaches of Jon Taffer and Yoda. Alert reader Ken Bradshaw commented that, essentially, if Yoda’s approach to providing consulting services could be evaluated, what did that imply for other major characters in the Star Wars universe, specifically Darth Vader?  The short answer is, well, a lot.

Here’s the longer answer

The notion that an advancement in project management capability can be attained by leveraging organizational power is as old as PM itself. I actually had a rather heated e-mail exchange with a person who fancied himself a scheduling expert who took exception to a Variance Threshold piece I wrote back in the day which challenged the so-called Critical Chain theory. This person – who continues to make himself a spectacle in the PM writing world – went ballistic on me for asserting that schedule float, ummm, existed. I swear I am not making this up. His basic criticism boiled down to, if a manager told someone to execute an activity, then, by golly, that person had to obey. I suppose this fellow presumed that instantaneous obedience to managerial guidance completely negated the concept of float in Critical Path Methodology-based schedule networks, which is, of course, astonishingly ignorant.

Initially unwilling to believe that anyone who presents as an expert in project management in general, and scheduling in particular, could possibly be that uninformed, I assumed he meant that re-assigning resources to critical and near-critical activities within the network could shorten the overall schedule’s duration (the core of critical chain theory), and I responded to him in that vein. His counter-response doubled down on his original fallacy: the notion of schedule float was wrong, on the grounds that proper management could demand that the start of a given activity happen as-planned.

Like I said, it’s astonishingly ignorant.

But it’s not that far removed from the managerial approach to many organizations when it comes to advancing a capability in project management.

Meanwhile, Back At The Empire’s PMO…

Which brings us long, long ago and far, far away, to the scene where Darth Vader is striding on board the second Death Star, and uttering the line in the title to the immense space station’s overly stressed PM. If memory serves, the PM responds that he is doing all he can, and that he needs more men. Vader replies that the emperor himself, who apparently has an even worse sense of humor than Vader, is due to arrive, implying that some extremely bad things will happen to the PM’s ability to breathe should the emperor have to read a Variance Analysis Report that indicates any significant schedule slippage (as an aside, would the Corrective Action paragraph of such a VAR include “Use the force to choke the PM to death, and then find someone to take over this high-profile project, and restore the schedule while keeping this person either unaware of the possibility or unafraid of being choked to death by the Force.”).

This approach flat doesn’t work, generally speaking. Oh, you will have the occasional project team amp up their production based on short-term fear, but as a standard approach, leveraging organizational power to advance a capability is a sure loser. That’s not to say that rank doesn’t have its role – it absolutely does. It’s just that using rank to lean on a project team to execute a given technical agenda is profoundly susceptible to the tactic of the Silent Veto, or, as the brilliant and irreplaceable Bud Baker puts it, the Slow Roll. This is where the cooperation of the members of the project team is verbally agreed to, but doesn’t seem to materialize in the event, or at least not in time for the successful execution of the technical agenda being pursued. Another symptom of having been Slow-Rolled or Silent Vetoed is that it’s nearly impossible to pinpoint the exact person responsible for, or moment of, technical agenda roll-out failure. And by the time you’re falling down thousands of feet of power coupling shaft, it’s really irrelevant if it’s specifically due to your main go-to guy having pangs of regret for the heavy-handed style he’s been forced to use all this time, or a failure to appreciate the martial abilities of a bunch of teddy bears.

The bottom line (which also happens to be Hatfield’s Rule of Management #1) is this: You cannot advance a capability by leveraging organizational power. If that’s the approach your consultant is recommending, check to see if their eyes glow orange.

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.