Game Theory in Management

Before you reject the question in the title as self-evidently absurd, consider the basic structure of your garden-variety martial arts movie:

• The protagonist, a young, up-and-coming martial artist, coming off a start-the-movie victory, is noticed by some large, mysterious organization comprised of other martial artists.
• This noticing invariably involves some invitation to a different place, where the protagonist’s skills are put to the test.
• A higher authority of some kind – usually a police or government intelligence agency – reveals their presence within the large, mysterious organization to the protagonist, claiming that they are there as part of an investigation into some nefarious activities.
• This higher authority is convinced that the nefarious activity is happening within the large, mysterious organization, but don’t know if it is being orchestrated by the leader of the organization, or if he’s even aware of it.
• As the protagonist participates in the test/competition, he becomes aware that some behind-the-scenes conniving is occurring that is aimed at preventing him from attaining the stated goal of the original invitation.
• Nevertheless, the protagonist overcomes the conspirators, and discovers that the leader of the overall organization is, indeed, involved in the nefarious activities, up to his eyeballs.
• Here, these movies typically go in one of two directions: either the protagonist overcomes the leader in one-on-one combat (Enter the Dragon), or else overcomes all of the other members of the organization except for the leader, and quits the scene in disgust (Dirty Harry, which, technically, isn’t a martial arts movie per se, but stay with me).

Now compare and contrast this story arc with that of the typical young, talented Project Manager:

• After having successfully bid and managed a smaller project, and/or attained a PMP® certification, or some other notable accomplishment, a young up-and-coming manager is noticed by her organization’s superiors.
• This manager is moved over to a larger existing project, ostensively to help it out of some difficulty.
• At least one extant member of the managerial staff is a widely-recognized or well-respected expert in some aspect of project management, and informs the new PM that some nefarious business practices have crept into the technical approach used in the larger project.
• This expert knows that the nefarious practice is occurring, and is probably the proximate cause of the project’s difficulties, but is unsure if the senior manager is ignorant of the practice, or is actively promoting it.
• As the new PM adds improvements to the baselining and the cost/schedule performance measurement systems, she becomes aware that the organization’s accountants believe that they should be the source and residence of such information, and begin to delay or even defy their roles in setting up those systems.
• Nevertheless, the new PM succeeds in delivering the sorely missed cost/schedule performance reports, which clearly indicate the specific parts of the project’s Work Breakdown Structure responsible for the overruns and delays.
• Here is where the career story arc can take one of two directions: either the poorly-performing managers are finally exposed and reassigned, or else they are exposed and stay in place, due to the senior management team’s direct intervention on their behalf, at which point the new PM despairs of succeeding in an organization that has abandoned a meritocracy, and seeks employment elsewhere.

This story arc is one I have encountered many times in my PM career, and I suspect it does not strike many of my readers as alien, even as it mirrors the typical martial arts move plot structure. And if the story is the same, with only settings, characters, and types of actions that push the plot forward differing, then perhaps we PM-types should be on the lookout for movie cameras hidden in our work areas.

Also, I hereby claim ownership of the rights to any action figures based on my character.

When I finished my undergraduate degree in the early 1980s, I knew what car I wanted: a Porsche 911 SC. I even had the color picked out (white, with the black trim. British Racing Green would be okay too. Everyone seemed to do this car in red, and the purple, black, and yellow ones were right out). Besides its legendary performance, perhaps a small piece of this car’s attraction to me was that it had a reputation for being highly attractive to girls, to the point that there were stories of pretty but rather forward girls actually jumping into the passenger’s seat of 911 SCs, without actually being acquainted with the owner. I may have thought about what I would say to such a forward woman, with the “winning” line being “Hey, beautiful. Want to go somewhere?” (This alone may have been sufficient reason for the exotic car gods to deny me Porsche ownership.)

Of course, reality had other ideas. The price of a 911 SC in 1982 was $39,500 USD, which is $97,807 in today’s money, and would have taken about two year’s wages for me to purchase. Besides, the girls I was dating at the time were fairly well educated, and weren’t the type to spontaneously hop into a stranger’s Porsche, even if it was white with black trim.

Flash forward to 2016, and my familiar sedan finally needed replacing after 290,000 miles. I decided on a Honda Accord, with a 6-cylinder engine. I did some research into how it compared with the Porsche, which was when I found out that the Honda out-performs the SC. No, I’m not kidding.

It’s faster 0-60.

It’s faster in the quarter-mile.

The Accord has more horsepower (a lot more, actually).

It even brakes better.

If you’re wondering how that’s even possible, it has to do with the intervening 34 years of technological advances. P.J. O’Rourke once asserted (I’m paraphrasing) that the things that were considered outrageous luxuries fifty years ago would hardly do on a camping trip today. Imagine, if you will, the looks you would get if you were to insist on back-up cameras, curtain air bags, and automatic obstacle-avoidance braking on a 1980s Porsche. The salesman wouldn’t know what you were talking about, even though each of those things (and a great deal more) are standard equipment on many 2016 models. In 1969, Seiko offered an analogue chronometer (clocks or watches accurate to within -4 or +6 seconds per day) for $175 ($1,142 in today’s money); today, however, digital watches that accurate are now available for under $10. For those keeping score, that’s more than a 99% reduction in price.

Also in the 1980s I received my first instruction in Earned Value and Critical Path Methodologies. Back then companies doing business with the U.S. Department of Defense would purchase forms printed by the Government Printing Office, roll them into our IBM Selectrics, and type the budget, earned value, and actual costs information onto the forms, and then either hand-deliver them or snail-mail them to the customer. Today, networked PCs perform almost all of the functions of project cost and schedule performance reporting, from the processing of the original estimate, through the time-phasing of the budget and collection of data from the general ledger, through pulling status and re-calculating projected end dates and at-completion costs, wrapped up by transmitting electronically, instantaneously. All of this used to require several (if not many) people to perform, at least some of them with advanced expertise. Now, if your estimating software doesn’t seamlessly pass its data to the critical path scheduler for time-phasing, which then passes the budget and the current status to the cost processor, which automatically accepts data from the general ledger, then your system is very, very close to being obsolete. By today’s standards, even the high-end project management information systems from as recent (?!) as the 1980s would hardly be perceived as acceptable today. But keep in mind, this effect is cyclical: in 2051, those PM specialists will, no doubt, view our gee-whiz systems as wholly inadequate; and, if we somehow know what those systems will be like, we would be amazed (1950s-era PM: “What’s a ‘Selectric’?”)

As for my own anachronistic response to pretty women jumping unbidden into my Honda, I think my responses will include:

• “You may have – entirely understandably – mistaken me for Brad Pitt.”
• “You either have an advanced knowledge of car performance parameters, or else are in need of an eye exam.”
• “Hey! Get out of my car!”

I like spending space in this blog ripping into openly fraudulent management science precepts that have somehow crept into the generally-accepted mainstream. I got to thinking the other day, how do these ideas get introduced in the first place, in such a way as to make them appear valid or attractive when they are plainly suspect? And I was instantly reminded of the book Walden Two.

For those of you who are (blessedly) not up-to-speed on the theories of B. F. Skinner, Walden Two was a utopian novel about an isolated community that was structured around the theories of behaviorism he would later expound upon in the infamous Beyond Freedom and Dignity. By basically shedding the norms of societal behavior that did not fit into the mold of stimulus-response-reward/punishment, this isolated community – surprise, surprise – became highly profitable and successful, populated by happy, well-adjusted people. The narrator, a reporter, who has come out to do a news story on the community, is so impressed that he abandons his reporter life, and joins the community.

Imagine that.

So, essentially this Harvard psychology professor advances his pet theory initially in a utopian novel (Walden Two preceded Beyond Freedom and Dignity by more than twenty years). Something similar happened with Critical Chain, where the technique long-known as “crashing the schedule” (i.e., transferring resources from non-critical path activities to critical ones in order to shorten the project’s overall duration) got a new name and, in a fictionalized setting, succeeds at several levels, among them in the project management realm.

Imagine that.

This kind of approach irritates me no end. I think it’s highly disingenuous, and ought to be considered ipso facto evidence of charlatanism. If you happen to belong to a well-led organization, a standard operating procedure is that, should your manager receive a communication that criticizes the work or character of a member of the project team, but such a communication is unsigned, it goes straight into the trash can, no exceptions. Indeed, organizations that do not have such a practice, formally nor informally, should be automatically assumed to be poorly-led. I think something similar needs to happen in the PM arena: if your profound, wide-ranging idea is introduced, not through a peer-reviewed publication such as the Project Management Journal, but rather through a fictionalized setting, such as a novel, well, your idea is probably too silly to be considered in a valid academic setting, no exceptions.

But that’s the purist in me talking. In the real world, many goofy ideas (my regular readers know I’m thinking about risk managers, communications experts, and GAAP practitioners, among others, who attempt to make inroads into the PM realm) arrive with so much glitter on them, it takes a hard-bitten blogger to call them out as suspect, much less mock-worthy.

But perhaps I’m mistaken. It’s happened before. So, I say, let’s do a test: we’ll set up two colonies of rats (the white, cute ones, not the grey mean ones, no matter how closely the latter resemble my critics). Colony A will receive electric shocks each time they refuse to perform risk analysis, enhanced communications practices, or adequate asset management, and will be rewarded with food pellets each time they are observed pursuing these objectives. Colony B will simply be fed the food pellets they retrieve at the end of the maze.

Care to bet which colony gets fat?

I found myself in the docket, in a room that looked very much like the courtroom scene at the beginning of Harry Potter and the Order of the Phoenix. In fact, the people assembled in the gallery were dressed similarly to the characters from that movie.

“Stanley T. Raspberry, do you know why you are here?” said the fellow in the judge’s seat, in a sonorous voice.

“Sure. I received this rather formal-looking summons to be at this place at this time. I did a quick internet search – you guys aren’t a branch of law enforcement, are you?”

“We’ll ask the questions here!” the “judge” stormed. “Were you or were you not involved in a case recently, where an Information Technology firm hired you to look in to why they were consistently overrunning their software projects, and finishing late?”

“Define recently. That stuff happens all the time.”

“On or about April 17.”

“Let me think … oh, yeah, that was the O’Malley case. Pretty simple solution, really.”

“And did this ‘solution’ of yours involve issuing a stop work order on the subcontractor firm performing risk analysis?”

“Yeah, of course. Conventional risk analysis is almost always useless in project management, but it’s especially so in IT projects.”

A collective gasp went up in the room, and one woman cleared her throat in a way as to suggest she was attempting to gain everyone’s attention.

“So silly of me” she began, “but I thought I heard you say that risk management is useless.”

“On IT projects, yes, absolutely, and probably everywhere else, too.”

The several dozen or so people in the gallery suddenly began talking amongst themselves in earnest at this point. The judge slammed some sort of metal sphere the size of a tennis ball against a sound block on the desk in front of him. The gallery quieted down.

“And did another part of this so-called solution involve a suspension of formal baseline change control processes?”

“Yes” I said emphatically. “Look, in extremely fast-paced projects, some of the more traditional and formal aspects of PM must be de-emphasized, or abandoned altogether, in order to improve the odds of project success, and change control is near the top of that list. For cryin’ out loud, haven’t any of you people ever heard of Agile, or Scrum?”

Again the gallery exploded into side conversations, and again the judge pounded the steel tennis ball on the sound block.

“Have you no appreciation for proper PM techniques at all?”

“Sure” I began. “But what all of you have to understand are the effects of hybrid project management. When a management science hypothesis appears to be effective in improving actual project performance – like the introduction of Agile/Scrum in IT projects – such ideas are often modified and tested in analogous project situations. That’s how PM theory is advanced in the real world.”

“These ‘hybrid’ ideas, as you call them” the sonorous-voiced judge began, “we refer to them as ‘muddles.’ And it’s one of the jobs of this ministry to eliminate all muddles from the project management world. They’re simply too impure, too far outside the existing codex.”

“Interesting” I responded. “And how, exactly, do you plan to go about doing that?”

“We will reveal that you do not have our approval as a licensed project management investigator.”

“You didn’t license me in the first place.”

“A minor detail.”

My secretary met me outside the courtroom on the steps leading to street level.

“How did it go in there?”

“Pretty weird. The short answer is that they’re going to recommend revocation of my PM investigator’s license.”

“That’s sounds terrible!” she cried. “Can they do that?”

“Well,” I began, as I caught up on my smart phone messages, “they can make any recommendations they want, though they’re clearly not associated with PMI®. Hey, check this out: three large clients have dropped us, but 17 others are asking about my availability. I think we’ll do fine.”

Meanwhile, back in the courtroom, a dark figure emerged from the shadows.

“Everyone performed well” the Monolithic executive stated in a guttural voice.

“What happens, lord, if he continues to defy us?” asked the judge.

“Then we’ll just have to find another way of setting him back.”

At this, the room erupted in a sound that can be best described as what happens when someone tells a really funny joke at a Darth Vader impersonators’ convention.

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?