Game Theory in Management

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.

Among Game Theorists a favorite game for analyzing cooperation or defection among non-related biological units in a common environment is The Prisoner’s Dilemma. The basic version of the game goes like this: you are a prisoner, and your jailer comes to you and says that he will cut your sentence if you rat out your cellmate. The dilemma comes about when you realize that your cellmate will receive the exact same offer. There are four possible outcomes:

• You both inform on the other, and each receive three years sentence.
• Neither of you informs on the other, and you each get one year.
• You rat out your cellmate, but he does not inform on you: you walk free, while he gets 5 years.
• Your cellmate rats you out, but you don’t inform on him – he walks free, while you get five years (this is known as the “Suckers’ Payoff”).

In the 1980s, Robert Axelrod sponsored a tournament of computer programs playing multiple iterations of the Prisoner’s Dilemma against each other. Both conventional wisdom and the Nash Equilibrium had informed that the optimal strategy would be to always defect, since the player would never want to be on the receiving end of the Suckers’ Payoff, and always defecting was the only way to guarantee that. However, in the event, the winning program, named “Tit for Tat,” did not enact that strategy. Instead, it initially did not inform. Thereafter, it did whatever the opposing program did on the previous iteration. After the competition, some analysts looked in to why Tit for Tat’s strategy was successful. To that end, they developed some variants to compete against the original. One defected on the first iteration, and then did the Tit-for-Tat strategy; another cooperated the first five iterations, and then performed the Tit-for-Tat strategy, among others. All of the variants failed. The analysts concluded that Tit for Tat succeeded due to three factors:

• It was originally nice. It cooperated.
• It retaliated immediately for defection.
• It forgave immediately and completely for cooperation.

I Would Normally Write “Meanwhile, Back In The Project Management World…” At This Point, But I’ve Been Talking PM This Whole Time…

For some time I had been struggling mightily with which broad-based PM implementation strategy could be considered optimal as I was doing research for my first book, Things Your PMO Is Doing Wrong (PMI® Publishing, 2008) when it hit me: make the implementation strategy incorporate Tit-for-Tat’s three factors! Consider:

• When rolling out the new PM initiative, program, structure, whatever, make it “nice,” as in falling-off-a-log simple for the target organization to plug-and-play. From last week’s blog, the resistance tactic of claiming difficulty in advancing the PM capability is effectively blocked.
• “Retaliate” is a bit strong. However, if you are counting on participation from some elements of the organization, and that participation isn’t forthcoming, you can’t let that slide. You MUST respond, and effectively. Again from last week’s blog, this factor will negate the “Slow Roll” or “Silent Veto” counter-strategies.
• If you are receiving cooperation, but the data is of poor quality, then the participants are golden. Data quality can be improved, but deliberate non-participation cannot.

I would like to call GTIM Nation’s attention to the first factor of the Optimal Strategy, that of making the advancement in capability extremely easy to implement, since it does contradict much of what passes for insight on what needs to be included in a PM advancement effort. Conventional wisdom holds that, in order to implement a valid, or quality, or advanced, or authentic (choose your superlative) Project Management Information System, the person directing the effort must include such things as a robust risk management system, or a quality program, or a communications management plan, or a comprehensive set of procedures, or training, or, or, or.  The list is as long as the number of self-styled experts who have latched on to some aspect of PM that lies outside the mainstream ideas of Scope, Cost, and Schedule, muddying the waters of a clearly articulatable approach to a common management problem.

And here’s the infuriating part: once all of the ancillary “experts” have larded up the implementation strategy so that it’s anything but simple to roll out, they will turn around and claim that any system that actually is easy to install simply must be invalid. To be fair, it’s basic human nature to reflexively reject the notion that complex problems could have a simple solution. But the cynic in me can’t help but believe that another factor is that, should the experts’ pet analysis technique become ensconced in the PM codex as being a key or critical component of a truly valid PMIS, then those experts’ area of expertise will see an increase in demand, making them and their like-minded comrades more valuable to organizations struggling with the best way of advancing PM.

I have incorporated these three factors in the implementation strategy for small organizations, all the way up to very large portfolios, and it has always delivered an effective PMIS in an unexpectedly brief amount of time, all while demonstrably advancing PM maturity. GTIM Nation knows that I’m no ringer for the Game Theory crowd – I have often called out deficiencies in their approach, usually for failure to take into account sufficient parameters to provide a strongly analogous “game.”

But not this time. This time, Game Theory has painted a great big epistemological arrow for we PM-types to see what the optimal general implementation strategy ought to include. The fact that it happens to exclude risk managers is just icing on the cake.

In the 1933 film The Invisible Man, Claude Rains plays Dr. Jack Griffin, who has discovered a potion that renders him invisible. He plots (what else?) world domination, and either kills or materially causes the deaths of a lot of people before he is, himself, killed by police, who can detect his whereabouts by the footprints Dr. Griffin leaves in the snow. And now, for what has to be a record for the earliest introduction of my trademark segue,

Meanwhile, Back In The Project Management World…

I believe that a whole bunch of projects have failed due to one causal element, and it has to do with one of the most enduring, yet invisible PM pathologies: the ineffectual implementation of a desired strategy. It’s evident in the literature, the paper presentations, the tone of PM educators – they know the right answer, but nobody’s heeding them. To live out their careers as latter-day Cassandras appears to be their fate.

Of course, it doesn’t have to be that way. After stepping on the Implementation rake hundreds of times, you’d think that everyone who crashed a project due to this would start to wise up. But, no: just check out some of the lower-level PM-themed conferences, and you will find them chock-full of eat-your-peas-style hectoring, especially in the Critical Path scheduling and Earned Value analysis sessions. Back when I was a regular attendee at such conferences, I found that I could expect pretty much the same presentation on the basics of Earned Value Management, with the addition of some extraordinarily tiresome scoldings to those organizations that weren’t doing it already. I have absolutely no idea how or why those paper presentation proposals kept getting approved. Invariably, at the next conference I would attend, some variant of this same presentation would be on the syllabus, without a scintilla of original research or experimental results, as if scolding by itself was an appropriate way of implementing a program.

However, as I pointed out in my first book, Things Your PMO Is Doing Wrong (PMI® Publishing, 2008), you can’t advance a capability maturity by leveraging organizational power. In other words, you can’t make your team get better at what they’re doing. They have to be led there, certainly; provided the right tools, no question. But any attempt at forcing a capability advancement will be inevitably blown to smithereens by one or more of the following land mines:

• The Silent Veto. This is where some members of your team present as ready and willing to step up and commit to the level of intellectual and energy investment needed to implement your strategy, and then … they kind of disappear. The actual performance isn’t forthcoming, and they always have a really good excuse as to why they missed certain deadlines.
• The Slow Roll. When I was writing the aforementioned PMI® - published book, I was in contact with my old PMNetwork columnist colleague, the brilliant Bud Baker, who was (at the time) a professor at Wright State University. Bud told me that, in his days in the military, their version of the Silent Veto was the Slow Roll, which is where the team actually does participate in the rolling out of the new capability or strategy, but just not quite enough to make it a success. The Slow Rollers seem to have an innate sense of how much energy is behind the impetus to implement the new scheme, and will make an excellent show of advancing the cause – just not quite enough to really make it happen.
• The “it’s too hard” objection. I once inherited a team that included an Administrative Assistant who was clearly less than thrilled that I was being brought on-board. She would work out her frustration by asking for detailed instructions for any task she would be assigned. It got rather comical (though I wasn’t laughing at the time) when I had to provide her with step-by-step directions for doing basic filing. It finally dawned on me that she knew all too well how to do the job – she was just pretending that any task sent her way was too difficult, or dramatically outside the range of activities that she would nominally be asked to do. It was easier to either assign someone else, or do the task myself.

Managers used to a highly hierarchical organizational structure, such as that which exists in the military, will have a greater tendency to be agitated by these implementation-wrecking tactics by the Project Team, and will often resist understanding and working with or around them. As far as these managers are concerned, once the technical agenda has been set, and the specific tasks communicated and assigned to the staff, that should be enough; and, if it isn’t, well, that’s just a sign of some organizational behavior and performance pathology (laziness, incompetence, insubordination, etc.) that can be addressed through disciplinary actions. They seem to never stop to consider that the reason that their projects fail is due to a poor (or even non-existent) implementation strategy, as if the very need for an implementation strategy has been negated due to their advanced placement within the organization. They are the Project Managers, dontchaknow, and their insights and instructions must be followed! Or else! But the real world of Project Management is no respecter of persons. You are either effective at leading the Team to on-time, on-budget completion of the scope, or you are not.

“So!” I can hear GTIM Nation say, “If you’re so smart, how would you overcome the invisible man those implementation strategy landmines?” First, you…

Look at that! Out of pixel ink for this week. But, like The Invisible Man, GTIM Nation can expect a sequel.

What’s a “blaster?” We don’t know exactly, because a working model hasn’t been invented yet in this galaxy; however, we have many, many examples of how they work in the setting for the Star Wars movies, that galaxy far, far away, and have seen it in action. They come in various sizes, from a pistol-sized personal weapon all the way up to massive ship-mounted cannons. No matter the size, when fired they shoot out a bright segment of a beam of light, of various colors, accompanied by a distinctive high-pitched sound. The Jedi eschew them as being “uncivilized,” and “random.” Nevertheless, they appear to be the go-to weapon of virtually every non-Jedi or Sith combatant in the Star Wars series of films. A well-placed shot will kill on impact (e.g., Greedo in the original release), while a glancing shot will create a painful wound (Leia, in Return of the Jedi). The personal blasters used by storm troopers can take down armored vehicles (the Jawas’ sand crawler in the original), and transmit a considerable amount of heat (in The Empire Strikes Back, the walls in Cloud City that were hit near Luke were not only cratered, but at least one of them was maintaining a small flame).

In four of the first six Star Wars films, Darth Vader (the evil version of Anakin Skywalker) spends considerable time as an apex villain, naturally attracting his share of blaster fire. Not only is Vader capable of deflecting individual blasts using his light saber, he can completely absorb a personal blaster shot, from extremely close range, in the palm of his hand (The Empire Strikes Back). So, what does end up killing Darth Vader? It would appear to be a combination of exhaustion from participating in a light saber duel with his son, Luke Skywalker, followed closely by an intense dose of Sith “lightning,” intended to kill Luke but intercepted by Vader as the Emperor is being tossed down a massive power generating shaft.

Meanwhile, Back In The Project Management Galaxy World…

While my poison-pixel criticisms of common risk management analysis techniques have been bright, powerful, and leave flaming craters behind, they have not brought down the massive risk management empire, estimated at $11 Billion (USD) in 2016.[i] Since I view risk management as being the apex villain of the Project Management Galaxy World, it’s incumbent on me to stay true to my Jedi early PMP® training, and thwart their attempts at taking over the management universe. Think I’m exaggerating their intentions? The last time I challenged a well-known risk management expert to define the purview of RM, he responded “any event or condition that can have an impact on a project, positive or negative.” He was somewhat taken aback when I pointed out that that definition not only covered every other aspect of management, but of living life in general. So, yeah, I''m okay with the belief that they’re out to take over the management world.

But pointing out the logical flaws in their techniques appears to have done little more than earn me a spot on their “Most Despised Business Writers” list. Clearly, I need a more effective strategy if I’m going to convince a plurality of my readers that these guys are, well, wrong. And to find that strategy I only needed to look at their genre, where a better approach readily presented itself. You see, risk management falls within the genre of Predictive Analytics, along with regression analysis, descriptive systems, and … Game Theory!

As confirmed members of GTIM Nation know, one of the favorite tools of Game Theorists is the payoff grid. Personally, I can’t seem to string together more than five or six blogs in a row without using one. Let’s do one on risk management, shall we? Consider:

Let’s dismiss Scenario C right off the bat. If the risk analysts failed to predict an event that didn’t happen anyway, then the control set is literally infinite (though I can’t help to wonder what number would be assigned to the “wasn’t predicted, didn’t happen” scenario that involves a Sith Lord arriving on the project’s job site and destroying everything with a lightsaber).

Scenario B appears to contradict my thesis, no? The risk analyst predicted that something “positive or negative” would happen to the project, and that thing occurred! Let’s set this scenario aside for just a few more sentences.

I’ve been proposing an experiment to reveal the number of times Scenario A has happened. That experiment would be to have the risk managers and Earned Value analysts compile a list of projects/tasks at the reporting level of the Work Breakdown Structure that are going to overrun, and eliminate the agreed-upon tasks. The remainder would represent a workable test of risk management efficacy – and I’m confident I know who would win.

Scenario D happens all the time, but somehow doesn’t erode the confidence placed in risk management techniques. Why is that? It’s due to the same reason that Scenario B, when it actually occurs, fails to serve as supporting evidence.

Read any project’s risk management plan, or analysis. Whichever technique is employed (categorization, decision tree, Monte Carlo, whatever), the results are the same: There is an X% chance that scenario N will occur, having a cost impact of Y dollars and Z units of time. They’re not even really predicting anything! Such an analysis has all the relevance of being reminded that, prior to flipping a fair coin, the odds of it landing heads-up are 50-50. When Scenario A unfolds, the risk managers can point to not having actually predicted that that something would happen, just that there was a possibility that it would happen. And, when Scenario D unfolds, they can always point to that wandering invisible unicorn of doom, the “unknown unknown” events (actually, the whole definition of “known unknowns” and “unknown unknowns” struck me as highly circular at best, and flat-out tautology at worst).

So, what has our payoff grid revealed? That risk management can’t produce anything that’s actually evaluate-able. When they’re “right,” they’re brilliantly insightful, don’t you know, but when they’re wrong, well, they didn’t actually predict a specific scenario would unfold now, did they?

Using one Predictive Analytic technique to showcase the intellectual vapidity of another might seem to be a bit unfair. After all, those endowed with The Force have a limited ability to perform a mystical version of Predictive Analytics. But, that being the case, maybe the Sith risk analysts should have seen it coming…

[i] Retrieved from https://www.globenewswire.com/news-release/2017/03/15/937815/0/en/Assessing-the-17-1-Billion-Technologies-for-Assessing-Risk-Management-Markets-Global-Report-2017.html on 6 July 2019, 14:01 MDT.