Game Theory in Management

Official GTIM Nation Members are aware of an axiom that I take as valid, which is Affordability, Availability, Quality: pick any two. Specifically,

• An item or service that’s available immediately for a low price is probably not going to be of the highest quality,
• An item or service that’s available immediately and is high quality is likely to be expensive, and
• A high-quality item or service that’s not expensive will probably involve some amount of waiting.

I’m reminded of this axiom due to a recognition of a systemic barrier to sustaining an advanced (or even adequate) level of PM capability maturity, a barrier which stems from the very nature of organizations that let contracts and those that write proposals for them: the winner tends to be the lowest bidder. Circling back to the axiom that opened this blog, this tendency will pretty much automatically settle the Affordability aspect of the triple constraint. Organizations that maintain a highly mature, or quality Project/Program Management Office, with personnel who can be made available within a couple of weeks of the contract winner announcement, are not likely to be cheap, putting them at a distinct disadvantage in such competitions.

This leaves two alternatives: the Quality PM teams are likely to be late for the start of the project, while the Available PM teams might not be aware that a Cost Variance is definitely NOT a comparison of budgets to actual costs (keep this example in mind – it’ll come up a little later). Now, I’m sure there are lots of times when a winning Project Team has some latitude in hitting the ground running, and can have a robust Performance Measurement Baseline up and reviewable very soon after the project has officially started. But I’m also pretty sure this isn’t the norm. Customers tend to expect the level of quality they paid for to be displayed fairly early in the project, otherwise they wouldn’t put all those infernal requirements for the resumes of “key personnel” in the Request for Proposal.

So, what does all of this leave us? If we assume as true the aforementioned axiom, and fold in the fact that most major projects are let to the lowest bidder, we have a systemic force that’s set up against the very thing that PM-aware organizations are trying to establish and sustain: an advanced capability in Project Management. The deck, as they say, is stacked against us. That being the case, we PM-types can certainly expect that those who claim to be within our ranks are not actually making things worse, right? Right?

Well, no, actually. Consider that we’re talking here about a capacity to sustain some level of PM maturity, and the Affordability card has already been played. The winning contractor is attempting to assign the talented PM peeps to the new project as soon as possible, where they can set up the necessary project management information systems (PMISs) that will provide the data needed for the actual PM to make informed decisions. Let’s say, for the sake of argument, that the talent is actually available, and on-site (available) for the beginning of the project. They set up the baselines in record time, and are ready to pull status. What’s standing in their way? The list includes:

• Certain guidance-generating organizations pump out what they consider to be minimum quality standards for PMISs, and these include extremely dubious characteristics, such as the ability to compare budgets to actual costs at the line item level. Anyone familiar with even the most basic aspects of Earned Value Management will instantly recognize that such a comparison is clearly outside the purview of EVMS. Nevertheless, these organizations insist that it’s intrinsic, and mandate its usage.
• Our old friends the risk managers. I believe that risk management, as currently practiced, is openly fraudulent management science. However, certain guidance-generating organizations insist that some sort of risk analysis is vital to “quality” PM Information Systems, when it’s clearly irrelevant.
• The demand to include all stakeholders. This unwanted assertion, oft put out by communications specialists, completely ignores the fact that the set of “stakeholders” usually includes those who actively seek the failure of the project at hand, ranging from competitors to activist who reject the project in its entirety. Arranging the PM approach to accommodate this “quality” characteristic is a barrier that’s not only unneeded, but represents a serious impediment to successful project completion.

What we have here is, even in those instances where the winning bidder (remember – lowest cost!) has a quality team available, there are forces internal to the PM community who seek to add irrelevant standards of what they assert to be “quality” project management, making the third aspect of service/product delivery that much more unattainable, and, therefore, unsustainable.

So, to answer the question in the title, yes, the sustainability game is rigged against us. The kicker is that, through those nefarious guidance-generating orgs, we’re kinda doing it to ourselves.

When we’re talking Sustainability (ProjectManagement.com’s theme for April), my first reaction is to recall Carnegie Mellon University’s Software Engineering Institute’s (SEI’s) original Capability Maturity Model®. This model stipulated[i] five “Levels,” with my interpretation of them so:

• Level 1, “initial,” is chaos. Everybody’s doing their own thing, or nothing at all, so that, paradoxically, you can actually have centers of excellence in Level 1 organizations.
• Level 2, “repeatable,” while basic, is fairly universal. Everybody is using the same forms, techniques, and overall strategies as they pursue the targeted enhanced capability.
• Level 3, “defined,” which I equate to “sustainable,” is achieved when the capability being enhanced doesn’t unravel if the heroes who got you this far get hit by the proverbial beer truck. There are enough procedural, training, and shared techniques in-place to ensure the capability survives.
• Level 4 is where you’re just so darn good at this capability that your organization can export it to other, less advanced ones.
• Level 5 (I've never seen anybody get to Level 5) is where you are so advanced at this capability that your organization is routinely discovering solutions to long-endured problems.

Okay, let’s get back to Level 3. Since almost every organization pursuing a more advanced PM capability is enmired somewhere in Levels 1-3, Level 3 becomes something of the brass ring in the Sustainability Sweepstakes. In fact, whenever you hear some new executive assert the idea that he or she will take the organization from Level 1 to Level 4 within a certain span of time (why does eighteen months keep coming up?), GTIM Nation should take it as an automatic sign of cluelessness.

Ennyhoo, we’re trying to get to Level 3, and stay there. Don’t get me wrong – you can get some wunderkinds in the fold, and when they start to export your brilliance everybody has a good day. But that’s kind of rare, even among reputable PM consulting firms. Most orgs would be thrilled just to get to the point where everybody’s pretty much doing the same thing in PM expertise space, and top execs get to host Project Reviews where half the room is speaking intelligently about To-Complete Performance Indices without the other half of the room looking like German Shepherds at a physics conference. So, what’s keeping you from being the champion that gets your organization to Level 3? Some pretty common organizational behavior pathologies, particularly ones that tend to specifically blow up PM initiatives, that’s what. Here’s a partial list.

1. Our friends, the accountants. They don’t act out of malice (well, most of the time) – it’s just that they’ve been taught things that just aren’t so, such as the point of all management being the maximization of shareholder wealth. This little piece of management science misdirection has massive implications, not the least of which is that those management information systems that are designed to provide project performance data are misguided, and will never be as useful as the information already being provided by the General Ledger, in their learned opinion. Since they’ve been trained to believe that this is the case, it will tend to strike them as a waste of time to arrange their chart of accounts to pull actual costs based on the Work Breakdown Structure (WBS). Unless the organization is highly project-oriented (a “strong matrix”), the accountants will be inclined to collect actual costs based on some other structure, like organization. However, no Earned Value Management System (EVMS) can function without actuals being collected (at least) at the reporting level of the WBS, and no project can have its cost performance reliably or accurately measured without EVM. In short, it’s impossible to sustain a PM capability without a bit of cooperation from the organization’s accountants, and, more often than seems reasonable, they don’t have to cooperate.
2. Members of the project team who dislike Project Management Information Systems. As stated above, no project can sustain even a basic PM capability without an EVM. But, even if the accountants are on-board, and willing to provide actual costs at the reporting level of the WBS, there has to be at least a modicum of cooperation from certain members of the project team when it comes to setting up cost baselines, schedule networks, and pulling status each reporting cycle. Much of these steps can be dramatically simplified to make them relatively quick and painless, and even very simple Earned Value systems can generate highly useful and insightful reports. But if, say, Work Package managers (or their functional equivalents) withhold all support, and point to some intellectually vacuous reason such as the supposedly onerous level of participation asked of them that would allow a system to be sustained, the system will unravel.
3. If the sustainable system’s champion seeks to overcome the land mine in #2 above by making project team participation falling-off-a-log simple, thereby removing the “too onerous” objection, there’s still another barrier: the charge that an EVM simple enough to require minimum participation from the Work Package managers can’t possibly provide useful or insightful information about the project’s cost performance, and should therefore be abandoned in favor of the General Ledger (feeding into the barrier from #1 above). This assertion is also false: I have personally set up multiple systems that needed only (a) a time-phased budget (which can be independently derived by spreading the project’s Budget at Completion [BAC] over its period of performance), (b) the project’s actual costs, and (c) an assessment of its percent complete as of the end of the reporting period. Note that both (a) and (b) are usually already available from the General Ledger, leaving only (c) as the totality of the status pull. These systems, as basic as they were, consistently provided early detection of work that was on a pace to overrun, or experience delays, at over 96% accuracy.

But sustainability barriers don’t have to be valid in order for them to be effective.

[i] The Capability Maturity Model: Guidelines for Improving the Software Process, Carnegie Mellon University Software Engineering Institute, Addison-Wesley, 1995, pp. 16.

I get it. I really do. Even the best Project Managers can get to a point where their capacity to adapt to new circumstances, organizations, locations, technology advances … the list goes on and on of those things that force us to modify our strategies and tactics if we are to succeed. It’s easy to look back on previous successes, and desire to repeat that success by, well, repeating those managerial approaches, confident in a repeat of the outcome.

But that’s the catch, isn’t it? By definition, every project is unique, sometimes dramatically so. And there’s really no way of quantifying which PMs were successful due to re-loading tried and true strategies, and which were successful by significantly deviating from those very same strategies. Actually, it’s fairly difficult to differentiate the consistently successful PMs from the repeat failures, due to the wide variety of cover-the-backside techniques, so that coming up with a litmus test for telling the successful ones clinging to traditional strategies from the radically innovative ones is probably impossible.

I know this from personal experience. I had been assigned to set up the cost/schedule performance systems for this one major project where the PM insisted, at the very first project team meeting no less, that he wanted a “swim chart” as his primary method for tracking the project.

“You know, a swim chart!”

“Umm, do you have an example?”

With a sigh and a roll of the eyes, he went to the white board, where he drew a comically crude PERT Chart, with the tasks arranged by organization down the X axis.

“Oh, okay, I see what you want. We’ll need to begin with a Work Breakdown Structure.”

“A what?”

“A Work Breakdown Structure. It’s the way we decompose the scope into the tasks and activities that we can then sort by performing organization.”

“Look, I don’t want to hear about any of that. I just want a swim chart! Can’t you just give me that?” (Point of fact: when a manager starts repeating the word “just,” it’s a sure sign that they don’t have a clue of the difficulty associated with the fulfillment of their demands.)

“Not without some groundwork first” I replied, as meekly as possible.

He called my boss and had me removed from the project.

In retrospect, I understand his frustration. It was clear that, on some previous project where he was involved, this report had been generated on a regular basis, and much of the decision-making had been predicated on it. This PM probably didn’t realize that the org-sorted PERT Chart wasn’t simply a cartoon graphic, or the output of a singularly immature system. I just happened to be the unfortunate project controller who broke the news to him that he couldn’t “just” have one quick and easy.

This why-can’t-it-be-just-like-my-last-project phenomena occurred again, when my bosses’ boss, a fairly seasoned executive, wanted to initiate a new action item tracking system, and wanted me to head up the implementation effort. With the software’s reps on the conference call speaker phone, this exec was very ready to spend some serious coin to make it happen. Like an idiot, I had to ask a question.

“I see you have categories for ‘Action Items,’ ‘Issues,’ ‘Concerns,’ ‘Trends,’ etcetera. Do you have a precise definition for each of those categories? I mean, what’s the exact difference between an ‘action item’ and a ‘concern’?”

“We let the individual users define those.”

“What difference does that make?” stormed the exec.

“Well, it’s just that a given ‘issue’ could show up in a wide variety of systems already in place, or even in multiple categories within the same system. If the same action item shows up in multiple places, and the particulars aren’t in agreement, how do you know which one is correct?” I then addressed another question to the software vendors. “Does this system reach into other tracking systems?”

“No.”

“Then, if one item does show up in multiple iterations, and everybody’s not in complete agreement, how will we know which system has the more reliable information?”

I could see the exec getting visibly upset.

“Look, if you have your heart set on this system, I don’t want to be the barrier. I’ll work whatever implementation effort you choose.”

The exec called my boss and had me removed from the project.

Along about this time my capacity for sympathy for managers desperate to recreate previous, comfortable environs was drying up. This exec clearly had no concept of how valid Management Information Systems are set up, or function, and had fallen prey to a slick and shiny software package that had made some inchoate promises along the lines of how they could provide an easily-understandable report that told him what he needed to pay attention to that day, or that week, and this pesky PMP® was throwing cold water reality on the object of his fascination.

Again, I get it. Having to respond constantly to situations that are only marginally analogous to ones where we were confident that we had the optimal solution gets old really quickly. But that having been said, how many parties do “managers” have to attend where they insist that the hostess change everything to match the parties the managers had previously attended before they don’t get invited any more?

When it comes to advancing Project Management capability within an organization, there are two vaguely-defined monsters that keep popping out of dark corners to savagely obliterate such initiatives. They are “politics” and “culture.” I sincerely can’t count the number of times I’ve heard frustrated managers blame one (or both) of these as the reason they failed in their attempts at “doing” PM, as if these causal agents were completely out of their control. Since we can’t counter such monsters without knowing exactly what we’re up against, I’m going to go ahead and take a shot (get it?) at scoping them.

Politics – at least the variety seen in the office – I define as the pursuit of an agenda that benefits the person pursuing it, but is at odds with the advancement of the project team as a whole. Obviously, if the project team seeks to advance PM capability within their organization, and a member of the team sees an opportunity to benefit themselves at the expense of this advancement, the temptation will be to go ahead and engage in a purely political maneuver.

Recall my previous references to the excellent Michael Maccoby, author of the book The Gamesman: The New Corporate Leaders (Simon and Schuster, 1976), where he posits four archetypes of workers:

• The Craftsman cares deeply about his output, but not so much about for whom he works.
• The Company Man tends to adopt the persona of the macro organization.
• The Jungle Fighter gets ahead through calumny and deceit, rather than through actual merit or quality of contribution.
• The Gamesman sees his paycheck, not as food on the table or a roof over his head, but as a token in some grand game he is playing. As such, he tends to both master the rules of the “game” to a greater degree than the other archetypes, and tends to take risks more willingly.

Now, of these types, whom do you suppose would be more willing to pursue a personal agenda at odds with the Project Team’s direction? If you said “Jungle Fighter,” go to the head of the class; however, if you said “Company Man in an environment where Jungle Fighters have significant sway,” you can leave the classroom, go do whatever it is you want, and I will give you an “A” for the semester.  Should the Jungle Fighters and Company Men influenced by them create a sizable bloc within your Project Team, your attempts to further any legitimate agenda – particularly and especially the advancement of Project Management capability – has been hopelessly compromised, and, finally, office politics would be to blame.

Now let’s address “culture.” What is culture, exactly? I generally hold that whenever you hear some manager say something like “In order for Project Management to be advanced within the organization, the culture has to be right” as another way of saying “Our selected strategy for setting up our PMO was profoundly flawed, but we’re going to blame everyone else for it anyway.” It’s easier to split the blame a few dozen ways, so that many people bear some small part of the responsibility, than it is to pinpoint one or two individuals, and make a crystal-clear accusation that their lack of management savvy or integrity was the proximate cause of the organization’s lack of advancement in PM capability. Even this latter is far easier than taking a good, long, hard look in the mirror and coming to the conclusion that the selected strategy was wrong-headed in the first place.

Now let’s combine the inchoate “politics” and “culture” causes of PM advancement failure, and address them head-on. How political is your Project Team, or the macro organization where it resides? Are there many Jungle Fighters? Are they influencing the Company Men who, if you recall, tend to assume the persona of the organization around them? Have they formed a sizable bloc? If the answer to these questions is “yes,” then you can, indeed, legitimately blame “culture” for the difficulties in advancing PM within the organization. However, this raises additional questions: Who let in all the Jungle Fighters? How were they allowed to advance? Their very presence screams out that the macro organization has drifted away from a meritocracy. Why did that happen? How did it happen? And, most importantly, did you stand by as it was happening?

The answers to those last three questions is key to understanding how the political monster savaged your Project Team, and led to the culture that has little trouble thwarting attempts at advancing PM. Any deviance from a true meritocracy leads inevitably towards the types of political machinations that undermine the overall organizational culture, and do so to the point that legitimate attempts at advancing PM capability are pretty much doomed from the get-go.

So, sure, go ahead and listen to failed PMO directors blame “politics” or “culture” as the insurmountable barriers that prevented a successful advancement of Project Management within the organization. Just keep in mind that, contrary to the way they’re being presented, they are almost never purely external to the person complaining about them.

I know what the ultimate Program Management Office is. It produces winners on a consistent basis, and is probably the closest to a pure meritocracy that any organization has ever, or will ever attain. Any American can join, but overseas GTIM Nation needn’t worry – analogous PMOs exist worldwide. Through this PMO, winning strategies and tactics are truly advanced, with no time given for unproven theories or modes of operation.

The organization I’m talking about? The United States Chess Federation.

“Wait just one minute, Michael!” I can hear GTIM Nation say. “The USCF isn’t a Program Management Office at all! It is, in fact, a collection of people who play a board game, albeit a very sophisticated, ancient board game.”

Fair points, all. But consider: what is a Program Office? Is it not a collection of PMs who manage projects sharing a common theme?

“Chess isn’t a project.”

Perhaps, but projects do share many characteristics with games (Game Theory in Management, anyone?). Besides, each game is unique, with a definitive beginning and ending date (time). Its scope is agreed to prior to its start (checkmate the opponent), and resources are dedicated to it.

But in my opinion what makes the USCF the ultimate PMO is the fact that its members’ value is definitively set, and on a purely objective basis: their score. You can be tall or short, skinny or rotund, beautiful or plain, well dressed or scruffy, and it makes absolutely no difference: if you win chess games, your score goes up. If you lose them, your score goes down. Period.

Compare and contrast this refreshingly objective evaluation basis to what happens in Project Management space. We all know of contractor companies that win large contract awards despite having massive overruns and lengthy delays in their histories. These guys lose, and lose big, but never seem to pay any kind of long-term penalty for doing so. Similarly, there are Project Management consulting organizations that deliver substandard services while charging inflated salaries, and yet, somehow, stay in business. Conversely, smaller, less influential contractors, with winning records, are often shut out from even competing for larger procurements.

Then there are the strategies and tactics that go into specific games projects. In the PM world, so-called experts can sit on the sidelines, pushing baseless assertions about the need to, say, time-phase Estimates to Complete, and how this “analysis” is absolutely critical to proper resource assignment, and print the codex of their idle speculations into guidance documents, and never pay any price for their error. Did any – any – of these people actually manage a project where the time-phased ETC prevented an overrun? No? Again, compare and contrast this to Chess Life magazine, which lists hundreds of Master and Grandmaster-level games. The reader can actually see which strategies and tactics worked, and which ones failed.

Chess players within GTIM Nation know that chess openings – canned strategies for the first 5-15 moves – have their own names, like Ruy Lopez, or the King’s Gambit. Indeed, virtually every named opening has at least several variants, each with their own name. Back when I was playing tournament chess, no player who had failed to commit to memory at least three openings (one when playing white, one when playing black and the opponent opened with 1. P-K4, and another when the opponent opened with 1. P-Q4), each with at least four variants (for those not counting, what was needed was a minimum of twelve game templates, played through around the tenth move) had any kind of chance. On the PM side, we have our own set of must-know canned strategies. The manager who does not know the difference between a Work Breakdown Structure and an Organizational Breakdown Structure, or isn’t familiar with how schedule logic can’t define a critical path within a network if most of the activities have been constrained, isn’t going to (or at least shouldn’t) last long in the PM profession.

In chess, winning strategies remain, and losing ones are abandoned. In Project Management, risk management is a multi-billion dollar per year industry, and yet has no real record of ensuring, or even aiding, project success. Ditto with communications management, or any of a dozen other, in my opinion, highly dubious assertions made in the theoretical quarter. These canned strategies simply seem to hang around and eventually become part of the conventional wisdom without ever having been shown to be the proximate, or even material cause of project success. At the risk of pushing my analogy past the breaking point, chess masters don’t have to deal with so-called communications experts, extolling them to keep their team mates (“stakeholders”) informed of what they’re doing, how, why, or when they do it. Nor do they have to listen to risk managers trying to tell them the odds that their opponent will employ a certain strategy (with an 80% confidence interval, don’t you know). Indeed, it’s illegal for a player in a tournament setting to be so advised.

If GTIM Nation comes away from this blog appreciating the strength of the analogy, great. If not, I understand. But to the latter category, let me add but this: The PMO that successfully enacts the USCF’s two main strengths – personnel status based on a pure meritocracy, and the ability to quickly and effectively reject losing strategies – will consistently out-perform the ones that don’t.