Game Theory in Management

I’m of the opinion that the seminal double-entry bookkeeping body of knowledge (get it?) came about due to two drivers:

• A mostly mathematical exercise by Luca Pacioli, in the 15^th century,[i] and
• A method to fairly extract taxes from a rapidly expanding and more sophisticated business sector at that time.

Prior to double-entry bookkeeping, taxes were generally collected on a rather subjective basis. Unless one was a member of a feudal court, the display of personal wealth made for a natural target of the tax collector(s). As the wealthy sought to downplay conspicuous displays of affluence, tax collectors would have a more difficult time differentiating between those who ought to pay more, and those who had already paid their “fair share,” and then some. If you think about it, this entire dichotomy is the basis for the Robin Hood legends, where King John I of England was forced to raise taxes in order to meet the ransom demands for retrieving King Richard I from the Austrians. Since the actual collection of revenue was performed by the constabulary, this duty fell to the fictional Sherriff of Nottingham, the villain in the Robin Hood legends. Lacking a solid basis for such assessments, it would have been next to impossible to fairly and even-handedly perform this function. Notably, King John reigned from 1199 until his death in 1216, whereas Luca Pacioli didn’t publish his treatise until 1494.[ii]

But, once double-entry bookkeeping became common, specific laws targeting particular types of transactions or holdings could be passed, and evenly enforced. No more tax booths by the side of the road, demanding of passerby a percentage of their possessions based on superficial appearances. From a legal and financial point of view, it was brilliant, but it does raise the question: if not for the obligation to pay taxes, or to provide a consistent standard for valuing economic entities, would businesses today predicate almost all of their budget or money-related Management Information Systems (MISs) on the general ledger? My point is that I’m rather dubious that it got to that position based exclusively on its management utility, as opposed to its use for governments to raise money. It’s also easy for me to believe that, since every business had to use double-entry bookkeeping anyway, it was a relatively small management science/narrative step to assert that the point of all management was to “maximize shareholder wealth,” a bit of information that can only be derived from – you guessed it – the general ledger. And from there the expansion of the codex asserting double-entry bookkeeping as the ultimate authority when it comes to informed management decision-making just seemed to make sense.

I can almost hear rookie members of GTIM Nation saying “But Michael! There’s a vast difference between the knavery of the fictional Sherriff of Nottingham and modern-day Chief Financial Officers! For example, the Sherriff of Nottingham would make decisions about the collection and distribution of funds based on insufficient information and/or his own personal prejudices, leaving some interests overburdened and bitter, while others were unfairly and almost arbitrarily rewarded. Conversely, the modern-day CFO makes decisions or bases advice about the collection and distribution of funds based on the data in the general ledger, perhaps influenced his own personal prejudices. It’s completely different.”

Adding to the dynamic that provides the information from the general ledger appearing to be more valuable than its counterparts from the Project or Strategic Management realms is the immediacy of its apparent payoff. A generic employee approaching a generic manager and demonstrating that they had saved the company X amount of money appears to have made a strong case for their own personal contribution’s value. Not as clear is the immediate value of the Project Team member who informs their PM that they have averted a cost overrun in a specific Work Package. Success in the PM realm is often not realized until the project is actually finished, sort of like the way some colleges will award grades exclusively on the final exam. And, about that generic employee with their “savings.” Eliminating, say, a salesperson from the floor will “save” the company that person’s salary. It is also likely to frustrate customers who can’t get help during peak traffic hours with their purchase decisions, meaning that, in the mid-to-long term, such “savings” may actually hurt the organization in both the PM (customer-focus) and Strategic Management (market share) arenas.

Of course, I don’t anticipate the content of the GTIM blog to overturn the commonly-held notion of the supremacy of the general ledger in generating management information streams. I’m just posing some long-overdue questions about it. Please don’t send the Sherriff of Nottingham to take all my stuff.

[i] Retrieved from https://en.wikipedia.org/wiki/Double-entry_bookkeeping on June 4, 2023, 19:47 MDT.

[ii] Ibid.

How did the phrase “Project Management acumen” become subjective? I mean, it shouldn’t be, and PMI® has published scholarship to prevent it from becoming so, but somehow the common usage of the term seems to be heading away from the objective. Consider this blurb on Business Acumen, from PMI®’s website:

Business Acumen: Professionals with business acumen understand the macro and micro influences in their organization and industry and have the function-specific or domain-specific knowledge to make good decisions. Professionals at all levels need to be able to cultivate effective decision-making and understand how their projects align with the big picture of broader organizational strategy and global trends.[i]

I especially appreciate the phrase “…need to be able to cultivate effective decision-making…” How does one objectively score “effective decision-making?” If the PM doing the decision-making consistently brings in projects on-time, on-schedule, I would say that qualifies. That being the case, why does it seem that so many consultants, paper presenters, and seminar hosts point to anything and everything other than the successful project completion win rate in their portfolios? Don’t misunderstand – I have nothing against citing college degrees and certifications to establish PM cred. But what happens when a bunch of degreed and certified PM “experts” disagree on a central (or multiple) tenet of PM science? I’ve often said in this blog that you can put fifty Project Managers in a room together, and they won’t agree on the color of an orange. Let me add to that the notion that, of the fifty, most will hold themselves to be experts, with the dissenters worrying about their upcoming PMP® certification exam.

Consider one of the primary, if not the primary, tools of the risk managers (no initial caps), the Monte Carlo Simulation. Without getting too technical, suffice to say that, of the risk analysis software packages I have used, they all involve getting data from Subject Matter Experts, and these data typically include (with the Project’s/Task’s/Control Account’s cost and schedule baseline as a “most likely” starting point):

• If things go really wrong, what would be the cost/schedule impact?
• What are the odds of the worst-case scenario unfolding?
• What about if things just go medium-wrong? What would the cost and schedule impact be then?
• What are the odds of that scenario occurring?
• What if everything goes well? Are there any savings in time or budget that could be realized?
• And what are the odds of that happening?

Sometimes the data collection/SME interview process will pull more data similar to the above, but this is typically the basic data set that they’ll use. The risk manager or risk analyst (neither gets initial caps) then feeds this “data” into the Monte Carlo Simulator, and dials up the number of “random” outcomes. The resulting analysis is used to inform the recommended size of the contingency budget, likely at-completion dates or costs, or even the amount to be considered in the poorly-defined “schedule contingency.” Should anybody challenge the veracity of these figures, the risk managers will often remind them that a Monte Carlo Simulation method was used, resulting in a chilling effect on any common sense-blessed PM from speaking up in the first place.

Here’s the problem with all this.

None – and I do mean none – of the bulleted data points can be known with any precision. The polled Subject Matter Experts are usually speculating and guessing when passing these parameters. As cool as “Monte Carlo Simulation” sounds, the selected processing method becomes irrelevant, since the data feed is essentially a collection of guesses. Now, risk managers will point to the necessity of using a stochastic method for this type of analysis. Funnily enough, the first definition of the word “stochastic” from Wordnik is “Of, relating to, or characterized by conjecture; conjectural.”[ii] “Statistics Involving or containing a random variable or process.” has to wait for the second definition.[iii]

And yet, it’s been my experience that a plurality (if not a majority) of risk managers and analysts pretend to the business acumen high ground, even though the analysis techniques they push on the PM Universe are weak, if not out-and-out flimflammery. Hence my request that we coin a new term, a combination of acumen and flimflammery, “acuflammery.” Since the PMBOK Guide® lexicon’s format is pretty plain, I’ll assert the definition in Merriam-Webster format (the term will make it that far sooner or later, so I may as well):

Acuflammery noun

accu flamm ery ‘a kyu flam er ee’

: an idea or concept, particularly in the Project Management domain, that has the appearance of legitimacy, but is, in fact, an unsound analysis technique.

Synonym: snake oil.

And I can assure you, dear readers, that this term is by no means confined to the risk managers.

[i] Retrieved from https://www.pmi.org/certifications/certification-resources/maintain/pmi-talent-triangle-update on May 27, 2023.

[ii] Retrieved from https://www.wordnik.com/words/stochastic on May 27, 2023, 21:56 MDT.

[iii] Ibid.

Let me state right up front that I believe that the use of fictionalizing an idea from the sciences – especially and particularly the Management Sciences – is disingenuous. My first encounter with this approach to selling a supposedly scientific hypothesis or theory was when I read Walden Two (Hackett Publishing Company, 1948), by B. F. Skinner. Skinner, of course, was one of the seminal and most persuasive drivers behind the psychological theory of Behaviorism. How big was Behaviorism? According to VeryWellMind.com, “From about 1920 through the mid-1950s, behaviorism became the dominant school of thought in psychology.”[i] In Walden Two, a rural community has been established, with its internal governance based in Behaviorism. And, of course, this community thrives.

Eliyahu Goldratt took a similar approach to introducing the notion of “Critical Chain” Project Management with the publishing of his novel The Critical Chain (North River Press, 1997). Based on the Theory of Constraints, Goldratt’s characters engage in dialogue to lay out the various ideas that make up Critical Chain PM, mostly in a university setting. And wouldn’t you just know it? Those ideas effect successful outcomes in the real world (“real world” here being the difference between the fictionalized university and the fictionalized company where these ideas are implemented).

Compare and contrast this approach to what Waterman and Peters did in In Search of Excellence (Harper Business Essentials, 1982). They went to (then) successful companies, and noted what these companies did differently. No made-up characters, places, or events. This is the way Management Science is advanced. Not through untested suppositions looking for some organization with a claim to success that appears to be working its structure, and certainly not by a prefabricated hypothesis being set in a fictionalized place and time.

I can already hear GTIM Nation challenge “Michael! If you’re so against fictionalizing management science concepts, how do you explain Stanly T. Raspberry?” For the newer members of GTIM Nation, Stanly T. Raspberry is a fictional private detective that receives requests to investigate “cases” of egregious Project Management malfeasance. I introduced him back when I was writing my PMNetwork column, The Variance Threshold, and he has made several appearances in GTIM. The difference here, though, is that I’m clearly not expecting anybody to take ol’ Stanly seriously. The entire franchise started with a column entitled “Really Bad Management Writing,” and I’ve been using it as a device to mock both the fictionalization of management science ideas as well as some of the practices that I found to be, well, egregious.

However, there’s no denying the effectiveness of introducing a management hypothesis in a fictionalized setting, having that introduction and implementation proceed smoothly in the fictional organization, and the realization of the solution to long-existing problems leading to clear success. There’s even a Goldratt Institute, with points of contact in the United States, Malaysia, and Japan.[ii] This being the case, I can’t help but to wonder what would happen if I were to admit the efficacy of the PM-science-in-a-novel approach, dial down my loathing of that particular device, and write a novel about some aspect of PM that I believe is underappreciated (like Earned Value Management Systems’ ability to accurately forecast cost and duration Estimates at Completion) coming to the rescue of a fictionalized company or organization beset with rival information streams that are basically flim-flammery. The main problem with writing such a novel is … finding a truly underappreciated PM theory? No, that part is easy. The “theory” being pushed doesn’t even need to be valid, since, in fiction, the outcome is always in the novelist’s head. What is needed is an original situation for the underappreciated PM theory to work on as some sort of talisman, since the long-standing and familiar issues with macro-PM theory, like the optimal role of the PMO in setting guidance, or the level of robustness called for in a given organization, will never have a clearly articulatable theory that’s widely applicable. The central conflict/plot driving device here must be fresh somehow, like what PMs in charge of human-like androids face in their work that’s somehow applicable to what, say, capital projects and construction PMs encounter.

So, before anybody beats me to it, I think I’ll write a novel about a young, brilliant PM named “Michael,” who has been put in charge of a line of human-like androids, and has brought with him an appropriate recognition of an EVMS’ ability to accurately forecast at-completion costs and durations. He is opposed by risk managers (no initial caps) and accountants who stand to lose their corporate standing if Michael successfully brings in his scope on-time, on-budget, completely without their “help.” Then, I’ll reveal at the climax that the risk managers and accountants are actually androids themselves, from an earlier line that was discontinued due to their overly robotic, template-driven approach to PM. If real-life risk managers and accountants object, I’ll reply “It’s only fiction! Didn’t you see the whole “any resemblance to actual persons…” bit in the Introduction?
Also, I’m going to want exclusive rights to the action figure version of Michael.

[i] Retrieved from https://www.verywellmind.com/behavioral-psychology-4157183 on May 17, 2023, 20:10 MDT.

[ii] Retrieved from https://www.goldratt.com/contact , on May 20, 2023, 13:52 MDT.

The “Lake Wobegon Effect” is the common term for the phenomena of illusory superiority. According to exploringyourmind.com,

The Lake Wobegon Effect is believing that we are superior to others and being oblivious of our weaknesses and errors. We have a false sense of superiority, whether it’s in intelligence, beauty or behavior.[i]

Lake Wobegon, of course, is the fictitious setting for much of author Garrison Keillor’s work, and is a place where “all women are strong, all men are good looking and all children are above average.” The effects of illusory superiority are surprisingly common. For example, 80% of Americans and 77% of Swedes believe themselves to be better-than-average drivers.[ii] Now comes the question that seasoned GTIM Nation members probably already know is on my mind:

What does everyone reading this blog believe would be the result of the poll question put to self-identifying PMs, “Do you believe yourself to be below average, average, or above average Project Manager?” Of course we’re experts, dang it! I still cringe when I recall an instance where, in a major project review meeting, one of the customer’s “experts” described a clearly incorrect method for collecting Earned Value data, and was called on it. “Do you know PMI®?” she demanded. “I’m a PMP®!” she exclaimed, as if that was supposed to suddenly add legitimacy to her clearly invalid assertion.

An added aspect of illusory superiority is that genuinely advanced people tend to have an appreciation of what they don’t know, leading the way to some level of self-awareness that can serve as a brake on the Lake Wobegon Effect. The implication here, of course, is that it’s the less-advanced people who are more likely to exhibit illusory superiority, meaning that…

Meanwhile, Back In The Project Management World…

…in those instances where, say, some policy or procedure document is being developed for PM application within the macro-organization, it’s at least somewhat likely that the people who are presenting their ideas most aggressively may very well be the very people whose ideas should be filtered out of such documents.

I recall the time I spent working on the Practice Standard for Earned Value Management for PMI®. At a meeting held back in Pennsylvania, where we were being instructed by subject matter experts in the legal and practical matters associated with generating this practice standard, one of the presentations was from a person from the American National Standards Institute, or ANSI. One of the take-aways from this fellow’s presentation was that the content of our practice standard should seek to be such that no one considered an expert in the field should object to its presence in the document. I remember holding up my hand and, after being recognized, asked “We’re talking about the community of Project Management specialists, here. You could get fifty of them into a room, and they would not agree on the color of an orange. How on Earth are we going to get that level of consensus across the much larger expert-in-Earned-Value population?” The presenter had no direct answer. If I recall correctly, he basically reiterated his original assertion. I just shook my head, suddenly less enthusiastic about the task in front of the Team. Now add to all this the Lake Wobegon Effect, and we have the threat of the advancement of legitimate Project Management science being commandeered by the people who are most likely to present themselves as advanced in PM scholarship or experience, but lack the kind of in-depth understanding needed to document valid insights.

The Lake Wobegon Effect may also go a long way towards explaining why management fads tend to get the traction that they do prior to being either openly exposed and discarded, or dying long, drawn-out deaths as organizations gradually abandon them. I would absolutely love for the former of these two fates to be the one that finally takes down risk management (no initial caps), but my sense is that it will eventually die on-the-vine, like Six Sigma is doing. For those in management in the 1990s, Six Sigma was all the rage, so much so that not having a Team or Group dedicated to its proliferation was considered by the “experts” to be very poor form, indeed. As the craze hit fever pitch near the turn of the millennium, more and more organizations with legitimate management acumen began to realize that its adoption did not directly lead to a competitive advantage, which raises the question: did those exerts and consultants who insisted on implementing a Six Sigma program suffer from illusory superiority? And, if so, what’s to stop their modern-day counterparts from initiating another, similar fad within the PM universe?

The only remedy that I can think of is for we PM-types to keep in mind that Garrison Keillor’s Lake Wobegon doesn’t actually exist. If we find ourselves in a place or organization where everyone is an expert in PM, there’s a distinct possibility that its output is little more than compelling fiction.

[i] Retrieved from https://exploringyourmind.com/the-lake-wobegon-effect-above-average/ on May 6, 2023, 13;16 MDT.

[ii] https://www.semanticscholar.org/paper/ARE-WE-ALL-LESS-RISKY-AND-MORE-SKILLFUL-THAN-OUR-Svenson/ad37e00352406dd776bc010769489b2412951c7d?p2df.

“I have one simple request, and that is to have sharks with frickin’ laser beams attached to their heads.”  --Dr. Evil, Austin Powers, International Man of Mystery, 1997.

The comic villain from the Austin Powers movies, Dr. Evil (brilliantly played by Mike Meyers), heads a massive organization set on (a) destroying the Earth with purloined nuclear weapons, (b) destroying the Earth with a moon-based laser beam, and/or (c) using a tractor beam to pull a meteor into the Earth, presumably resulting in its destruction. Fortunately, the world is spared these terrible fates by secret agent Austin Powers (also played by Mike Meyers), but not before these various, ahem, projects are well past their planning stages and have begun implementation.

Now, the reason Dr. Evil is desirous that his pet/guard sharks have lasers attached to their heads bears some scrutiny. The stated purpose is that he “…figure(s) every creature deserves a warm meal.”[i] This reason is, of course, comedy gold, since it provides an extremely silly purpose on top of a clearly unreasonable request.

Meanwhile, Back In The Project Management World…

I’ve endured several instances of highly-placed executives making, umm, unfortunate Management Information System (MIS) requests of me in my career, but two in particular stand out in my memory as being illustrative of what can happen in PM space when people with a limited knowledge of Project Management principles are put in charge. The first of these involved a PM who was very interested that I, his project controls specialist, create for him a “swim lane chart.” With a little prodding I discovered that this “swim lane chart” was actually a PERT chart, sorted in rows by performing organization.

“Sure, we can do that. We’ll need to start with a Work Breakdown Structure, then develop the project’s Organizational Breakdown Structure, which will allow us to create the Responsibility/Accountability Matrix…”

“I don’t want any of that. I just want a swim lane chart.”

“I understand, but the boxes in the PERT … I mean, “swim lane chart,” represent Work Packages, and to create them, we’ll need a WBS…”

“Look, I’m telling you I don’t want any of that! I just want a swim lane chart!”

Seeing him get more agitated and insistent led me to believe that I was making no progress, so I demurred and told him I would get right on it, and headed back to my office. While I was en route this guy called my line manager, and had me kicked off the project.

The second was similar. An executive was brought in from a place that was really not very analogous to his new situation. After a few weeks I received the out-of-the-blue assignment to help him acquire and implement a specific computer application that was billed as an “action item tracker.” My first meeting was with this exec and the software’s marketing team, who had obviously already sold the exec on its “benefits.” The meeting started with just me and the exec in the conference room, with the marketers on video.

“What role is being envisioned for this app?” I asked.

“It’s an action item tracker!” came the exec’s reply, already somewhat agitated.

“Okay, but (this organization) already has an institutional action item tracker. Will this application do something that the institutional one doesn’t?”

The frantic looks between the marketers and the exec quickly and clearly informed me that no one had even thought to look at the existing systems for duplicate (or even compatible) functionality.

“This one is just for (a specific set of) projects. Also, I want it to relay performance information.”

“You mean like Critical Path analysis? Do you want it to perform a forward/backward pass by itself, or should it take in data from (the existing CPM software)?”

Again, it became immediately clear that no one had even thought about duplicate or compatible functionality.

“The app doesn’t have a utility that will accept data from (our CPM software)” the software marketing guys offered.

“Can it perform Critical Path calculations itself?”

“No.”

The exec called an early end to the meeting. After I left, he contacted my line manager, and had me removed from the project.

Now, since this calling of the line manager and having me removed business has an Austin Powers analogy to Dr. Evil pushing a button on a console and having the occupant of a specific conference room chair ejected into a fiery pit, I think I can safely assert a couple of take-aways. The first is that most (if not all) PM-types will encounter, at some point in their careers, an exec who doesn’t understand the basics of Project Management nor Management Information System architecture, but is nonetheless in a position of making key decisions in those arenas. The second is that these people will intensely resent anyone who points out the deficiencies in their ill-conceived initiatives.

So, how do you attach a laser to a shark’s head? You don’t. If asked, you get out of the conference room before your chair ejects you into a fiery pit.

[i] Retrieved from https://en.wikiquote.org/wiki/Austin_Powers:_International_Man_of_Mystery on April 26, 2023, 20:43 MDT.