Game Theory in Management

With ProjectManagement.com’s June theme of “sustainability,” it’s perfectly understandable that many of the contributions are going to be centered on environmental issues, and that’s okay. I have absolutely no intention of challenging those ideas. That approach, however, is not how I see this topic.  Instead, I want to show how “sustainability” ought to be achieved within the management science structure of Project Management.

But first, what, exactly, are we talking about when we discuss “sustainability?” In the management sense, it means to construct and maintain a business model that continues to earn a profit over the long-term. To the extent that such an organization improves the lives of not only its customers, shareholders and employees, but also the community around it is certainly a plus. But even the most community-friendly company can’t go on for long if it fails to turn a profit, meaning, definitionally, it is not sustainable. To be sure, many organizations developed and kept in place business models with serious flaws, and somehow stayed afloat, while others executed relatively pathology-free models, but failed nevertheless. I think it’s fair to assert, however, that central to “sustainable” management, Project or otherwise, is to make the decisions that keep the organization viable over the long term.

Okay, so how does one go about doing that?  It occurs to me that this is right down PM’s alley, in that organizations only make a profit in a free-market economy if they have customers willing to give them money in exchange for their goods and services. And this is where PM assumes its front-and-center role, in that it’s PM’s techniques and approaches that are centered on monitoring cost and schedule performance against a defined scope baseline, all three of which are typically set by the customer, and all three are germane to PM.

Now, I understand that such an assertion runs contrary to the narrative propagated by our friends, the accountants, and taught in business schools across the land, that the point of all management is to increase shareholder wealth, but even here an insight presents itself. Even the Asset Managers will maintain a managerial duty to shareholders, not stakeholders. The latter category may attempt to assert veto status over the project’s completion, or even existence, but the fact is that, again, in a free-market economy, a contract between a client and the organization executing the project legally binds those two entities alone, assuming, of course, that the project is carried out consistent with applicable laws. This is true even when outside stakeholders attempt to lay claim to some moral or intellectual high ground. If the project’s scope is perfectly legal, as are the methods and resources used to attain its completion, then no third parties should have a say in whether or not the project ought to proceed to completion. To try and manage otherwise would be to subject one’s Project Team to the business world equivalent of the “hecklers’ veto,” essentially placing at significant risk any but the most anodyne projects from the outset.

Of course, I am aware that such assertions run directly contrary to my second-favorite target of criticism (after risk managers), the Communications Managers, who often maintain that all stakeholders should have a say in the technical direction and/or implementation strategy of projects. But beyond the validity of the cliché that too many cooks spoil the broth, it’s been my experience that allowing self-identified experts or stakeholders to add requirements or scope that can hinder (or even prevent) a given project from being executed on-time, on-budget is almost always a bad idea. Think about it: do these additional stakeholders have anything to lose if the project fails to come in on-time, on-budget? Indeed, in many instances these have something to gain from your project failing to come to a successful completion, if nothing else for the sense of empowerment that comes from thwarting an effort they perceive to be immoral or unethical. Again, I’m not even going to address the basis for determining whether or not a given project really is immoral or unethical – I’m just saying that, from a purely management science point of view, improving one’s PM technique can only have one rational goal, and that’s to improve the rate at which your projects come to a successful conclusion, thereby enriching the lives of your Project Team, your organization, your customer(s), and even the macro economy. Imagine how the business world would improve if we were to see a dramatic decline in the staggering percentage of failed projects documented in the Forbes article “3 Main Reasons Why Big Technology Projects Fail – & Why Many Companies Should Just Never Do Them.”[i]

For these reasons (among others), I have no problem arguing that the path to sustainability runs through PM.

[i] Retrieved from https://www.forbes.com/sites/steveandriole/2021/03/25/3-main-reasons-why-big-technology-projects-fail---why-many-companies-should-just-never-do-them/ on 9 June 2025, 19:42 MDT.

I’m the fourth of five children, so I know first-hand what a pain older siblings can be. Since they’re older, they tend to have a significant physical edge, at least until puberty comes along, meaning that, if any conflict turns into an actual scuffle, they will almost always win. The outcome of any confrontation was virtually guaranteed to not be decided in my favor, no matter the merits of my position. Some other burdens of having multiple older siblings, at least in my observation, include:

• When the parents go out for the evening, the oldest sibling remaining at home was “in charge.” Fascinating how being temporarily “in charge” bestows on an older sibling the ability to utterly change the foods that may be consumed, television shows that may be watched, or even bed times.
• Prior to even considering buying new clothes, any and all potential hand-me-downs must be evaluated and proven utterly unworkable before such purchase and, no, failing to fit properly is not an accepted reason for committing to new clothes purchases.
• Want to “ride shotgun” (meaning to occupy the family car’s front passenger seat if one of the parents isn’t in the car)? Forget it. Even “calling shot gun” first isn’t usually accepted if you aren’t the oldest travelling child in this situation.
• Statistically, only- and oldest-children tend to perform highest academically, and a strong majority of Nobel Prize winners are either only or oldest children. Why does this matter? Ask anyone who’s been there what happens when you present your report card to your parents, and it is notably inferior to your older siblings’ when they were at that grade level.

Don’t misunderstand, I’m not complaining at all. I perceive all of my older siblings as wonderful, brilliant people, for reasons which I’m sure will come to me. But they do tend to tilt life’s playing field before you even have a chance to run down the access tunnel.

Meanwhile, Back In The Product Project Management World…

Many Management Science historians will trace the genesis of Project Management to Product Management, as originally developed (formally, at least) by Proctor & Gamble, in 1931[i]. The “51331” memo, penned by Neil McElroy, proposed a new management role for a “brand man,” the person who would be responsible, not for the processes involved in creating a given product, but for the product itself.[ii] This shift in managerial focus would (obviously) have many long-term effects, eventually bringing about its ideological sibling, Project Management. So, having this sort of genesis is totally cool, right? We’re all just one big, happy Management Science branch of the same family, right?

Well, no.

For starters, Product Management is largely free of, in my opinion, the deadliest foe of Project Management, namely, scope creep. Products are what they are: if the consumer wishes to buy it, they will, and if they don’t, they won’t. It’s that simple. On the other hand, Project’s Scope Baselines describe something that has yet to come into existence. If the customer is paying a contractor for this to-be-realized scope, and it doesn’t look like what the customer intended, the contractor can be pulled in to court for remedy. And, if something changes with respect to the original understanding of the scope, the contractor has to write, submit, and hope to have approved Baseline Change Proposals (BCPs). Clearly there’s no equivalent in the Product Management side of things, due to the aforementioned take-it-or-leave-it character of the transaction(s). So, while a staggering number of Projects fail due to Scope Creep, our older theoretical siblings, the Product Managers, end up looking great by comparison, since they never have to deal with that particular business model pathology.

Then there’s the whole deal on how Project Managers (typically) attract business as compared to Product Managers. Consumers in free market economies can kvetch endlessly about television commercials and other forms of mass marketing, but the fact of the matter is that such promotions pay for an awful lot of (if not the majority of) produced entertainment. Project Managers, on the other hand, usually must assemble a proposal team to address a Request for Proposal (RFP), which is characteristically awarded to the organization that can convince the client that their Team can deliver the requested scope for the lowest price of any of the RFP respondents. Besides this anxiety-producing aspect of the business-attracting function, in the contractor organizations I’ve worked, the Subject Matter Experts (SMEs) on the Proposal Team are rarely paid for their time. These are expected to put in free overtime after they’ve worked their current Projects, since their time can’t be charged directly, and indirect accounts are highly scrutinized and seldom lavishly-funded.

“Mom always liked you best!” was Tommy Smother’s famous line to his (actually, younger) brother Dick. I’d like to adapt it to Project Management’s ideological older sibling, Product Management, thus: The Business World treats you better than it treats us!

[i] Retrieved from https://mspm.cmu.blogs.elliance.com/2020/05/13/51331-the-origins-of-product-management/ on May 24, 2025.

[ii] Ibid.

After helping PMO Director Jane West assemble, process, and present the information she needed to sway Acme CEO Lee Daystrom towards deciding to take the stronger PM approach option, I returned to my usual working hours, but kept an eye on the business section of the local paper to see if Acme’s performance indicators moved. As I predicted, its stock prices dipped in the first couple of months after that fateful meeting, but started climbing again in month three, ultimately surpassing its value prior to my involvement. I also noticed Randy’s advertising campaign, the one announcing Acme’s use of its new technology representing an advancement in quality while lowering costs. It was actually rather clever, and almost certainly contributed to Acme’s stock rebound. Jane herself had said that she would ask me back “in a few month’s time,” but that call never came, which struck me as being perfectly fine. I had helped her find her footing within her new PMO, in an organization that, while not hostile towards Project Management, definitely expected demonstrable results at every turn, and she and her Team had apparently delivered. My sense that Jane, Randy, Lee, and the rest of my clients at Acme would end up being okay in PM space was confirmed when I was in my office late one evening, and saw in the financial section of the paper that not only had Acme added significantly to its market share, its percent increase matched Monolithic’s loss, and rather closely. I re-folded the paper, put my feet up on my desk, and said aloud to nobody in particular, “Another case solved by Stanly Raspberry, Private Eye.”

*  *  *  *  *

Meanwhile, back at the executive board room at Monolithic Corporation, the mood was very different.

“How did this happen?” Monolithic’s CEO growled, as he slammed the same financial section of the paper down on the table. One brave VP spoke up, albeit tentatively.

“Tech advances are always hard to predict.”

“Not that, you fool!” the CEO countered. “How did that idiot Daystrom arrive at the optimal strategy for leveraging it?”

A different VP chimed in. “Our inside source says that their new PMO Director, Jane West, brought in Stanly Raspberry, who assembled a usable Corner Cube model in an improbably short time, and that was what led to Daystrom making the right call.”

“Raspberry?!” repeated almost everyone in the room.

“Raspberry” the CEO mumbled, almost spitting the name out.

“Wait, we have an insider at Acme?” a young, naïve exec asked. “Who is it?”

“None of your business” growled the CEO.

“How did Raspberry know about Corner Cube theory?” another VP queried.

“Who knows? He may be actually reading the Project Management Journal, and saw it when it was originally introduced back in the late 90’s. Or he may have read the book Game Theory in Management, where it’s also laid out. But our source claims he actually managed to assemble the model, and fairly accurately place Acme’s performance within it. When Daystrom saw it, he immediately selected the right strategy.”

“Do we know if Acme is going to use that model on an on-going basis?”

“They haven’t asked Raspberry back yet, and the original presentation looked like a one-off, so there’s a real possibility that they only employed it for that one key decision.”

“But their PMO Director, Jane West – she’s no dummy. If she saw Raspberry assemble it, she should be able to replicate that information stream on demand.”

The conference room fell silent for an awkward moment.

“So, what do we do now?”

“About Acme, or about Raspberry?”

“Acme’s CFO – I think his name is Lindstrummer – he’s definitely old-school. Really imbued in that whole ‘maximize shareholder wealth’ business. I’m a little surprised he didn’t push back more when West brought in Raspberry. Lindstrummer might have lost out with respect to this particular decision, but, long-term his focus, combined with his level of influence, will have a detrimental impact on Acme’s ability to maintain their recent surge in market share.”

“Get to the point” the CEO challenged.

“Point is, the do-nothing response might be the most appropriate.”

“I disagree” another exec chimed in. “Now that they know Raspberry’s available and reliable, the next time they come to a similar inflection point in their high-level management decision-making, they’ll pull him back into the mix. We’ve got to do something about Raspberry.”

“Maybe we could have one of our shell companies contract him for some consulting work at Reichenbach Falls.”

At this suggestion, the room immediately sounded as if someone had told a really funny joke at a Darth Vader impersonators’ convention.

“What’s so funny about Reichenbach Falls?” asked the youngest VP.

Next Week: GTIM returns to non-fiction. GTIM Nation will have to wait until my next foray into fables to find out the answer to that last question, and what happens to Stanly Raspberry, Private Eye.

“Well, I absolutely do not” Lindstrummer began. “Everybody just admitted that ‘Asset Management’ was out-performing both Project and Strategic Management, and Raspberry wants to sacrifice that in an attempt to fix what…” Lindstrummer paused, and looking at Jane and Randy, continued “…no offence, Jane and Randy, these others got wrong? I’m not buying it.”

A heavy silence filled the room. Daystrom sighed.

“We seem to have arrived at an inflection point, with two strongly divergent strategies. I’m not really seeing an in-between technical approach here.”

The room again fell silent. Perhaps the others were picking up on some indicators from Daystrom that it was time to stop talking, but I possessed no such insight.

“You’ll have to forgive me” I started, “but I’m given towards a bias for action.”

At the words “bias for action,” Daystrom’s attention was suddenly focused on me.

“If you’re looking for a single-axis litmus test for which approach is most likely to succeed, I would point to the book In Search of Excellence, particularly its highlight of the characteristic of ‘staying close to the customer.’”

“Yes, I remember that part of the book.” Daystrom acknowledged. Jane shot me a knowing glance, realizing in an instant why I had commented on Peters’ and Waterman’s classic being on her bookcase.

“I really liked that book, and actually bought copies for all of my senior management” he continued.

“Again, all due respect Lee, but that book was published in 1982.” Lindstrummer objected.

“True, but I maintain that many of its precepts are certainly valid today, and in our circumstances in particular.”

“Well, okay, I get that” Lindstrummer continued. “But, if that’s the binary we’re using for tech approach evaluation, and Jane and Randy represent the ‘close to the customer’ camp, that would put me in the ‘close to the shareholders’ corner.”

“That follows” Daystrom observed.

“Lee, customers can’t fire you. Shareholders can.”

“Mmmmmm…..” I weighed in. “Customers can’t fire a CEO as directly or dramatically as the Chairman of the Board can, but customers do, in fact, ultimately decide the fate of any commercial organization.” Jane, sensing the decision-tide was turning in favor of her beleaguered PMO, entered the discussion with more confidence than I had previously seen in her.

“I’d like to add that much of this discussion has been predicated on this notion that if Randy and I get our preferences chosen, that it would somehow be ultimately harmful to the Asset Management position, kind of a win/lose proposition, as much as I hate that cliché. But if we can convert two of our fab units over to using the new tech while keeping our existing customers happy, it will give Randy an advantage in attracting new ones. We would then be in a position, finally, to compete with Monolithic in per-unit costs once those fab units are back up and running. This could easily turn into a win-win-win situation.”

“She’s right, Lee” Randy added. “One more thing that should be pointed out: we could see more of these kinds of technical advances in the future, even though the one we’re discussing was rather unexpected. But this could also easily be a once-in-a-blue-moon advance, and, if we don’t take advantage of it, we would be committing a management blunder. As it is right now, Monolithic is positioned to win this industry’s market share long-term. This could be the very game-changing opportunity we’ve been looking for.”

Daystrom suddenly appeared both resolved and relieved.

“Alright, everybody, let’s do this. Joel, have the Ops Managers for Fabs One and Two prepare to convert to the machines they need to work with the new tech. Fabs Three and Four can go to double-shifts for both the employees’ coverage and to try and maintain the current project and product load. Jane, have your schedulers reset the Project work at Fabs One and Two over to Three and Four. Randy, prepare a new campaign, targeting the customers we’ve been losing to Monolithic based on our inability to compete with them on unit costs. Joel, let me know how much of this we can fund ourselves, and whether or not I need to release more commercial paper, or go to the bankers. Suzanne, I want you to work with Quinn to coordinate the issues and performance from Project, Strategic, and Asset Management, and have Raspberry show you how to maintain the Corner Cube model. And I …”

Daystrom paused, as if being suddenly reminded of an unpleasant task.

“…and I will prepare some slides for the next shareholder meeting. Any questions?”

“Yeah, lots!” Lindstrummer began.

“Not about the decision, Joel. I’ve made up my mind. I expect you, and everyone else in this room, to do your best to make this transition work. Am I clear?”

“Yes, sir” was the unanimous response, albeit with more enthusiasm from some than others.

As the conference room cleared out, Lindstrummer walked up to me.

“If this goes sideways, Raspberry, I’m blaming you.”

“Fair enough. But, if it succeeds, I’m going to make sure people know that it was due to Jane’s ability to generate the information stream that clarified the decision to the point that Daystrom was confident making it.”

Lindstrummer’s eyes narrowed, and then he turned and strode from the room.

“I’ll bet he’s a blast at birthday parties” Randy quipped.

“It’s all good. He’s simply reflecting his education. Virtually all business schools teach that ‘maximize shareholder wealth’ stuff, and tend to reflexively reject any other approach.”

“To quote Star Trek’s Montgomery Scott, ‘the haggis is in the fire for sure.’” Oscar chimed in, which created a much-needed laugh from the people remaining in the room.

 “Sounds like everybody’s work is cut out for them.”

“Indeed” Jane replied. “We can take things from here, but I’d really appreciate it if you can come back in a few months’ time.”

“Sure. Just have Oscar call me when you’re ready.”

Next week: The conclusion of The Path To The Corner Cube - A Project Management Fable

As the last of the major projects’ managers wrapped up their presentations, Daystrom addressed me directly. “Mr. Raspberry, take a seat up here at the table. What have you got for us?” Lindstrummer chimed in.

“We have a meeting in ten minutes to review some make-or-buy determinations” he reminded Daystrom.

“That can wait. I want to hear what this man has to say, Joel.” Daystrom responded.

“Jane, could I presume on you to project my slide deck?”

“Sure.”

As the managers and executives in the room looked over the XYZ chart, with a bubble placed towards the lower right part of the cube, Lindstrummer blurted out “what’s this supposed to be telling us?”

“This is Acme’s Corner Cube Model, showing the relative performance of the three types of management, Asset, Strategic, and Project, charted along the X, Y, and Z axes, respectively.”

“I’ve never seen this kind of an analysis before” Daystrom began. “How did you derive the parameters?”

“Some came from Jane’s Project Management performance measurement systems. Randy passed along some high-level data in terms of his targeted goals for market share, and Joel did the same for Asset Management. Everything else I gleaned from Acme’s most recent prospectus.” I could see Joel Lindstrummer react adversely to both my referring to him by his first name, and in remembering the data points he had so casually conveyed during our brief conversation of the previous week.

“Jane, please tell me we have a signed NDA on file for Mr. Raspberry” Daystrom sighed.

“Absolutely.”

“I can see why your reputation as a PM ‘detective’ is what it is, Stanly. I’m glad you’re on our side, at least for the length of your contract. Please proceed.”

“I don’t know about this, Lee” Lindstrummer interjected. “For all we know, he’s simply a shill for Jane’s PM agenda!”

“Joel, the man literally just got done shutting down one of our major project’s PM on his poorly-developed EAC. That does not strike me as the action of a ‘shill.’ Proceed, Mr. Raspberry.”

“The size of the bubble indicates the relative dollar value of your proposal backlog. Its placement in the lower right-hand part of the model, sub-cube number four, indicates that, while you are doing fine with respect to Asset Management, you are falling behind in the Product/Project and Strategic Management arenas.”

“Okay, so what does that tell us?” Daystrom asked.

“It’s saying that Acme is in real trouble.”

“That’s not reflected in our stock prices!” Lindstrummer interjected.

“Not yet, but it will be soon, unless a significant adjustment is made to your business model, particularly in light of your recent discovery.”

“Elaborate.” Daystrom prodded.

“If your Product/Project Management performance dwindles, you are likely to see them go elsewhere. You have good customer loyalty, but it’s not enough to keep standing toe-to-toe with Monolithic long-term. Once the customer base recedes, your already overworked and under-supported Strategic Team won’t have a real chance at bringing them back, or replacing them. The danger here is that that combination of factors will initiate a tail-spin, forcing your executives into a highly reactionary mode, which, in turn, accelerates the downward spiral.”

Randy and Jane exchanged knowing glances, while Lindstrummer appeared frustrated, but hesitant to engage.

“Is there a canned strategy for getting us out of this?” Daystrom asked.

“Yes, but I’m wary of template-like solutions. In this case, the strategy indicated is to divert resources to Jane’s and Randy’s teams. Immediately re-tool Fabrication Units 1 and 2 to take advantage of the new tech you’ve developed, and leave Fabs 3 and 4 alone, for now.”

“Nobody’s been able to establish that the future margins will cover those costs!” Lindstrummer stormed.

“That’s because you can’t quantify something that doesn’t exist, and the future does not exist.”

All eyes turned on the speaker, in the back of the conference room. It was none other than Quinn.

“We’ve been using these ROI formulae for some time, young lady” Lindstrummer began, condescendingly. “They’ve worked fine so far.”

“Only in that they support your recommendations. I don’t believe they have ever been benchmarked against actual recognized revenue.”

“She’s right, Lee.” Randy enjoined.

“Yes, she is.” I agreed. “Based on my interviews, you should be able to make the switch-over within two months’ time. Starting towards the end of Month 2, have Randy start an ad campaign that emphasizes Acme’s new capacity for delivering better quality for lesser prices. Contact your long-order customers, and offer them, say, a 5% discount on their existing contracts.”

“We can’t afford that!” Lindstrummer was becoming more and more agitated.

“In the short term, your Asset performance will fall off. That should be expected, and it will impact share price as soon as the ratios get published. You’ll want to have the appropriate communications ready for the next shareholder meeting.”

“You make a compelling argument, Mr. Raspberry.” Daystrom began. “And, believe it or not, much of what you have presented I’ve been made aware of, just not in this type of structure. Let’s say, though, that I remain unconvinced, and only take advantage of our new tech for those few projects that can fully document a positive ROI, and don’t require a full re-tooling of any of our fabrication units. What do you believe will happen next?”

“Those few projects will do well” I replied. “But they won’t perform so well as to make a real change in your PM performance trajectory. You will save money in the near-, or even mid-, term, but sooner or later your occupying Corner 4 in the model will lead to the tailspin I just described.”

“Jane?” Daystrom asked.

“I agree with Raspberry.”

“Randy?”

“Me too.”

“Joel?”

“Well, I absolutely do not” Lindstrummer began. “Everybody just admitted that ‘Asset Management’ was out-performing both Project and Strategic Management, and Raspberry wants to sacrifice that in an attempt to fix what…” Lindstrummer paused, and looking at Jane and Randy, continued “…no offence, Jane and Randy, these others got wrong? I’m not buying it.”

A heavy silence filled the room. Daystrom sighed.

Next Week: A Decision Is Handed Down