Game Theory in Management

It was a dark and stormy mid-afternoon. I was sitting at my desk, staring at the etching on the frosted glass window of my office door, rotagitsevnI etavirP, yrrebpsaR .T ylnatS, when a shadowy figure let himself in.

“You Raspberry?”

“Whom did you come here to see?”

“Raspberry.”

“Whose name is on the building directory for this office?”

“Raspberry.”

“Whose name is on the door?”

“Raspberry.”

“Why are you asking, then, if I’m Raspberry?”

“’Cuz I need to know. You Raspberry?”

“Yes, I’m Stanly Raspberry” I sighed. “What can I do for you?”

The shadowy figure strode up to my desk, sat down in my cane-bottom chair, and began talking excitedly.

“It’s not what you can do for me that brought me here” he began. “It’s what I can do for you!”

“What’s all this?” I asked, as he dropped a series of colorful brochures on my desk.

“It’s the most recent breakthrough in crime-solving software. We call it the Crime Reporting and Adducement Program.”

“Wait, you have developed software that helps solve cases?”

“Not just specific cases – it solves entire groups of crime!” the C.R.A.P. salesman maintained. “We based it on those project management software systems that expanded to program management.”

“Wait a second …” I objected. “In order to design a computer program that can solve an individual case, let alone a collection of similar ones, it would have to know what types of information are needed, much less how to collect the data itself. How on earth does it purport to pull that off?”

“Oh, these crimes aren’t that different” the salesman began earnestly. “Thy all involve one or more perps, one or more victims, they have to take place at a certain time, and at a certain place.”

“Yes, that’s all true” I replied. “But that’s about where their similarities end. The whole point of being a Private Investigator – similar to being a project manager, I would assume – is to respond to the wildly and widely differing circumstances presented for each project or case. The diversity of information needs is so vast, you couldn’t possibly…”

“Which is why we have designed this software to mirror program or portfolio management software. As we all know, the point of all management is to maximize shareholder wealth, so the majority of management information can come from the General Ledger. But, for the unexpected, everything else can come from the risk analysis, right? Well, our software uses the crime database and records as the substitute for the GL, and borrow from the risk managers their techniques for all of the rest! It can’t miss!”

“Look, mister…”

“Call me Melvyn.”

“Okay, Melvyn, first of all, the point of all management is NOT to maximize shareholder wealth, and secondly, even if it were, no one computer program could possibly provide a comprehensive, program or portfolio-wide information stream that could lead to an informed decision on any issue under every circumstance. The diversity of problems, not to mention the decision-style of the managers confronting them, renders such tools as capable of helping, but far, far from being able to solve these cases on their own.”

Melvyn rolled his eyes, and sighed.

“How can you expect to solve anything without this kind of information?”

“I collect ‘this kind of information’ all the time, thank you. They’re known as ‘clues,’ and, unless you can demonstrate how your software acquires or sorts them better than I can, I’m afraid I’m not interested in your software.”

“You do not appear to be even in possession of a personal computer.”

“Another reason why I’m not interested.”

Melvyn scooped up his brochures, headed for the door, and turned around.

“You realize that your strategies in solving cases are utterly at odds with both prevalent risk management theory, as well as university professors who write textbooks about quantitative analysis in business (strikethrough) case-solving.”

“Yeah, I’ll make sure I steer clear of them when I’m out doing my work – if I actually encounter them, of course.”

There’s a lot of confusion out there about the precise nature of program management, as opposed to project management, so I’ll go ahead and weigh in, leading, I’m sure, to either immediate clarification or hopeless obfuscation.

According to Wikipedia, “program management” is the

process of managing several related projects, often with the intention of improving an organization's performance. It is distinct from project management.[i]

Clearly an aspect of scalability is in play here, and I believe it goes all the way down to the smallest component of project management, the Work Package.

Quick refresher – the Work Package (WP) is the lowest point of the project’s Work Breakdown Structure (WBS) that has estimates (baselines) for cost, schedule, and scope and, depending on their size, will typically have a manager assigned to them, or at least one person responsible for its performance.

Work Packages are combined to form Control Accounts, which also will typically have a manager assigned. Control Accounts combine to the total project level where, again, one person is typically responsible for the overall project’s performance.

Now this scalability gets a little dicey. As long as we’re managing a specific set of scope objectives, management is safe in assuming that all of the information they need to maximize their odds of on-time, on-schedule scope completion can be generated by the earned value and critical path-based information streams. To engage in a bit of hyperbole, past the members of the PM’s own project team, she really doesn’t care about the performance of the rest of the organization. But once we start talking about a combination of projects that share a common “goal or result,” then the basis for collecting the programmatic work into a given category becomes both more broad and less cohesive, and acquires the expectation that the resources belonging to the organization must now be taken into account in a way they hadn’t been previously. An upholsterer and a machinist may both be working on different car models (projects) within the same factory (program), but that does not automatically translate to a demonstrable need to manage their efforts using previously unknown techniques under the rubric of “doing” program management.

Let’s go ahead and perform a little mental exercise, where we leap-frog from techniques clearly belonging to project management, jumping over program management, and arrive at the techniques belonging to portfolio, or enterprise management. To provide the information necessary for maxxing-out the odds of successfully managing the overall portfolio or enterprise, three management information systems (MISs) must be in place: Asset Management (the General Ledger), Project Management (Earned Value and Critical Path systems that cover all of the project work), and Strategic Management (a system that analyzes the macro-organization’s proposal and contract backlog, along with data on market share/competitors). As I discuss in my latest book, these information streams, and the concerns they represent, must be balanced in order to, again, maximize the odds of success.

Now, let’s turn around and consider the category of program management, sitting, as it does, on the tier between project and enterprise management. I believe that program management is simply up-scaled project management, and should confine its information requirements to earned value and critical path across all the conjoined projects. I also think that when assertions are made to the contrary, such as the so-called need for accommodating the asset managers’/accountants’ input on how these programs should be run, such assertions do nothing more than muddy the epistemological waters, thereby granting importance and emphasis to people and information streams that do not deserve them, at least not at this level of management.

Okay, so now I’ve staked out program management’s theoretical boundaries. Next, I’ll review the hucksters (strikethrough) purveyors of business techniques and strategies who need to be excluded from the program management discussion they have so crassly crashed.

As ProjectManagement.com’s December theme of the future of project management draws to a close, I found myself speculating if the typical project controls analyst could be replaced by a robot and, if so, what would that robot look like? (There is a non-zero chance that  our friends, the accountants, have already been replaced by androids, made to look more human by wearing suspenders and round eyeglasses. Similarly, some PM-types could have been replaced by androids, and continue unrecognized as such. In fact, some ProjectManagement.com bloggers could be androids. Indeed, theoretically, I could be a…)

But I digress. Since I spend considerable time discussing how project controls analysts – you know, those PM geeks who go out collecting massive amounts of data, distill them into cost and schedule baselines, and produce invaluable reports that convey these gems of management information – should ensure that their information streams have the following characteristics:

·         The information is accurate,

·         Timely, and most important of all,

·         Relevant!

So, where in the world of science fiction (where a surprising number of predicted future scenarios that ultimately come to pass are hatched) is such a robot depicted?

Well, in Marvel Comic’s Iron Man series, billionaire playboy/engineering genius Tony Stark has a butler, who became an assistant, and by the time the Iron Man movies came around had become an artificial intelligence-based assistant, named Jarvis. When he was a human butler/assistant, his name was Edwin Jarvis, but by the time he appeared in the movies his AI-based self was an acronym, short for Just Another Rather Very Intelligent System. Could this JARVIS render all of us project controls analysts obsolete in the not-too-distant future?

In that not-too-distant future, we see millionaire/playboy/Project Manager (stop laughing! It could happen!) Toby Snark, and his AI-based project controls analyst, NARVIS (Now, Another Relevant Very Intelligent System) preparing for an upcoming project review.

Toby: NARVIS, have you completed those cost/schedule performance reports yet?

NARVIS: Yes, Mr. Snark. I pulled status for the reporting month just 12 seconds ago, and have the information ready now.

Toby: Wow, that’s great! My last project controls analyst took up to a full day to do the same job! What do the reports show?

NARVIS: That you have out-of-threshold negative cost and schedule variances across almost all of your activities at the reporting level.

Toby: How can that be? Look at the Current Period column for earned value – it’s all zeroes!

NARVIS: Yes, sir. Those cost account managers either missed the status submission deadline, or reported no progress.

Toby: When was the status deadline?

NARVIS: 45 seconds ago.

Toby: NARVIS, you can’t just process this data with so many holes in it. Call or e-mail the CAMs with the missing status data, and remind them.

NARVIS: There’s no time to re-pull status – your report is due to our top-secret high-tech government customer in 10 minutes.

Toby: Okay, okay, but next time ping those guys earlier, and plan on at least three follow-ups.

NARVIS: Why three?

Toby: ‘Cuz that’s what my human project controls…. Nevermind. What are we going to say in the Variance Analysis Report?

NARVIS: I recommend “The proximate cause of the out-of-threshold negative variances is a consistent refusal on the part of the Control Account Managers to send in their status data by the stated deadlines.”

Toby: Are you insane? Our super high-tech top-secret government manager would issue a stop work order faster than we could say “I didn’t mean it.”

NARVIS: But it’s the truth.

Toby: What did we say last month?

NARVIS: “The negative cost and schedule variances are artificial, and due to an anomaly in the general ledger. We do not anticipate carrying these variances forward.”

Toby: Okay, let’s reuse that.

NARVIS: I calculate a 98.453% chance that our super high-tech top-secret government manager will reject this VAR on-sight.

Toby: Why?

NARVIS: Because we have used this verbiage, or something very much like it, the last nine reporting cycles in a row, and the last time he threatened us with just such rejection. Wait … stand by. Stand by. Okay, I just did it.

Toby: Did what?

NARVIS: Transmitted the cost and schedule report. It was due.

Toby: Are you crazy? Do you have any idea how much trouble I’ll be in with our super high-tech top-secret government manager when he receives an incomplete cost performance report that contains nothing but bad news?

NARVIS: I cannot miss a deadline.

Maybe the replacement of real project controls analysts with robots isn’t as unavoidable as I had imagined…

In the Star Trek (original series) episode “Mirror, Mirror,” Captain Kirk, Commander Scott, Dr. McCoy, and Lieutenant Uhura are sent via a transporter accident to a parallel universe, one where the Starship Enterprise serves a galactic empire rather than the benevolent United Federation of Planets. Most things are identical to their home universe, but their alternate-universe shipmates are aggressive and thuggish, and have orders to wipe out a planet’s inhabitants for failing to negotiate for a coveted asset. Kirk and the others must find a way to stop this senseless slaughter, while simultaneously finding a way back to their own universe.

Close to the climax, the alternate universe Spock (who’s wearing a beard) figures out that something is amiss with this Captain Kirk, and confronts him. Kirk, trying to stay in-character with his parallel, brutish self, threatens Spock by saying “You’re taking a big risk, Spock,” to which the Vulcan replies “I’m the one holding the phaser, Captain.”

Meanwhile, back here on Earth in the 21^st Century, ProjectManagement.com’s theme for December is developing technologies that may influence the practice of project management – the future, essentially. And I’ve had a couple of blogs thus far saying that there’s no way of knowing, predicting, or calculating the future, and therefore my readers should ignore any purveyor of business data analysis that contends to the contrary. But now I must admit, there’s a catch – there actually is a pair of business information streams that do a pretty good job of predicting the future. Since I wear a beard in this universe, I’m guessing my evil counterpart is noticeably without one, so I’ll blame previous blanket assertions to the contrary on a transporter accident, and the parallel Michael submitted those blogs.

The information streams I’m referring to are Earned Value and Critical Path. And they do indeed perform remarkably well in predicting the future, as long as a few conditions are met:

·         They’re applied to project work (as opposed to asset or strategic management subjects)

·         They’re set up by someone who knows what they are doing (HINT: not everyone who claims expertise in these areas is truly an expert), and

·         Everyone understands that the predictions of when a project or task or activity will end, and how much it will cost at that point, are predicated on the phrase at this rate of performance.

This is the major weakness of the parallel universe’s way of doing things, since that business model’s every projection is based on the data in the general ledger. “Performance” never enters in. Oh, sure, they can tell you how much was planned to be spent, and they can tell you how much was actually spent. They can also slice and dice the categories of the budgets and actual costs ten days to Sunday. But the general ledger has absolutely no way of quantifying performance. For that you need those project management geeks.

Unfortunately, in the epistemological competition between management information streams, the asset managers’ meme reigns supreme. I understand why – the need for governments to collect tax revenue trumps all other business concerns, and the general ledger is what enables them to do so. While the entire organization needs to be okay with the taxman, usually the only people who truly care about actual project performance are actually in the project teams.

Projecting into the future, both literally and metaphorically, ProjectManagement.com readers are very much like our universe’s Captain Kirk, facing off the evil, parallel universe’s Spock. It really does little good to try and explain why our version of the future is superior – the bearded Spock, analogous to the massive body of conventional business science “wisdom,”  is the one holding the phaser (a phaser is a ray gun, in case your childhood was bereft of Star Trek).

But there is hope. Much as alternate Spock recognizes that his Galactic Empire will inevitably crumble, so, too, are there young, up-and-coming managers who are less than convinced that the return-on-investment calculation can explain everything managerial.

And when they become the ruling majority, blogs like this one won’t appear as fantastic as science fiction, and everyone can return to the universe where Lt. Uhura does not accessorize with a bunch of holstered daggers.

True story – when I was preparing for my all-day Certified Cost Consultant (as it was then known) examination, I knew that of the four 2-hour tests, two of them would be open-book, and one of those would deal with risk management. Since both my wife and I were MBAs and had retained all of our textbooks, there were several tomes on statistics or quantitative analysis in business to choose from that would provide the distribution tables I needed. The night before the actual exam, though, it had snowed, and snowed a lot. I woke up in a frenzy to get on the road an hour prior to the time I had originally planned to leave, and simply grabbed one of the aforementioned textbooks from that part of a bookshelf as I blitzed out the door.

I felt good about the test as I came home that evening, and thanked my wife for letting me borrow her quantitative analysis in business textbook.

“That’s not mine. I thought it was yours.”

“It’s not mine” I replied. I looked inside the title page – it was published prior to the outbreak of World War II. How it arrived on one of my bookshelves and was placed among our other textbooks is beyond me; but, since I passed all four parts of the test on my first sitting, there was no harm done.

But it did get me to thinking – have the management sciences been so slow to truly advance that someone versed in 70-year-old techniques would not only fit in today’s management environment, but actually advance and thrive, as evidenced by acquired certifications?

Accounting based on the double-entry bookkeeping model has been around since 1494, when Henry VII was King of England, Columbus had just returned to Spain with news of the New World, and Niccolo Machiavelli was 25 years old. Its basic structure has changed little in the intervening 520 years, so I kind of get a kick out of contemplating what Cameron of the McGaughy Clan in 1494 would have received back from his tribe of contributing scribes for ProjectManagement.scroll had he sent them notices asking for their takes on the future of management science back then. “Are’st thou kidding?” I would have quilled. “Once one knowest the wisdom of the balance sheet and profit-and-loss statement, no other business knowledge will be requiredst! Ever!”

I think the two major aspects of the future of the management sciences rest on the following assertions: the technology will advance, but human nature will remain the same.

Most investment houses hire a team (if not an army) of data-savvy analysts (“quants”) who pour over vast amounts of information, repeatedly testing the limits of the accuracy of the saw “correlation is not causation.” Should they find an apparent link, like, say, jellyfish biology to human life expectancy, they will exploit it to its limits for as long as the link is perceived as valid. Like I said, the technology will advance, but human nature will remain the same. It’s why Shakespeare’s works live on as masterpieces while the medical writings of his time – calling for bloodletting and leech-applying – are now considered an embarrassment to the profession.

As for my predictions, I do believe that, eventually, the overextension of the data streams emanating from the general ledger and current risk management theory will be recognized; the GL we will have with us forever (or at least as long as governments need tax revenue, which is the same thing), but the risk managers are vulnerable to having the efficacy of their techniques challenged. Nassim Taleb, in his best-selling book The Black Swan, the Impact of the Highly Improbable (Random House, 2007) makes the case against overuse of Gaussian Curves in business analysis so strongly that I’m surprised that risk management hasn’t seen a significant epistemological retreat since its publishing.

But, until such a correction in the widely-accepted management sciences occurs, it remains a safe prediction that this blog will continue to poke fun at our friends, the accountants and risk managers!