Game Theory in Management

Since my undergraduate degree is in English, and I have a particular affinity to the works attributed to William Shakespeare, I was somewhat taken aback to learn that the phrase “hoist with his own petard” originated in Hamlet (Act 3, Scene 4, the “Closet Scene”). In this particular case of ironic reversal, Hamlet is referring to the scheme between Claudius, Rosencrantz, and Guildenstern to have him murdered during a trip to England. I used to believe that it meant to be hung with the noose that the schemer had tied for someone else; in fact, it means to be blown up by a bomb created by the bomb-maker himself. In a play full of ironic reversals (Laertes is killed by the saber he himself had poisoned; Claudius is forced to drink the poisoned chalice he had intended Hamlet to drink, among others) this particular reversal remains ensconced in modern English idiom; even those who have no idea what the archaic meaning of “hoist,” or any idea at all what a “petard” is (or was) knows the meaning of the phrase. That is, perhaps everyone except Project Managers.

Not all PMs, to be sure, but a dangerous percentage. My regular readers know that I’ve spent considerable computer pixel-ink on the perniciousness of Processors, those claiming membership within the PM community who are more interested in making project teams obey what they consider the right way of doing PM, as opposed to Producers, who simply bring their projects in on-time, on-budget. The Producers know, often intuitively, that even simple Earned Value and Critical Path systems can produce extremely valuable cost and schedule performance information, information without which their jobs become extraordinarily difficult. Ah, but there’s the rub, as the melancholy Prince of Denmark might say. Processors know this too, but have no intention of allowing the notion that simplified systems will still deliver powerful information streams to become commonly accepted. No siree, these Processors are out to make a buck on their idle musings, and want the Producers to be the ones to pay.

The strategy to monetize their flawed business models is as familiar as it is transparent. They set up an approach similar to the jaws of a vice. The first premise is one that’s indisputably true: to track cost and schedule performance on project work, the Earned Value and Critical Path methodologies are irreplaceable. Projects that had eschewed these methodologies early in the project cycle ended up failing spectacularly, and remain as cautionary tales for any major project’s manager who believes himself to be so advanced as to not need such traditional tools. Critical Path and (especially) Earned Value are simply indispensable, and any PM claiming to the contrary is going to experience a major PM debacle. Oh, maybe not the very next project, or the one after that. But, sooner or later, it will happen.

The other jaw of this vice is where the Processors come in. You see, Earned Value is really a very simple concept. By placing a value on how much of the projects’ budget has been actually accomplished, or “earned,” much valuable information can be gleaned. In fact, the calculated Estimate at Completion (EAC), arguably the most valuable piece of Project Management information out there, can be accurately and reliably derived from two parameters: cumulative percent complete, and cumulative actual costs. That’s right: divide the former into the latter, and you have an estimate that’s been shown to be consistently accurate to within ten points of the real at-completion costs. Something similar happens in forecasting when the project will finish, based on performance. Divide the percent complete figure into cumulative duration, and you have a reliable estimate on total duration. It really is that simple.

“Not so!” claim the Processors. They will insist on a long list of both marginally and completely superfluous data collection and analysis techniques, such as:

• The time-phased budget must be derived using up-to-date resource dictionaries.
• Ditto for the Basis of Estimate.
• Variance Analysis Thresholds must be set tightly, as tight as possible.
• Ditto for Change Control Thresholds.
• Did I mention Change Control? The members of the Change Control Board must be highly educated and diverse stakeholders, some of whom probably hate your project.
• Time-phased Estimates to Complete, comparing the original Basis of Estimate to the actual costs on a line-item basis, “bottoms-up” Estimates at Completion…
• And don’t get me (re-) started on risk management.

I could go on (and often do), but you see my point. The second jaw of the vice, that of an overly-complex EV system being required, because, well, reasons, is pushing the whole concept of setting up and operating such systems into insufferable, if not intolerable territory. Already Earned Value is being slandered with a reputation of being so difficult and onerous to use that the newbies in the PM world avoid it like it’s a curse.

And here’s the ironic twist: many self-identified “experts” within the community are the ones larding up these Management Information Systems with the unnecessary requirements that make them less likely to be widely accepted, or employed. I would normally make some plea here, along the lines of “Hey, guys, we’re doing this to ourselves,” except for the fact that that’s not entirely accurate. The Processors are doing it to the Producers. Maybe it’s a sort-of payback for all that success that the Producers produce, while laughing at the Processors behind their backs.

Just keep in mind, you Processors: Fortinbras doesn’t know nor care about the subtleties or murderous machinations of the Danish Royal Court, and yet he’s the one crowned king at the end of the play.

And very few of the rest of them had a happy ending.

A few weeks ago I wrote about the main corollary stemming from the Triple Constraint/Iron Triangle (the familiar PM concept that Scope = Cost = Schedule, and you can’t change one without changing the other two). This corollary asserts that among the product/service characteristics of affordability, availability, and quality, the customer should expect/pick any two. In other words,

• High-quality, affordable goods or services will require a wait;
• High-quality goods available immediately will be expensive, and
• Readily available, affordable goods won’t be of the highest quality.

This corollary is axiomatic among seasoned practitioners; in fact, ignorance of this effect is a “tell” that the person you’re dealing with isn’t very advanced in the PM sciences.

I want to combine this axiom with another established theory from economics, and I believe the combination will reveal some rather interesting insights. The combine-ee is the notion of how first, second, and third-hand purchasers change the nature of the industry supplying any given good or service. A first-hand purchaser is a person who is buying something for themselves. They seek out the vendor who matches most or all of their parameters, and perform the purchase themselves. A second-hand purchaser is someone who is buying something for another person, as in a gift. They often don’t know all of the intended recipients’ expectations in-depth, and will usually have a budget figure in mind that the intended recipient may or may not have been willing to spend.

Here's where it gets interesting. A third-party purchaser is buying something for another person, but not using their own money. Nassim Taleb’s recent book Skin In The Game addresses this phenomena, and is worth reading. An essential take-away is that, if you don’t have a direct interest in, this case, the way a management information system (MIS) should be designed and implemented, you shouldn’t weigh in. At all. My take is that such ones are so removed from the first-party purchasers’ model that any assertion or decision they make is bound to be flawed, and lead to poor management decisions.

Now, let’s combine these two truisms of affordability-availability-quality, and third-person purchaser limitations, and see what they yield in Project Management space. Let’s say you are the director of a PMO of a medium-to-large company, and the PM for a recently-won project comes to you for project management-type support. The canny PMO Director will ascertain the PM’s inclinations with regards to the availability, affordability, and relative quality of the support sought, and seek to accommodate these parameters. Conversely, the moribund PMO Director will have already decided the level of “quality” that the PM ought to have requested, leaving the only negotiating points the price and availability. Since most PMs will need their Critical Path and Earned Value systems in-place at the project’s start date, these PMO Directors will assume that their erstwhile clients will be compelled to purchase such support at whatever price point the PMO Director stipulates. This is how PM is sent backwards within industry, and at warp speed.

Consider what happens in second-party PM support scenarios. The PM of the new work goes to the PMO Director for support, but the level of PM rigor has already been established by the organization, usually through procedures. Hopefully, this level of rigor was placed into the Basis of Estimate in the project’s proposal, which means that the level of affordability, availability, and quality has already been established. So, no issues here, unless the new work isn’t entirely consistent with the other projects within the portfolio. Presumably, if the pre-determined level of rigor was too expensive, the proposal would not have won in the first place.

Now we come to the third-party option, and it’s not pretty. In those instances where some “stakeholder” places themselves into a position where they can demand a higher level of PM information system rigor, while they neither pay for such an increase, nor are they the ultimate recipients of the successful completion of the scope of the project, the opportunities for quackery increase exponentially. Assuming a position of PM authority or expertise, these people are in a position to damage both the suppliers’ ability to meet the clients’ expectations, and the latitude that the clients have in selecting contractors who meet their specific mix of availability, affordability, and quality. Since most contractors work on a Cost Plus Fixed Fee/Award Fee, or even Firm Fixed Price basis, the Affordability parameter has already been fixed. The Availability issue has already been established as well, since the cost and schedule baselines are typically fixed at the point of contract award. This leaves only the level of PM rigor which, if we are to observe the Triple Constraint, must remain consistent with the other particulars of the project. “Not so!”, say those “guidance”-generating organizations that like to assert their “expertise” in the PM industry. All major projects must perform analyses that the contractor PMs did not originally intend to provide, nor which their customers wanted in the first place. To do otherwise is to commit some inchoate sin against the purity of Project Management!

I find it fascinating that these guidance-generating organizations against whom I often rail never seem to publish documents calling for more affordable, or more available PM information systems. It’s always the same old thing, about how everyone needs to slather on the irrelevant Management Information System lard, like comparing basis of estimate to actual costs at the line-item level, time-phasing the Estimate to Complete, or performing Monte Carlo risk assessments. In fact, if you are involved in having to provide any of these analyses, I already know something about your project. It was either not competitively let, or else there are third-party stakeholders asserting some level of control over the PM information systems.

Forced to do useless things in PM space? Blame the Processors entrenched in the guidance-generating industry.

Do you remember the scene from The Wizard of Oz (1939) where the Tin Man, Scarecrow, and Cowardly Lion (and Toto, too!) have crept up on the Wicked Witch’s castle, and watch her guards march about the front gate, in formation? They are singing/chanting, but for the longest time I had no idea what they were saying. They are actually repeating the words in this blog’s title, over and over, using only two notes and a militaristic drum score which adds dramatically to the creepy motif of the castle. Only after Dorothy accidentally dissolves the Wicked Witch do we discover that this “love” that the guards have for “the old one” wasn’t so deep after all. In fact, the guards appear almost joyous when they realize the Witch is gone, which kind of makes one wonder whose idea it was for them to sing those words, over and over, in the first place. My guess would be “upper management.”

Meanwhile, Back In The Project Management World…

I wanted to save this organizational culture-related subject, the darkest of this month’s theme set, for last. It’s highly relevant, though, since, while it won’t have a current impact on all of my readers, I can safely assert that all of my readers, at one time or another, has dealt or will deal with this topic. No, it’s not how to ward off flying monkeys (actually, come to think of it, it is about that – more in a minute). Rather, it’s how to get by in those times you find yourself in a highly toxic organizational culture, and a well-placed bucket-load of water won’t dissolve all of the toxicity generators.

We’ve all either been there, or will be there, or both. Let me start by stipulating that a toxic organizational culture is NOT one where you disagree with your boss or coworkers, or think that you should be receiving more compensation or respect. By that definition, every organization out there is toxic. Some of the indicators of a genuinely toxic organizational culture are:

• The organization is not a meritocracy, as evidenced by cronyism, nepotism, or clan-ish behavior. The most talented don’t advance, only the best connected.
• Managers allow ex parte conversations. Ex parte conversations are strictly disallowed in the legal professions, since, if the judge is listening to only one side of an argument without opposing counsel present for rebuttal (or even evaluation), then one version of a narrative is being advanced at the expense of the other, and the truth is rarely achieved by such means. Management is no different in those instances where ideas or personnel are competing for acceptance. If certain people or ideas are being advanced on, say, the golf course, you might work for an organization with a toxic culture.
• Based on my previous descriptions of the Maccoby archetypes (or even directly from his book The Gamesman), take a copy of your organization’s org chart, and next to each name place a “C” (Craftsman), “G” (Gamesman), “M” (Company Man), or “J” (Jungle Fighter). If you end up with a bunch of “J”s, or even one “J” overseeing a lot of “M”s, you are probably in a toxic organization.

The best remedy, of course, is to find another position with an organization that shows none of these characteristics. Realistically, that’s often not an option, and the PM professional needs to make the best of a toxic situation. Here’s where it gets tricky, since there’s a right way and a wrong way of surviving a toxic organizational culture, and to make this distinction clear we have to return to the Wicked Witch’s castle, and our old, creepy friends, the Flying Monkeys.

Creepy in the movie, and not much better in real life.

The term “Flying Monkeys,” in psychology, refers to those people who are associated with narcissists, and help them advance their nefarious agendas through tactics that are strongly associated with the Jungle Fighter Maccoby archetype. I’m going to stick with the Maccoby archetype here, rather than speculate along psychological lines, since Maccoby made observations about people’s observable behavior, and observable behavior is the sole basis for furthering organizational behavior and performance theory.

So, when you find yourself in a toxic organizational culture, you must not only deal with the Jungle Fighter execs themselves, but with their “Flying Monkeys.” To do so, let’s start by considering the four archetypes displayed by members of a dysfunctional family:

• The Golden Child is clearly the favorite, and gets away with things the others can’t.
• The Mascot enthusiastically supports the family as a whole, and seeks to smooth over conflicts.
• The Lost Child simply seeks to get by with minimal interface with the rest of the family.
• The Scapegoat is blamed, usually unfairly, for the difficulties the family encounters.

Toxic organizational cultures will often display characteristics similar to dysfunctional families, but with some modifications. Let’s evaluate the following payoff grid (Hey! I’m in to Game Theory! We love our payoff grids!):

In the dysfunctional organization, the Golden Child is considered the most loyal and competent, and the Scapegoat is considered least in both categories. In this game of “Escape the Witch’s Castle,” the main goal is to avoid letting the Flying Monkeys put you into the Scapegoat category. The wrong way of doing so is to ensconce yourself in the Mascot category by performing overt displays of loyalty to the Jungle Fighting execs. This is how people get turned into Flying Monkeys. Rather, focus your energies on technical performance and quiet displays of competency, all in order to move towards the Lost Child category. From here you can either wait out the toxic influences within the organization, or use this archetype as a platform from which to move, either to a division within your existing organization that’s not dysfunctional, or out of the macro organization altogether.

If this blog was a bit compressed, or if you would like more information on this particular strategic approach, you might want to check out my ProjectManagement.com webinar on the same topic, here. Alternately, you could come up with an adequate defense against winged Cercopithecidae, though, if an actual lion and a armored man with an axe couldn’t stop them, well…

In last week’s blog I discussed the tactics employed by epic villains who take down their host organizations from their point of view. This week I’d like to explore how to counteract these villains, which requires a James Bond-like hero, just in the PM realm. You won’t need to wear a Rolex Submariner or Omega Seamaster, have a specific, signature alcoholic beverage, or drive an Aston-Martin. You will, however, need to amp up your managerial and observation skills, specifically in the following areas.

The first piece of advice I gave the epic villains was to not reveal their roles as villains, since such ones require subtlety and deceit in order to carry out their nefarious plans. Think (again) Richard from Richard III, or Iago from Othello. So, the first insight I can offer the Project Managers who seek to intercept these villains’ intentions is to learn to recognize them, the earlier the better. Your MI6 superiors will not be giving you an envelope with photos and biographical information about them, unfortunately. Know that learning this skill isn’t easy – even in Bond films most of the epic villains are originally presented as above-board industrialists.

Luckily, the Maccoby archetype of Jungle Fighter (see last week’s post) will invariably throw off some tells, or signs that they’re not on the project team to embrace and pursue the scope. These people are there to advance their own interests, often at the expense of others, and almost always at the expense of the overall project team’s interests. This being the case, Jungle Fighters will often display the following clues:

• In previous blog posts I’ve made a distinction between project personnel who seek primarily to attain the projects’ objectives, and only secondarily are concerned with what’s considered the proper process. I named these people “producers,” and contrasted them with “processors,” or those people who are more concerned with following an approved process than they are in actually attaining the projects’ goals. Jungle Fighters are rarely Producers, in my experience. In a simple process of elimination, it’s relatively safe to assume that your team’s Producers are either the Maccoby archetypes of Gamesmen or Craftsmen.
• Jungle Fighters are commonly the least educated/certified of the team, and are given to expressing a cynical attitude towards the value of post-graduate degrees, professional certifications, or peer-reviewed publications. Those things are hard to attain through calumny and deceit, meaning that they don’t come easily to the Jungle Fighter. Don’t misunderstand – I’m not saying that they are necessarily uneducated per se. There are plenty of Jungle Fighters in University faculty lounges everywhere. But, within a given organization, those employing Jungle Fighter tactics often do so because the legitimate ways of getting ahead are more difficult for them, meaning they lack comparative expertise.
• As the PM, train yourself to be highly observant of the interactions of your Project Team, particularly during the Storming Phase of the Forming-Storming-Norming-Performing model, and especially at team meetings. Craftsmen and Company Men Maccoby archetypes will usually not be noticeably aggressive in their assertions, or in attempting to get their ideas or technical approaches adopted by the larger group. Gamesmen and Jungle Fighters will be, giving you another metric to eliminate more team members from the potential epic villain list.
• Another tell occurs when the Jungle Fighters do something that is borderline unprofessional, and just a little bit creepy. I once had a Team Leader approach my administrator behind my back and ask her for a copy of my daily calendar, under the auspices that he “needed to coordinate his appointments.” This was a lie – he simply wanted to know with whom I was meeting, and when, in order to better scheme his advancement at my expense. This particular admin was not only okay with it, she kept it hidden from me. I switched admins.

Once you have an idea of whom on your Project Team is a Jungle Fighter, what do you do about it? Several strategies can frustrate the Jungle Fighter, including:

• Do not allow any member of your team to discuss a third member with you without that person being present. So much of the Jungle Fighters’ effectiveness comes from the misunderstandings that naturally occur in Project Teams being amplified out of proportion, and ex parte conversations are a huge part of this misunderstanding amplification. Simply don’t allow it, and you deny the Jungle Fighters a key maneuver.
• Make it clear to the entire team that their comparative value to the organization is predicated on attainment of the project’s scope, and nothing else. Not time spent at the desk over a given number of hours, not how they are viewed by others, not how often they play golf with the org’s veeps – none of that. In those projects where I’ve seen the PM consistently place a heavy emphasis on the attainment of the scope, something remarkable happens. The Gamesmen will find common cause with the Craftsmen and begin working with them more closely. Next, any Company Men who can contribute will be engaged. But these producers will almost never voluntarily interact with the Jungle Fighters, seeing their participation activities as a waste of time.
• Reward your contributors in a timely fashion. This will not only lift Project Team morale, thereby engendering even better performance, it will also signal to the Jungle Fighters that they aren’t getting ahead without actually contributing. Frustrated, they will simply seek other Project Teams whose leaders don’t read ProjectManagement.com bloggers, and therefore remain vulnerable to their villainous schemes.

Know that employing these strategies will rarely – rarely – result in immediate payoffs. You’re taking a long-game approach to Project Team optimization, not saving the world in a fifteen-minute span of automatic gunfire, massive explosions, and epic villain comeuppance.

On the bright side, since your competition will not be reflexively driven to destroy your project’s capital equipment, you can expect to avoid tongue-lashings from Agent Q…

Having the reputation as ProjectManagement.com’s resident contrarian has its advantages. For example, as my colleagues address July’s theme of organizational culture by providing insights on how to improve it for greater efficiency and effectiveness, I am free to take the opposite angle: how to develop a strategy to diminish and eventually ruin that very culture.

GTIM nation knows I would do this just ‘cuz I can, but more recent readers might wonder why this is, in any sane PM universe, a valid topic. To these I ask, have you never read (or seen a production of) Shakespeare’s Othello, or Richard III? In these plays the villains Iago and Richard himself wreck devastation on the protagonists, and they do so for a reason: they seek to set up their own version of how things should be run, and the existing management/ruling structure, as virtuous as it is, is simply in the way. Oh, sure, they have multiple other nefarious motives, but those are not important for this analysis. The fact that they (and other, real-life actors like them) use specific tactics as a part of an overall strategy that very nearly worked to perfection is important for this analysis. So, practice twirling your Snidely Whiplash-style mustache and your Dr. Evil-style maniacal laughter, and let’s begin.

In 1965 Bruce Tuckman introduced the forming-storming-norming-performing model[i], asserting that newly-formed teams go through these stages as they grow to address the challenges before them. Additionally, Michael Maccoby’s book The Gamesman asserts that organizations tend to be populated by personnel who exhibit behaviors consistent with four different archetypes, the Company Man, the Craftsman, the Jungle Fighter, and the Gamesman (I discussed this at some length in my blog two weeks ago).  Considering these two models concurrently yields some very interesting insights on how to completely discombobulate an otherwise promising project team without having to actually tie anybody down onto railroad tracks.

Let’s start by taking Tuckman’s model at face value. Let’s also stipulate that, on any team with more than a dozen members, at least one Jungle Fighter is likely to be present. Luckily (for the Jungle Fighter, anyway) this person will not wear a sign, or offer any other obvious indicator that they intend to behave in a manner consistent with this archetype. After all, neither Richard III nor Iago had any grand reveal until after it was painfully obvious to the most casual observer that they were bad. What’s a Jungle Fighter to do in this situation? The obvious first step is to not reveal yourself to be a no-talent, conniving manipulator who gets ahead by having others oppose each other, all while taking credit for successes that you had little to do with and deflecting blame for your own mistakes.

Okay, check the “stealth mode” box on your list. What’s next? Based on Tuckman’s model, the next maturation step after the Project Team forms is to “storm.” At this point in the process the team will naturally encounter some level of churn as precise roles, responsibilities and authorities are defined, tried out, and redefined. This is the perfect environment for the Jungle Fighter to operate, but not just for their own advancement. No, the primary goal here is to elongate this phase as long as possible. The more distrust and confusion that can be introduced into the Project Team during this difficult phase the longer the effects of suspicion and a lack of clearly-defined roles and functions will last. The Gamesmen, with their characteristic willingness to take risks, will tend to become frustrated with the Craftsmen’s tendencies to strictly observe procedures in order to turn out a first-class product or service, while the Craftsmen will view the Gamesmen’s behavior as too avaunt-garde to realize the team’s optimal strategy. Take advantage of this natural rivalry by engaging in calumny in-between the two camps, stoking the fires of outrage by passing along the narrative that’s contrary to the archetypes you’re manipulating.

What about the Company Men? Their greatest fear is of being left behind, assigned a role that’s not only underappreciated, but considered to be out-and-out useless. The optimized Jungle Fighter can take advantage of this vulnerability in every instance where the project’s scope is poorly defined. The Company Men can be sent on all sorts of wild goose chases by implying the objective of any particular Work Package is some (believable) derivative of the actual, poorly-articulated scope. Their wasted time and frustration may not spill over into open conflict, but it certainly won’t help the Project Team move past the Storming phase.

Once the Project Team (finally!) moves past the Storming phase and into Norming, another opportunity will present itself. Even if open warfare has been subdued, you can count on a sense of lingering mistrust to remain in the background of the organizational culture. Each and every time a Craftsman addresses and accomplishes a part of the project’s scope, start a rumor (or even communicate directly) to that Craftsman that some part of the Gamesman coterie believes that it was delivered too slowly. It’ll drive them crazy. Conversely, whenever the Gamesmen begin to complete a Work Package, imply that it won’t pass quality control review. To avoid the embarrassment of being seen as a target of the Craftsmen, the Gamesmen will thoroughly review, if not completely re-do, the work that was about to be wrapped up. This will delay the beginning of the Performing cycle significantly.

What happens when the Project Team (finally!) achieves the Performing cycle? Is the Jungle Fighter now bereft of tactics? Absolutely not! Do what you can to influence the Team’s narrative, so that the actual achievers are not given credit for their accomplishments. Oh, sure, it’s a charge to have their successes attributed to the Jungle Fighters, but this is usually a difficult narrative change. It’s safer to have the successes attributed to nearby personnel, while transferring failures or errors to the real performers. Such mis-attribution, if done thoroughly enough, can actually push a Performing team all the way back to a Storming one!

After all of this Machiavellian skullduggery a bit of a caveat emptor is appropriate. Richard III is killed at the battle of Bosworth Field by the eventual Henry VII after being double-crossed by the Earl of Northumberland and Thomas, Lord Stanly, while Iago is led away to captivity and torture once his machinations, so cleverly hidden, come to light at the end of the play. Snidely Whiplash is accidentally shot and taken into custody in the 1999 film Dudley Do-Right, leaving Dr. Evil as the only master schemer/manipulator to escape a dreadful fate.

I’ll close with this little exchange from the 1999 film The Mummy[ii]:

Evelyn: You know, nasty little fellows such as yourself always get their comeuppance.

Beni: [laughing] Really? They do?

Evelyn: Oh, yes. Always.

[i] Wikipedia contributors. (2018, June 1). Tuckman's stages of group development. In Wikipedia, The Free Encyclopedia. Retrieved 03:21, July 15, 2018, from https://en.wikipedia.org/w/index.php?title=Tuckman%27s_stages_of_group_development&oldid=843918688

[ii] Retrieved 18:45, July 16, 2018 from https://www.imdb.com/title/tt0120616/quotes