Game Theory in Management

When fairly large organizations institute a Project/Program Management Office (PMO), some very strange dynamics are often bubbling just beneath the surface, dynamics that can easily doom the PMO’s ability to attain even a mediocre level of success. Every organization is different, of course, and many, many PMOs start up and enjoy a long, successful run. But of those that fail, the arc towards failure tends to be remarkably consistent. I’ve seen the pattern so many times I can almost recite it in my sleep.

• First, some enlightened Vice President, Director, or other honcho, who recognizes the value of having Project Management practices adopted across the organization’s portfolio, will convince a plurality of the other wizards with whom he hobnobs to provide the funding for a PMO.
• This enlightened one will then either promote a mid-level manager from inside the organization, or do an external hire, and name that person the PMO Director. This person will be either (relatively) young and idealistic, or more experienced and seasoned, having performed the same function for another, similar organization.
• The new PMO Director will also either promote from within (it’s amazing how quickly an Earned Value Management course, followed up with a basic course in driving one of the more popular Critical Path software packages, can turn a lowly administrative assistant into a fully-functional Project Controls specialist), or do a few more external hires, or a mix of each. They will then attempt to codify what the rest of the organization’s project teams “must” do in PM space.
• Those project teams already fluent in PM will either negotiate an exemption from the procedures being churned out by the PMO, or else will insist that one of their members has a hand in directing the requirements.
• Once the first major project’s team has arranged to not have any part of the new procedures apply to them, the floodgates open, and all other projects will seek to carve out exemptions for themselves.
• At some point, a major project will want to set up their own team of project controls specialists, outside the purview of the PMO. These are usually comprised of subcontractors, who are almost always notably more expensive than the organization’s home team version. No matter: some excuse will be offered on why the sub’s people are more appropriate for the specific application, and a “shadow organization” will have been born.
• As the shadow organization grows in influence and expertise, the PMO will attempt to bring them into compliance with the growing number of procedures being generated. These attempts will fail.
• Some project teams will be perfectly happy using the PMO’s personnel and techniques, but others will not. As this list of others grows, the original enlightened VP will become frustrated with the Director of the PMO, further eroding the Director’s influence and ability to stop the proliferation of shadow organizations.
• The PMO loses its funding, unable to justify its budget in light of the highly uneven advance of capability maturity across the entire organization and number of projects not using their personnel or policies.
• Another (or even the same) enlightened VP will convince a plurality of the other wizards with whom he hobnobs to give the PMO idea another shot. The current Director will move on, and the cycle starts anew.

Because of the way that the introduction of shadow organizations within the macro-organization becomes a harbinger of institutional PMO failure, savvy PMO Directors will often attempt to leverage authority or influence to either stop these shadow orgs from coming about in the first place, or, if they already exist, thwart them. In addition to churning out procedures, additional tactics include restricting access to the Critical Path software, or attacking the basis for rogue projects to claim exemptions to the way they “ought” to perform Project Management, based on the PMO’s procedures.

These attempts will also fail.

So, what’s the solution?

The solution is to set up the PMO in such a way that you are clearly offering a service to the project teams. Never – and I do mean NEVER – presume to tell them how to do their Project Management, especially via some sort of codex that you think ought to be binding. In previous week’s blogs I have stressed the main corollary of the Triple Constraint, “Affordable, Available, High Quality: Pick any two.” You must not only make your PMO flexible enough to accommodate any project team’s preference in selecting which two, you need to communicate this flexibility, loud and clear. The subcontractors already have one strike against them: they’re almost always going to be more expensive than the members of the PMO’s team. Exploit that weakness. Offer a level of PM support that’s not as rigorous as the nattering nabob class insists it must be, and make it readily available to any potential customers.

Subs are attractive because the PMs know that they work at the PM’s discretion. They can be let go for any reason, or no reason, meaning that they will never crank out dubious PM procedures, and then demand adherence to them. If you, as the PMO Director, see shadow organizations suddenly taking root, don’t employ any of the previously reviewed tactics to try and stop them. Simply offer whatever it is that makes them attractive to your organization’s project teams.

In short, as disruptive to the PMO’s goals the shadow organizations can be, don’t try to stop them from doing Project Management. It’s futile, and a waste of time and energy. Just do it better than they do.

As Project Management seminar season approaches I think it’s a good idea to be able to readily identify which paper presentations are worth attending, and which are a complete waste of time. Of course, most people make this type of decision based on the presentation’s title and the descriptive blurb that accompanies it in the schedule. If that’s not enough, extra clues about a particular session’s efficacy may be gleaned from the presenter’s short biography. However, I’ve been fooled into wasting between an hour and an hour and a half attending presentations that were basically self-aggrandizing theater, time that would have (literally) been better spent at the beach or pool – or, in some cases, taking a nap. In retrospect, I’ve come to the realization that the waste-of-time sessions had some things in common. So, to prepare my readers for the upcoming seminar season, and with a hat tip to John Baez’s Crackpot Index, I’m going to provide a quick-and-easy checklist that will help score the presentations, based on the materials provided when you check in/register for the seminar, or, if necessary, the content of the presentation within its first ten minutes.

The pathology that afflicts many of these seminars is intertwined with something about which I’ve been complaining long and loud, and that’s the lack of actual science in management science. The development of an hypothesis, advancing it towards theory, and disciplined collection of data or the exact staging of an experiment to either prove the theory or disprove the null hypothesis, peer review of the findings, all leading up to a Project Management paper presentation at one of these get-togethers is distressingly rare. Instead, we get inundated with, broadly speaking, three different types of material:

1. Ideas about how risk/quality/communication (or other trendy type) management should be performed, supported by virtually nothing more than speculation or anecdotal evidence.
2. The “Look What We Did On Our Gee-Whiz Project!” presentation, where no real causality analysis goes in to determining how (or even if) the particular project was successful.
3. The bazillionth eat-your-peas-style covering the basics of or scolding about how everyone ought to be doing Critical Path, Earned Value, or any other aspect of traditional PM.

If you can attend a session that avoids these categories, it’s likely to be worth your while. However, for the remainder, which may or may not belong to one of these categories and is, therefore, possibly a waste of time, use the following scoring to quickly determine the sessions’ worthiness of your attention.

Start with -100 points, then:

1. For every assertion without hard backup data that we’re supposed to accept simply because of the authors’:
   1. PMP® certification (add 10 points)
   2. Other PMI® certification (add 20 points)
   3. Other, non-PMI® certification (add 40 points)
   4. Affiliation with PMI® (add 50 points)
   5. Affiliation with another PM-centered professional organization (add 60 points)
2. Every time the paper presenter mentions his college degrees, add another 50 points.
3. Add 25 points for each piece of anecdotal evidence that “supports” the paper’s thesis.
4. Add 100 points if the paper doesn’t have a clearly articulatable thesis.
   1. Add 200 points if the presenter doesn’t know that the presented paper ought to have a clearly articulatable thesis.
5. If the presenter mentions the project-owning organization’s name as a point of reference, don’t add any points. However, if he keeps referencing it as if the name of the organization itself lends credence to his main assertions, add 20 points for the academic infraction, and 100 points because this is simply very irksome.
   1. Add an additional 100 points if this organization happens to be The Pentagon or a well-known aerospace company.
6. Any statistical inference based on fewer than 50 data points, add 25 eval points,
   1. …unless the inference is based on fewer than five observations, in which case add 500 points.
7. Any reference to a deceased person who “almost certainly would have agreed” with the author’s conclusions adds an automatic 200 points,
   1. …especially if the author claimed to have known the person being referenced, and
   2. … another 500 points if the deceased person reference didn’t publish any findings in a peer-reviewed journal, but just happened to be well-known.

If you can make these determinations without actually stepping foot in the hotel ballroom/conference center meeting room, and a full slate of sessions’ scores remain in negative territory, then you’re in great shape. However, if many are in positive score territory, then you can rank them from smallest to largest to maximize the odds that you won’t be wasting your time. Keep in mind that it’s entirely possible that a whole seminar is being put on by a bunch of people who will lean towards flattering themselves, with precious little true management science being performed. If this happens, it’s not really the presenters’ fault – it’s the fault of the committee scoring the original paper proposals.

Then there are those times where you are actually in the beginning of the presentation when the score suddenly moves from sub-zero to positive territory. When this happens, you should have a measured response, based on the following table.

While some of the Recommended Response tactics may seem extreme, consider that they are most likely in response to expertise signalers whose only true objective is to make themselves look better among their peers, at the expense of wasting your time. With that in mind, I would argue that these tactics are fairly benign!

As newly-minted PMPs® come into the Project Management arena, on fire to bring the ideas that their business school professors told them represented authentic project management, even though those very professors haven’t had to beg reluctant Control Account Managers for a status pull since the second Reagan administration (if ever), we more experienced PMs tend to roll our eyes, sigh a portion of patience, and try to channel their energies towards real-world project solutions. How do we do that, exactly? Well, we mentor them, assign them the task of begging status from reluctant CAMs, teach them to drive Critical Path and Earned Value Method software packages, invite them to Change Control Board meetings and project reviews, etc., etc. But there’s something else we do that, I believe, leaves behind an invalid, backward approach to Project Management, and does so in a way that’s singularly hard to avoid.

Yes to my regular readers who are asking themselves at this point “Is this another anti-guidance/procedure rant?” But this time I have something a bit more solid than the garden-variety frustration with the guidance-generating organizations’ overly proscriptive publications.

Procedures Eliminate Options

From the last two blogs, I have made the point that probably the most significant derivative of the Triple Constraint, or Iron Triangle, is the axiom “Quality, availability, affordability: pick any two.” I pointed out last week that, since most government projects are awarded to the lowest bidder, the option for obtaining an end-result that is both high quality and available soon has been taken off the table. The only options left are (1) low quality delivered on-schedule, or (2) high quality, waaayyyy late, either of which is sure to infuriate some set of stakeholders.

The guidance-generating organizations have done something similar, just against another leg of the Triple Constraint. It’s been my experience that these guidance authors, who recognize each other as “experts,” get into the ballrooms of the hotels where their meetings are held, and basically get into expertise-signaling contests, with the level of perceived proficiency being assigned by the number of mostly speculation-driven scenarios where traditional Project Management Information Systems might, just might, deliver an artificial variance. One never hears how a given experiment was set up, or how real-world data was collected in such a manner as to eliminate bias in conclusions or analysis. It makes Kabuki Theater look like King Lear.

As they amp up the “requirements” for setting up and running cost and schedule performance information systems, they sincerely believe that their work will result in an improved or more mature capability in such systems. But it doesn’t, and I know why.

In most cases, what these organization churn out represents invalid strategies to improve PM in general, and performance measuring information systems in particular. For example, one of the Implementation Guides insists that comparing the Basis of Estimate (BOE), on a line-item level, to that Control Account’s actuals, also at the line-item level, represents some form of advanced Earned Value Management capability. It does not. Indeed, the very raison d’etre of EVM stems from the uselessness of comparing budgets to actuals, level of granularity notwithstanding. But that didn’t stop this particular organization from publishing this deviation from legitimate management science.

But What If They’re Right?

For the sake of argument, let’s say that these guidance documents, either from outside organizations or from within your own company, are full of valid, insightful rules, and all the experienced and insightful managers think it’s just swell. Given such a scenario, what could go wrong?

Plenty.

Referring back to the Triple Constraint, this code of valid, insightful rules will inevitably decide a priori one of the aspects of your organization’s PM implementation strategy. It will mandate a certain level of quality rigor, meaning that anyone who uses such guidance has just been deprived of some latitude when it comes to advancing capability maturity. Your “quality” has to be at level X. That means that it will either be expensive, or it won’t be available in a timely manner, perhaps not until way past the time the project should have had a performance measurement baseline and regular reports generated. Since the projects involved can’t be made to wait, that means…

Yeah, that the “expertise” of these guidance-writers is now in more demand, meaning that they should be paid more for (ironically) less flexibility in delivering the products they promote. It’s all very much outside the manner that results from real management science research should be published, in my opinion.

What Will They Do? What Would You Do?

So, as the next generation of Project Managers enters the workplace, and seek their own ways of advancing PM capability, any general guidance that tries to decide for them which two aspects of the Iron Triangle they must accomplish in their specific circumstances won’t help anything. On the contrary, such guidance only limits the nextgen’s latitude of action, and in a way that’s certainly more fatal to successful project completion than any anomalies coming from the Critical Path or Earned Value analysis. This leaves our newbies with one of two options: obey these guidance documents to the letter, and hope for the best; or else respect these guidance documents as they see fit, and be prepared to abandon certain strictures when the situation calls for it. Which set of decision-makers will have the better odds of consistently bringing in their projects on-time, on-budget?

My money is on the latter.

Also known as the “Triple Constraint,” the Iron Triangle is the idea that Scope, Cost, and Schedule are intricately linked, so that, for any given project, it’s impossible to change one while leaving the others as-is. A corollary axiom, “Quality, price, or availability: pick any two,” is an often-overlooked truism, but it drives wide sections of current management science, and can explain why there are never-ending conflicts in the Project Management realm.

War #1: The PM is never good enough.

This is particularly true in the realm of Government-sponsored projects, and is rooted in the strategy of awarding contracts to the lowest bidder. Returning to the “pick any two” rule, there are only three possible management approaches to a given project:

1. If it’s high-quality work, to be delivered on an aggressive schedule, it’s going to be expensive.
2. If it’s high-quality work, but at an “affordable” price, then the number of organizations capable of performing it as such are going to be few and far between. In other words, the customer will need to get in line.
3. If the project does not require high-quality work, there are probably many organizations capable of performing it, meaning that it can be done quickly and cheaply.

However, since the way Governments tend to let procurements is based on the lowest bidder, Approach #1 above has already been ruled out. It never fails: whichever of the remaining two advantages is pursued, the stakeholders invested in the one given short-shrift in the trade-off will complain long and loud. Even in those instances where the product or service being sought requires high quality and an aggressive schedule, criticisms will be levied about its costs being too high. It’s true of roads, defense, medical care – it’s generally impossible to deliver comparatively high-quality, affordable goods or services with a ready availability.

This is where the private sector has a real advantage. In the case of medical services, some companies can set up their business model for those who need immediate care at an affordable price, and staff their clinics with newly-minted doctors and nurses in modest facilities. Other hospitals can concentrate on specialized medicine, with advanced, experienced personnel who can keep prices reasonable because their clients don’t need immediate attention, and can typically wait for an appointment. Still others can charge a premium for those who need to see them immediately for complex problems, and all three of these business approaches can exist side-by-side, with the most successful ones being determined by the individual patients’ choices.

This is rarely the case in Government projects, which tend to impact broad sections of their constituents in such a way that other alternatives are excluded. It’s one of the reasons the practice of formal Project Management techniques is so crucial. Regardless of which two of the three preferred attributes are chosen, the precise relationship among Scope, Cost, and Schedule is locked in when the three baselines are “frozen,” and subject to formal change control. It’s a way of making sure everyone (appropriately) involved agrees on what’s being delivered, at what cost, and when, with claims of deceit or poor performance evaluated in terms of the already-agreed-to parameters.

But it’s also why some Project Managers will never escape accusations of failing some group of stakeholders. (It’s also why the push to “engage all stakeholders” is, I believe, profoundly misguided.)

War #2: Why we’ll never be free of Scope Creep

This war is similar to War #1, since it’s also based on the “pick any two” corollary. Once the project is underway, getting more or better goods or services is the only informally-negotiable member of the Iron Triangle left available. Lower costs are quantified in currency, and schedules depicted in days. But better quality can be requested in many circumstances where those parameters aren’t precisely captured, especially if the improved quality being sought is produced by the project team working harder or longer. Check almost any organization’s Strategic Vision or Corporate Values statement, and the word “quality” will almost always be there, since quality is usually far more difficult to precisely quantify than cost or schedule. One can make a claim to offer a quality good or service with more confidence of never being proved false than the claim of being a the lowest-priced, or fastest available. It’s in this very inchoate characteristic of quality management that those customers set on maximizing their “value” by attempting to informally increase the scope will take advantage, and even seasoned PMs are not invulnerable to them.

In other words, a customer who requests post-contract award a reduction in budget can be easily rebuffed, and the same goes for the customer who desires services or goods delivery sooner than negotiated. But the client who complains about inattention to quality will usually be seen on the side of enlightened management science, and, so positioned, will be next to impossible to contradict or refute.

With standards of living rising precipitously across the globe, I think it’s hilarious to hear some millennials talk about how they are going to “fix” the “mess” they’ve inherited from previous generations. But when it comes to the next generation of Project Managers, I believe they have a case if or when they assert that these two long-standing problems should have been addressed, if not out-and-out solved already.

That being said, they could also easily pass these two problems on to the next next generation of PMs, meaning that these two Project Management wars, among others, are possibly never-ending.

One of the most noticeable changes in Project Management science over the years has to do with its lexicon. As I alluded to in last week’s blog, a project’s time-phased budget used to be known as its Budgeted Cost of Work Schedule, or BCWS, with the more seasoned practitioners simply referring to it as “S.”  Similarly, the Earned Value figure was titled the Budgeted Cost of Work Performed, or BCWP, or, just “P,” and actual costs were the Actual Cost of Work Performed, ACWP, or “A.” This allowed the use of acronyms for acronyms, as in the line chart that showed the cumulative budget, earned value, and actual costs getting the nickname “SPA” chart. In fact, the terms cited above are still on the U.S. Government’s Project Management reports’ official templates.

But the “planned value” people came along and tossed all of that aside. I do not care to debate whether or not the changing terms were a good idea. I simply note that these terms have changed, even though the data items they refer to represent the essential building blocks of conducting cost and schedule performance assessment and reporting. Given the “advancements” in PM science over the past few decades, we’re swerving perilously close to a state of affairs where we curmudgeons aren’t speaking the same dialect, or even language, as those new to the profession. Similarly, the newbies might be having a hard time adjusting to their post-college, professional PM roles, since there’s a bunch of us seasoned PMs out here, trying to get our projects in on-time, on-budget, and tend to not care what academia has to say about the way we do our jobs. So, in the spirit of helping to bridge this generation gap, I submit to my readers the following interpretation table.

If these so-called translations strike you as being overly cynical, allow me to make an appeal to inter-generational justice. If we had to put up with all of these things, then (a) why shouldn’t the next generation?, and (b) why should any of us believe that the next generation of accountants and PM-resistant engineers are any less sure of the veracity of all that pabulum they learned in academia? Remember how irksome we were when we were the “next generation” of Project Management?

But here’s our consolation: in twenty-five years or so, those who are now new to PM will be the ones looking at the incoming generation, and lamenting the ease with which they dispensed with terms like “planned value.” (Hey! Maybe then they’ll actually revert to BCWS!)