Game Theory in Management

It’s been my experience that one of the most – if not THE most – intransigent and difficult problems with setting up and maintaining a successful Project Management Office has to do with the implementation phase. Oh, sure, some of the more technical Projects can present quite the challenge when setting up the Scope, Cost, and/or Schedule Baselines, but once those are in-place the actual Cost/Schedule performance measurement systems aren’t that tough. Baseline Change Control / Configuration Management doesn’t require galaxy-brains either. No, the most obstinate barrier for the PMO, to my mind, has to be the implementation phase. After every last organizational element has been made aware of the effort(s) to advance the PM capability, and Earned Value / Critical Path Methodologies software packages have been installed on multiple machines, PMs, Control Account Managers (CAMs), and Work Package Managers have been identified, and even the General Ledger has been prepped to track costs at the reporting level of the WBS, somehow, when it comes time to actually demonstrate an acceptable level of overall PM expertise, things are found to be wanting. And I’m not talking about finding “it’s” instead of “its” in the Variance Analysis Reports, as infuriating as that may be. I’m talking about Organizational Breakdown Structure elements somehow finding their way into the WBS, or trying to claim the percent complete method as Level-of-Effort when it’s obvious that that particular task should be using Direct Units, or filing a Baseline Change Proposal for no other reason than the Control Account encountered a negative Cost Variance. These are not fat-finger-style errors. Rather, they point to a highly problematic lack of PM capability maturity which, in turn, can have rather serious repercussions across the entire project portfolio. What is a PMO Director to do?

Well, the first thing our afflicted PMO Director needs to do is to recognize the type of business model environment where she finds herself. GTIM Nation will recall my previous discussion of the Eric Hoffer quote,

Every great cause begins as a movement, becomes a business, and eventually degenerates into a racket.[i]

If I could be so presumptuous as to paraphrase Hoffer, I think the management version of this would be:

Every successful business endeavor begins with a great insight, which then becomes monetized, and eventually turns into an organization that exists primarily to keep itself going, having largely distanced itself from the founders’ original vision, or insight.

If we assume that this is a workable take on the long-term evolution of many organizations’ business models, the implications for the introduction and/or maintenance of the PMO can be profound. For example, if the target macro-organization is already in the just-keep-it-going phase, then any attempt at advancing a capability maturity in general, and PM in particular, is in for a very difficult time. Unless an advanced PM capability was already in-place, and therefore part of the machine that needs to be kept operating, this type of change to an ossified business model is going to be resisted to Cecil B. DeMille proportions. It will make absolutely no difference if the technical approach to the PM capability advancement is the most excellent ever devised – the implementation strategy that gets it quickly and fully operational doesn’t exist for this type of organization.

Also consider the type of workers that tend to populate the organization in the keep-it-going-to-keep-it-going phase. Drawing from the archetypes presented in Michael Maccoby’s excellent book The Gamesman (Simon and Schuster, 1976), the “great insight” phase is likely to see many Gamesman and Craftsman types. As the movement towards monetizing the great insight occurs, more Company Men will occupy the ranks, and more than a few Jungle Fighters are likely to be present. But by the time the keep-going phase is realized, it’s going to be dominated by Jungle Fighters and Company Men, if for no other reason than genuine Gamesmen and Craftsmen will find this type of organization less appealing, if not out-and-out intolerable, and will move on. I’ve worked for organizations that have placed considerable corporate culture distance between themselves and their founders’ original vision, with a significant number of Jungle Fighters and Company Men in upper management, and can confidently assert that such a work environment is both professionally frustrating and anxiety inducing. Advancement in such organizations – heck, even retaining a current position – has less and less to do with merit or virtue, and more to do with the political machinations among its decision makers.

My recommendation to GTIM Nation would be to maintain your managerial expertise – your PM virtue, if you will – and let the chips fall where they may. If you succeed, great. If not, the organization is likely to be on a downward trajectory anyway, and is doing you a favor by signaling as such.

[i] Retrieved from https://www.goodreads.com/quotes/98215-every-great-cause-begins-as-a-movement-becomes-a-business on December 23, 2024, 17:53 MST.

Worry not, GTIM Nation. I’m not trying to influence our beloved PMI® away from serious academic discussions on the management sciences and towards the tawdry. But I do think that there are some insights into the aforementioned management sciences that can be gleaned if we engage in a specific type of reductionism, stripping away if you will some of the layers of rhetorical fluff that accompany each of the management types from Corner Cube theory fame.[i] These three types of management are:

• Asset Management, with its main objective being “maximize shareholder wealth,”
• Project Management, centered around delivering what the customer wants (Scope) within the constraints of Cost and Schedule, and
• Strategic Management, focused on maximizing the organization’s market share.

I think it’s important to note that these three are different by type, and not just degree. They seek very different outcomes, and use different Management Information Systems to attain those outcomes. I’m looking to demonstrate that both Asset and Strategic Management largely take PM for granted, along the lines of simply assuming that their organizations already produce a good or service for an already-existing customer base. For the sake of this mental exercise, let’s begin our reductionism by removing organizations from the analysis. Our examination will posit individual people interacting with other individuals, so that the nature of the management types will become plain.

So, a single Asset Management-type approaches a potential customer in a whatever setting – shopping mall, office building, sidewalk – it doesn’t matter. What does the Asset Management-type want? To “maximize shareholder wealth,” of course. College-level business courses will maintain that as the ultimate goal of all management, which has always struck me as both classical theoretical overreach and rather arrogant. How does our Asset Management-type accomplish this in such a one-on-one setting? They could rob the potential customer, but that’s against the law. They could try and trick the potential customer into voluntarily providing the shareholder wealth, but that’s frowned upon, and also potentially illegal. Hmmm. What else remains? Well, they could offer some sort of product or service for which the potential customer would voluntarily give them the sought-after shareholder wealth, but that would land them in the Project Management realm, would it not?

Now let’s take a look at our friends, the Strategic Managers. Back in their organizations they are tasked with maximizing market share, typically through advertising or other marketing initiatives, but it can include such extreme measures as conducting a hostile buy-out of a competitor. But here, in the mall/office building/sidewalk setting, they really have nothing to offer without a separate piece of scope, which again, belongs to PM. I mean, sure, they could hover around the potential customer to try and ensure that they don’t seek to obtain the whatever goods or services from someone other than them, but they, themselves, don’t create a stand-alone good or service that would entice the potential customer to voluntarily part with their shareholder wealth money. In those instances where the particular Strategic Manager follows the potential customer to prevent the choice towards another organization with something more than verbal pleadings, the result is known as coercion, which can also be illegal.

And so we arrive at the Project Manager. What would the PM-type do, interacting with a potential customer, one-on-one? The answer to this question is the same as to the first principle of PM: discover the Scope. What does the customer want (Scope Baseline)? How much are they willing to pay (Cost Baseline)? When do they want it (Schedule Baseline)? Such proffered service is what drives a free-market economy – not “maximizing shareholder wealth,” and not dominating a specific market, though those outcomes can be achieved once the PM objective is attained.

Also consider the results of the stripped-down management types. As noted above,

• Asset Management cannot attain its goals without providing a good or service.
• The same is true of Strategic Management.
• Project Management without Asset nor Strategic Management, turns into … volunteer work!

Think about it – providing a potential customer with a good or service that they want without it being monetized or influencing market share is literally volunteer work.

I want to be crystal clear here: Asset Management and Strategic Management are fully legitimate approaches to business, worthy of study and attained expertise. And yet it must be pointed out that they proceed from a proffered good or service, and the management of the creation of goods and services belongs in the Project Management domain.

So, yeah, let’s look at those scantily-clad business models. It’s okay to conclude that ours is the most attractive.

[i] Hatfield, M. A. (1995). Managing to the corner cube: three-dimensional management in a three-dimensional world. Project Management Journal, 26(1), 13–20.

In last week’s blog I cited Hatfield’s Rule Of Management #3, which states:

3. The 80^th percentile best managers who have access to only 20% of the information needed to obviate a given decision will be consistently out-performed by the 20^th percentile worst managers who have access to 80% of the information so needed.

For GTIM Nation citizens who recognize that rule as a derivative of the Pareto Principal, go to the head of the class. I now want to introduce another PM-esque derivative of the Pareto Principal, this one sitting at #29 of the aforementioned Rules Of Management:

29. 80% of the value of a Project Management Office (PMO) is derived from 20% of the information it generates.

Does this sound outrageous? Indefensible? Consider the following: let’s postulate PMO (A) and PMO (N). PMO (A) sets its technical agenda so as to include the following:

• A robust risk management (no initial caps) system, including a risk register (nic) documenting the results of a thorough risk analysis (nic), with an ongoing re-evaluation of risk events, their estimated cost and schedule impacts, and additional risk event scenarios going forward.
• A fully-staffed communications group, who seek out all potential stakeholders, and employ the mechanisms to ensure that their “input” or “feedback” is properly incorporated into the formulation and execution of the Projects’ technical approach and, in some cases, reflected back to the macro-organization in such a way as to actually influence its business model.
• A strong Quality Management sub-team, providing Ishikawa Diagrams of each and every decision point that affects the Projects’ technical approach to resolving the scope, as well as Six Sigma analysis of the accompanying processes or any out-of-threshold variances encountered along the way.

Now let’s take a look at the setup of PMO (N). It includes:

• A robust Scope Baseline capture, including a valid Work Breakdown Structure, with Control Accounts and Work Packages sufficiently detailed to not only serve as the basis for deriving the Cost and Schedule Baselines, but also as a usable defense in the event of a conflict with any subcontractors (or even customers) over performance.
• A basic Earned Value Management System, one that allows for reliable cost performance measurement and accompanying accurate capacity for calculating at-completion cost and duration.
• And, since PMO (N) does this for all of the Projects in the portfolio, it can roll-up its information streams to indicate overall portfolio performance,

…and that’s it.

All other things being equal, I would argue that the organization served by PMO (N) would wayyyyy outperform the organization saddled with PMO (A). Just on its face PMO (N)’s information streams are more valuable than (A)’s, and, in my opinion, it’s not close.

Then we have the nature of the information streams of PMO (A). Consider what the risk managers (nic) alone would need to perform their “analysis.” It includes hours of time with the Work Package / Control Account Managers, asking them (or some other Subject Matter Expert) about the alternative outcomes of the selected Project’s execution strategy, their impact and estimated odds of occurrence, over multiple alternative outcomes. Also consider what happens at the end of such analysis: other than contributing data to the estimate of a potential contingency budget, it’s little more than a list of things that might go wrong, tripped out in Gaussian Curve jargon.

Then we have our friends, the Communications Managers. Don’t get me wrong – as long as these advocates structure a usable communications plan that aids in the Public Affairs aspect of Projects, particularly high-profile ones, I’m completely good with this function. It’s just that some of these experts, in my experience, often start pushing this business about “engaging all stakeholders.” The complete population of “stakeholders” will invariably contain people who are against your Project coming in on-time, on-budget, or even its existence. Giving these stakeholders unearned influence in the setting of the technical approach, appropriation of resources, and the manner or tempo of the work being executed is counter-productive in the best of circumstances. PMs who not only pursue this strategy but actually pay Team members (or even outside consultants) to do so would be well-served to re-examine their nominal approach to performing actual Project Management.

Next let’s look at the resources and time needed for Quality Management experts to perform their analysis and generate their specifically-tailored information streams. Useful for an ex-post-facto analysis of something that went wrong? Absolutely. But unless your Project provides a good or service for which any error could have massive, destructive outcomes, you might want to think twice before funding their budget.

And here’s the kicker: PMO (N) is, in all probability, going to cost less than PMO (A). Maybe not an exact Pareto Principle split of 80/20, but close enough to answer the question in the title. What can 20% of a PMO get you? Turns out, quite a lot, if it’s the right 20%.

In the Arthur Conan Doyle short story The Adventure Of Silver Blaze, Sherlock Holmes investigates the disappearance of a famous race horse, Silver Blaze, and the death of its trainer, John Straker. While the police’s primary suspect, Fitzroy Simpson, appears to have significant evidence against him, Holmes is struck by the fact that the stable’s dog did not bark as the theft was taking place. The precise dialogue is:

“Is there any point to which you would wish to draw my attention?'
'To the curious incident of the dog in the night-time.'
'The dog did nothing in the night-time.'
'That was the curious incident,' remarked Sherlock Holmes.”[i]

While the exact phrase “the dog that did not bark” does not appear in The Adventure of Silver Blaze, that phrase has become something of a cliché when it comes to describing a person, device, or organization that suspiciously does not perform as it should at a key time, indicating that something is very wrong. In fact, doing an internet search on “the dog that did not bark” will return results for both The Adventure of Silver Blaze and (typically) political manifestations of the cliché version.

Meanwhile, Back In The Project Management World…

GTIM Nation knows of my oft-asserted claim that the primary purpose of the Project Management Office (PMO) is to put into the hands of the decision-makers the information they need to make, well, the best-informed decisions that they can. Does this strike my readers as being unduly narrow? Consider: when combined with Hatfield’s Rule Of Management #3, which reads:

3. The 80^th percentile best managers who have access to only 20% of the information needed to obviate a given decision will be consistently out-performed by the 20^th percentile worst managers who have access to 80% of the information so needed.

…then generating such information becomes macro-organization-changing. Organizations with a PMO that creates and presents Project cost and schedule performance information to management will enjoy a significant advantage over their poorer-informed competition, which is likely to manifest in superior portfolio performance. As for those PMO Directors (and their supporting consultants) who insist that the primary function of the PMO is to drive “culture change,” or lead execs to a point of view that a robust risk management (no initial caps) function is necessary, or that all PMs should be forced to “engage all stakeholders,” etc., etc., I have this to say: no, no, and (blank) no.

But even if the PMO Director is enlightened enough to accept my take on the PMO’s primary function, we still have some problems, perhaps best shown by the following Payoff Grid:

Let’s dispense with the “all good” scenarios. If the Project is performing well in cost and schedule space, and the management information systems operated by the PMO indicate as such, then things are working as they should. Similarly, if the PMO’s information streams are raising red flags, and the Projects indicated are actually performing poorly, then those information streams are working as intended, notifying upper levels of management where they should be focusing their time and energy.

Which brings us to our two something’s-very-wrong scenarios. In Scenario B2, the “Silver Blaze” scenario, the PMO is failing because a management problem is manifesting, but not being detected by the very systems designed to reveal it. This can lead to stolen race horses and killed trainers in the literary world, and overruns and delays in the project portfolio in the real one. Cost and schedule performance issues can be hidden from an otherwise-functioning Earned Value Management System (EVMS) by such chicanery as overstating the percent complete of a task, or employing the “bottoms-up” method of developing the Estimate at Completion, but the canny PMO Director will have sufficient surveillance to prevent this undermining of these systems.

As this blog’s title implies, I want to now look at Scenario A1, where the subject Project is actually performing well, but the PMO’s information streams indicate a problem. Besides misdirecting limited managerial attention away from real problems towards the non-existent variety, and putting PMs on the defensive unfairly, such false alerts directly damage the credibility of the PMO, an organization that depends heavily on the reliability of the information it processes and presents. This damage only gets worse if the reason behind the incessant barking is due to something supercilious, such as the lack of a risk management (no initial caps) system, or a perceived failure to “engage stakeholders,” or “change the culture.”

It’s elementary: that dog needs to shush.

[i] Retrieved from https://www.goodreads.com/quotes/82195-is-there-any-point-to-which-you-would-wish-to on November 16, 2024, 18:41 MST.

One of my favorite scenes from the comedy classic movie The Blues Brothers (1980) involves the newly-reconstituted band playing a gig at Bob’s Country Bunker at a time slot intended for The Good Ol’ Boys band. Neither Bob’s Country Bunker management nor the rest of the Blues Brothers band are aware that Jake is hijacking the Good Ol’ Boys’ slot, and the Blues Brothers band, after introducing themselves as the “Good Ol’ Blues Brothers Boys band,” begins their set with the song Gimme Some Lovin’. Since this song is not normally associated with the country-western genre, the patrons begin to boo and throw beer bottles against the chicken wire that has been erected to protect the stage.

“We better figure out something these people like, and fast,” counsels Elwood.

“Hey, I’ve got it” replies Murph Dunn. “Remember the theme from Rawhide?”

As the band begins playing the Theme From Rawhide, the patrons at Bob’s immediately begin to show their approval, clapping, hollering, and dancing on the tables. By continuing the set with other songs in the country-western genre, the crowd continues to approve of the entertainment, and the gig ends successfully for the band (well, except that they end up drinking more than the value of the appearance). A couple of interesting tidbits about those two songs: Gimme Some Lovin’ was first released by the Spencer Davis Group in 1966, and charted in the top ten in several different countries[i], while the Theme From Rawhide was recorded by Frankie Lane in 1958[ii]. While it served as the theme song from the television series Rawhide, and reached the Number 6 slot in the United Kingdom[iii], it did not receive the same level of critical acclaim as Gimme Some Lovin’, which made Rolling Stone’s list of the 500 greatest songs[iv]. In other words, the assumption that Gimme Some Lovin’ would nominally receive more approval from a generic set of people than Theme From Rawhide appears perfectly rational; however, since their audience was certainly not a generic collection of people, the Blues Brothers Band had to make a quick change to their intended program in order to consider the gig to be a success.

Meanwhile, Back In The Project Management World…

GTIM Nation knows of my prior usages of the axiom Quality, Availability, Affordability: pick any two. I continue to believe, not only in its relevance, but that this truism is significantly underrated in the formulation of technical approaches to discovering and pursuing managerial problems. It’s been my observation that this undervaluation is particularly present in the founding or maintaining of the Project Management Office, or PMO. Which two of the three aspects of your organization’s product or service presentation must have a direct impact on which PMO strategy is best suited for that environment, to wit:

• The organization that has gotten ahead by offering affordable goods or services without their customers having to be on some sort of waiting list will likely not be interested in a PMO that insists, by encoding into policy or procedure, on robust Work Package/Control Account development, coupled to an exhaustive risk management (no initial caps) program, and overlayed with a Baseline Change Control Board that only meets once per month.
• Similarly, the organization whose market share depends on high-quality goods and services that are comparatively affordable, but require long lead-times, can afford to have a PMO that’s relatively smaller than the others in the same market, since the likelihood of the PMO being surprised with a sudden, marked increase in programmatic load is relatively small.
• This third configuration, of the organization that offers high-quality goods or services that are relatively available, but not as affordable, is the only one of the three where a high level of PM expertise driving a complex and robust PM discipline and information system creation and maintenance is likely to be appropriate.

But here is where the environment for having the band strike up Gimme Some Lovin’ when the macro-organization wants Theme From Rawhide is likely to manifest, since organizations large enough to dedicate the resources to create and maintain a PMO in the first place will often present as if the high-level-of-expertise crowd should come in and implement a robust PM strategy as being the optimal one. It could very well be that the macro-organization is seeking only a basic, easily-implemented cost and schedule performance measurement system in order to get a handle on the behavior of the project portfolio.

And I think it would be a good idea for the PMO Director to ascertain if that’s the environment she’s in, prior to the beer bottles hitting the chicken wire.

[i] Retrieved from https://en.wikipedia.org/wiki/Gimme_Some_Lovin%27 on November 11, 2024, 14:01 MST.

[ii] Ibid.

[iii] Retrieved from https://www.songfacts.com/facts/frankie-laine/rawhide on November 11, 2024, 18:53 MST.

[iv] Retrieved from https://en.wikipedia.org/wiki/Gimme_Some_Lovin%27 on November 11, 2024, 14:11 MST.