Game Theory in Management

It was a bright and cloudless day. I was sitting at my desk, reading the stenciled script on my frosted glass office door, yrrebpsaR .T ylnastS, eyE etavirP, when a very earnest looking young man walked in and, after checking the corridor behind him, closed the door.

“Are you Stanly Raspberry?”

“The door doesn’t lie.”

“I’ve heard about you at the local PMI® Chapter meetings. They say you can uncover the most anti-PM business model pathologies out there, no matter how well-entrenched. Is that right?”

“I can hold my own.”

“My company could really use someone like you. You see…”

“Wait” I interrupted, “what’s your name?”

“Oh, sorry” he replied nervously. “I’m Oscar Pennington, and I’m the Deputy PMO Director at Acme Corporation. Have you heard of us?” he asked as he sat down in the chair across from my desk.

“Sure” I began. “Acme is the main competitor to the Monolithic Corporation, my least-favorite organization. But it was my understanding that Acme was doing rather well.”

“We were. I mean, we are, but I don’t think we will for much longer, unless our PMO can get some real help.”

I took out my notebook and a pen and, leaning back in my chair, fixed Oscar in a scrutinizing gaze.

“Tell me.”

“About four months ago our Research & Development Department discovered a new technology, one that dramatically improves the material characteristics of a certain compound that’s in most of our products. They became both better in quality and easier to manufacture – I’m sure you realize why I can’t get much more detailed than that concerning our discovery.”

“I understand. Go on.”
“Well, our Chief Financial Officer, Mr. Lindstrummer, immediately began to stress in board meetings the need to monetize the discovery, but my boss, the PMO Director, tried to push back, insisting that we put Acme’s energies into finding out how many of our products stood to benefit from incorporating it.”

“Oscar, what’s your take on Acme versus Monolithic’s strategic management baseline?”

“Yes, of course!” Oscar enthused. “I’ve been reading the blogs on ProjectManagement.com, so I know what you mean. Compared to Acme’s products, Monolithic’s output is more affordable, of comparable quality, but isn’t always available right away. Acme has a slight advantage in availability, which is why we haven’t been killed in market share space.”

“So, this discovery…”

“Changes everything! As we integrate it into more of our products, it will make them better as well as easier to manufacture, meaning we’ll be able to maintain our current pricing structure, or eventually even lower it.”

“What is Lindstrummer’s view point on this?”

“I’m not sure, because he keeps prattling on about calculating Return on Investment. He’s even insisting that proposals for new work include the ROI for evaluation purposes.”

I sat quietly for a moment, taking in everything Oscar was relaying.

“What do you see as the most urgent problem?” I asked him.

“Our CEO, Daystrom, is on the fence about this decision. He’s relied on Lindstrummer throughout most of his tenure for making high-level decisions, but Daystrom is also aware that we are currently at a competitive disadvantage with respect to Monolithic unless and until we can take advantage of our discovery, and integrate it into our product line. The pressure to make a decision – any decision – is mounting, but I think that if we pursue the immediate-monetization route, we’ll fail to press our advantage, and Monolithic will be able to counter it.”

“Oscar, you said you are the Deputy PMO Director. Who’s the Director?”

“See, that’s the other part of my problem. Jane West is an okay person, don’t get me wrong. It’s just that she’s reluctant to take on Lindstrummer. To be fair, Lindstrummer is a kind of intimidating guy, but Jane doesn’t have the confidence in her convictions to stand toe-to-toe with him in the board room. She has the skills – she’s a PMP® -- but her recommendations tend to be rather mainstream PM stuff, with no real implementation strategy.”

“So, you would like to see me provide Jane with the kind of expert-level PM guidance that will help her make a more convincing case for pursuing the product-first strategy?”

“Exactly! I knew you would be the person for this job!”

“Not so fast, Oscar” I countered. “I’ve dealt with tough-as-nails CFOs before, and I can virtually guarantee it’ll take more than a strong technical case to steer this decision in the direction you think it needs to go.”

“What do you need?” Oscar asked, a bit crestfallen at realizing that the solution would not be as easily executed as he had hoped.

“First, I’ll need a contract, cost plus fixed fee – my assistant will email you the details. Try to avoid using my name, in case Lindstrummer knows about me, too, and cancels this whole thing before it even begins. Just refer to “general consulting” in the scope documentation. Next, I’ll need to have a meeting with Jane, and a separate meeting with your Proposal Management division.”

“Proposal Management?” Oscar objected. “This is Project/Product versus Asset Management! What does Proposal Management have to do with this?”

“Indulge me. Lastly, arrange for my non-disclosure agreement and badge paperwork prior to the meetings with Jane and Proposal Management in such a way that I’m good to participate in Acme meetings before Lindstrummer – or anyone else – is in a position to put the kibosh on all this. Do-able?”

“Yes sir, Mr. Raspberry. Thank you for taking the time. I’m confident we can do this, together!”

Oscar left, almost exuberant in his confidence that I would reach a solution quickly.

I wasn’t so sure.

Next week: I meet the principals, and the plot thickens.

Recently I took a trip and stopped by a newsstand on my way out of my home town’s airport to purchase The Five Dysfunctions Of A Team, by Patrick Lencioni (Jossey-Bass, 2002), to read on the flight. I was hoping that I would find that this book landed squarely in the genre of management science; alas, it was not to be (I should have paid more attention to the subtitle on the cover, which states that it is “A Leadership Fable,” albeit in a much smaller font). Much like Eliyahu Goldratt’s Critical Chain (North River Press, 1997), or even Walden Two by B.F. Skinner (Hackett Publishing, 1948), The Five Dysfunctions Of A Team is a work of fiction that advances a hypothesis.

Let me say that again: it’s a work of fiction that advances a hypothesis.

I remember reading a book by a martial arts expert (it may have been Bruce Tegner) where he lamented receiving letters from fans and students asking about a certain style of karate that they had seen in a movie or television show, and asking if that particular style was truly as effective as depicted. He would have to remind them that what they were watching was a fictional account. That particular style “won” because the script writers had determined that its practitioner would “win.” In the same manner, Goldratt’s characters attributed their success due to their use of the theory of constraints, Skinner’s characters credited attaining near-utopia to their adaptation of the precepts of Behaviorism, and Lencioni’s characters ascribed their company’s turn-around to the protagonist’s insights on leadership and team dynamics. In fact, all of these “successes” were predetermined. They triumphed because those authors wrote that they should in these works of fiction. In fact, in one of the chapters in The Five Dysfunctions Of A Team, the central technical issue facing our protagonist has to do with the proper balancing of the needs of the Asset, Project (product), and Strategic managers, which is what Corner Cube Theory is all about. But even here, the principals reach their solution through compromise attained in meetings – quantitatively balancing the three competing interests in a three-dimensional model is never discussed.

And yet, as intellectually vacuous as I find an attempt to advance a hypothesis through “fables” or other works of fiction, there’s no denying that, in many instances, it works. The three books cited above were all highly successful. Walden Two, combined with Beyond Freedom And Dignity (Hackett Publishing, 1971) had a profound impact on many university’s psychology departments, and there’s a Theory of Constraints Institute based on Goldratt’s writings. And, of course, The Five Dysfunctions Of A Team made it onto the New York Time’s bestseller list. These facts are leading me towards an unwanted conclusion, essentially, if I can’t beat ‘em, I may as well join ‘em.

“But Michael!” I can hear loooonnnng-time GTIM Nation citizens object, “what about Stanly T. Raspberry?” For relative newcomers to this blog, Stanly T. Raspberry is a PM-centric private detective who first appeared in my long-running Variance Threshold column in PMNetwork, and has made several appearances in this blog. He “solves” business model pathology problems the same way that the fictional characters previously mentioned attain success, by his creator writing his experiences that way. My response to this objection would be that Stanly never advocated for a particular management schema, past some plain vanilla PM and organizational behavior and performance axioms. Rather, clients ask for him to investigate the goings-on within a particular organization (usually the Monolithic Corporation), and Stanly does so. Besides, mocking business model pathologies in an 800-word column or blog using a clearly satirical fictional character is very different from creating a nominally legitimate protagonist that overcomes fearful odds by engaging a contemporary management science theory in what is essentially a novel.

This being the case, it is my intent to spend at least a couple of GTIM blogs on an elongated Stanly T. Raspberry PM adventure, only this time he will be actively promoting a relatively new management science concept, the aforementioned Corner Cube theory. If any GTIM Nation citizens wish to have a character based on them appear in this adventure, let me know in the comment section, and I’ll accommodate as many as I can. Candidates will need to tell me about their character, if they should be considered among Stanly’s allies or opponents, and whether or not you want first dibs on actually playing this character should a Hollywood producer sees these blogs, and wants to make a movie out of it.

Coming up next: Stanly T. Raspberry gets a new case!

Well, maybe not literally a Collie. But after having raised Collies most of my adult life, I can attest that they consistently demonstrate a variety of instinctive behaviors that would serve managers well in a business setting.

Exhibit A for this assertion has to be their unfailing loyalty to their Team. Their highly-developed senses are constantly scanning the environment for potential hazards or dangers and, if discovered, will immediately and directly address the hazard to resolution. Members of a Project Team who perceive that their manager is willing to tolerate a condition or individual within said Team that represents a threat to either accomplishing the Project’s scope on-time, on-budget, or (worse) is a menace to their professional advancement, will almost certainly lose faith in that manager, or even the entire Project.

Collies are also famous for their uncanny ability to figure out the optimal technical approach to problems they face. In 1954, a Collie named Tang planted himself in front of a milk delivery truck, barking and refusing to budge. The driver could not figure out how to get Tang out of the way until he checked the back of the truck, where a two-year-old girl had climbed into the truck, and would have certainly fallen out and spilled onto the street had the truck moved.[i] I’ve always found this particular hero-dog story compelling because of what Tang the Collie didn’t do. He didn’t go to the back of the truck to bark and raise the alarm – he went to the front, seemingly aware that the truck would leave going forward, and that he had to stop that from happening. And, of course, Collies are also famous for being easily trained in the herding behaviors, knowing just when and how to circle, bark, or feign stalking/charging techniques to keep their charges relatively confined. I shudder to think of the number of managers with whom I’ve worked who fail to identify a superior (or even workable) technical approach, opting instead to use some familiar, canned PM strategy when undertaking new scope, even when such an approach is clearly not appropriate.

When my wife was expecting with our boys, our Collie would not let her out of his sight when she was home. It’s as if he just knew that she was in a special, more vulnerable condition, and made it a point to be hyper-vigilant when she was around. This behavior was so acute that, when my wife would get up to go to the restroom, the dog would follow close behind and sit staring at the door until she came out. He would then closely follow her back to the sofa, and resume his place at her feet. Compare and contrast this natural behavior with those PMs who fail to closely monitor the most vulnerable part of the schedule network, the Critical Path, or review the progress of those tasks almost casually, not realizing the potential implications of poor performance.

Collies were originally bred in Scotland, and I remember reading about the sheep pens in those highlands. They were roughly circular, with a single gap in the fence for access, but no gate. Instead, either the shepherd or Collie would sleep across the gap, so that nothing could go in or come out without their knowing about it. Along those lines, I find it maddening when a so-called PM of anything but the smallest of projects refuses to implement an Earned Value Management System, or EVMS. Earned Value systems can be rather simple, but they are absolutely necessary if the Project’s cost and schedule performance is to be measured and relayed to management. Eschewing such systems is essentially broadcasting to the management world that it’s okay for the wolves to come trapsing into the pen the PM doesn’t care about bringing the Project in on-time, on-budget.

I don’t have any first-hand knowledge of this next aspect, but I have read that working Collies who have been trained to herd cattle should never be re-purposed for sheep. I guess the more aggressive techniques needed for bovines don’t work well for the rams and ewes, and might actually harm them. Referencing last week’s blog, where I discuss some of the negative management manifestations stemming from organizations that have moved from great original idea to monetization to keep-it-going-just-to-keep-it-going phase, managers who thrive in this last organization type may not be suitable for organizations that are more closely aligned with their founders’ original vision. The sharp elbows needed to thrive – or even survive – in highly politicized Project Management Offices are usually out-of-place in high-performing Project Teams, aiming at on-time, on-budget scope delivery. Such managers may actually harm high-performing Project Teams.

On the other hand, you should probably cut ties with your new PM if he steals socks from your sock drawer, and defiantly runs around the house with them, or gets into the trash only to regurgitate onto the rug later, or engages in a shedding-blast that overwhelms your vacuum cleaner’s ability to keep your floor clean, or…

[i] Retrieved from https://wellsmerecollies.com/the-hero-collie on December 27, 2024, 13:48 MST.

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.