Game Theory in Management

For those who steadfastly refuse to expose themselves to epic literature or epic motion pictures, Gandolph and Wormtongue are characters from J.R.R. Tolkien’s Lord of the Rings trilogy. Gandolph is a very wise and helpful wizard, and all who take his words to heart are greatly helped. Grima Wormtongue (what a name, right?) is actually an agent of ultimate bad-guy Saruman as he “advises” Theoden, king of Rohan. Theoden in particular, and Rohan in general, are greatly diminished and made more vulnerable because of Grima’s council, until Gandolph finally rides up to the castle (on a white horse in the movie, naturally), confronts Wormtongue, and drives him away, even though Gandolph initially encounters resistance from Theoden himself, who is not convinced that Wormtongue is an agent of Saruman. Got all that?

Okay, back to the office. Is there in existence a sure-fire test that can determine if your consultant is on the up-and-up, or a devious weasel, short of having an appearance that suggests that the consultant in question appears to be applying for a job as a model in Vogue by pursuing the “heroin chic” look? Yes, there is, but to learn how to invoke this test I’m going to need to cover some management information theory first.

As I discuss in my must-have book, Game Theory in Management, management information (not data, but information) is extremely powerful if it’s timely, accurate, and relevant. (How can you test for relevancy? Click here.) Indeed, the mediocre or even poor manager who has command of, say, 75% of the information he needs to make the best decision in a given circumstance will out-perform the exceptional manager who only has 50% of the information she needs, every single time. This effect is probably why real scientists tend to have such disdain for managers – their decisions are almost universally made based on complete information, whereas managers are often (always?) compelled to decide based on incomplete information. When I was in graduate school, one of my textbook’s authors asserted that information is the life-blood of any organization, and I’m not at all sure I disagree with that notion. And, from an organizational behavior and performance point of view, think of the groups or divisions within your organization that attempt to gain or leverage power over other groups by hoarding, limiting access to, or altering the flow of coveted management information. Timely, accurate, and relevant management information is power, and if you’re the person delivering that information to the upper-level managers who need it, and can convince them that you are the only source, than you have the same power over the organization’s decision-makers that a pusher has over a junkie. They simply cannot function without you. And, like Sargent Foley in An Officer and a Gentlemen, people will use any means, both fair and unfair , to be perceived as such a one.

Let’s jump back to consultants. They are usually brought in due to some realization on the part of the host organization, either that some vital piece of management information is missing, or else, given that a vital piece of information is missing and may not ever be provided, some level of expertise in making the right call working from an insufficient data set is needed. In my humble opinion, the vast majority of the perceived demands from consultants can be fulfilled with superior management information systems (and, no, I’m not talking about Wall Street “quants” – those guys are barking up the wrong epistemological tree) rather than the seat-of-the-pants advice, but I digress. How can one ascertain whether a consultant is performing their function with fidelity (Gandolph), or if they are engaged in a deceit that will allow them to collect their fee without truly advancing the attainment of the goals of the organization they serve (Wormtongue)?  Here’s the acid test:

·         A Wormtongue is advancing a narrative. Always at its core this narrative will make the decision-makers feel good about themselves, reinforcing their conceits and leaving them with an inflated view of their importance in the organization. The need to be recognized for our abilities is near-universal: all humans believe that they are under-appreciated.  Wormtongue knows this, and will push a narrative, often at variance with reality, that will insinuate himself into a position analogous to the provider of essential information, whether he actually provides this service or not.

·         Gandolph will analyze the current management information system architecture, reject as irrelevant some of the streams, and seek to set up others that are essential. If he is politically savvy, he will throw the occasional bone to the egos of those who hired him, but that’s not his primary focus. Of course, this puts him at odds with those who have sought to manipulate the clear and healthy functioning of the existing information streams, especially those that serve no legitimate purpose (like the risk managers’). But, if he has read my book, and is successful, then, suddenly, your organization’s 50% managers are out-performing your competitors’ 75% managers, every time.

And that’s how you tell if you have a Gandolph or a Wormtongue.

Some years back I was attending the wrap-up luncheon for a just-complete project management seminar, hosted for the paper presenters, track designers, and other instructors. The lady who was in charge of this particular wrap-up session posed a question to the room: after encouraging us to be open and frank, she asked what we would do to improve the next such seminar. I held up my hand.

“Waive the entrance fee for all paper presenters.”

The sponsor was incredulous, and made no attempt to mask her contempt for such an idea.

“Think about it” I continued, “these people are coming here, presenting original research,” (okay, I admit that I’ve endured endless sessions where the presenters go over the same old stuff, and it seems to happen at every seminar, but, for now, bear with me) “and you charge them for the privilege of doing so. Since your organization’s stock and trade is the collection and dissemination of new ideas, shouldn’t you be encouraging them, rather than discouraging them?”

My idea died on the ballroom floor, amidst much harrumphing.

But I believe it bears re-examining, if for no other reason than this concept serves as a kind-of bullstuffing detector when it comes to the presentation of project management concepts and ideas. I know one prominent author/practitioner of Earned Value Management concepts who has made quite a bit of money without expressing a single original idea about EVM, its implementation, or its place in the portfolio management universe. He just keeps blabbing on about known precepts, and thinks of himself as having a legitimate place at the advancement-of-management-theory table, while every person who knows the score simply rolls their eyes at this fellow’s material.

Consider one of my favorite targets, the risk management consultants. What are these guys selling, really? A partial quantification of the future. However, the future cannot be quantified. So, again, what are these guys really selling? A chance for a given project’s management to appear sophisticated and advanced in the selection of the sort of information that persuades their decision-making. It’s reminiscent of that iconic episode of the American situation comedy Cheers, where presumptuous waitress Diane is beating everyone else at the bar in their football pool by basing her decisions on things like which team hails from a city with a foreign-born symphony orchestra conductor.

I also like picking on communications consultants. Hey! Communications consultants! Guys, get this through your heads: conflict exists! It has since Eve bit the apple! And it will continue to exist until the Second Coming! Now, put this in your peace pipe and smoke it: talking it out will not eliminate it! My enemies despise me, because they are all jerks. Letting them know “where I’m coming from” will not make them less jerky, and my having a more thorough understanding of what makes them jerks will not make me like them. It really is that simple.

Most of the major management institutes, associations, and societies do not pay their columnists and bloggers. This simply invites charlatanism, and lots of it, and it is reflected in their material. The Project Management Institute® has an entire section of the PMBOK Guide® dedicated to risk management, and another to communication management, for crying out loud. And the last time I actually opened and looked inside an edition of my old venue, PMNetwork, more space was devoted to graphics than to the actual articulation of ideas, let alone new ones. I belong to another project management-esque organization that also provides certifications and a monthly magazine, and they refuse to pay their writers. This organization’s monthly magazine’s contribution to the advancement of management science can be measured in microns.

In the universe of consultants, bloggers, and columnists, specifically within the project management world, you do, indeed, get what you pay for.

In his best-selling book Games People Play (Ballantine Books, 1964), Eric Berne theorized that we all walk around with scripts running in our heads, collecting all the facts we gather in to a structure that resembles a story line – sort of the stories of our lives. Berne also asserted that we have three personas when it comes to interacting with others: the Child, the Adult, and the Parent. These three are somewhat similar to Freud’s Id, Ego, and Superego, but Berne’s analysis turns on how these three personas behave when we communicate with others – hence the “transactional analysis” he presents in his book.

In my not-bestselling (yet) but must-have book, Game Theory in Management, I take Berne’s theory one step further: we don’t have one script running, but three (or one story with a main plot and two subplots). These three scripts mirror the three personas, but with a twist:

·         The Child persona’s script is what we tell ourselves about ourselves. It’s entirely internal, or self-centered.

·         The Adult persona’s script provides the structure for how we ought to interact with others, primarily to in order to fulfill the needs of the Child.

·         The Parent script tells us what we should aspire to, and is often based on our perceptions of those around us and their status.

Because the child persona is the Berne equivalent of Freud’s Id, its narrative tends to be both highly emotionally-charged and irrational in the extreme. If we convince ourselves that we are superlative in some area, and evidence arises that suggests otherwise, or even the exact opposite, we will often reject that evidence, for the simple reason that re-writing any part of our Child’s script is usually excruciatingly painful. A truly humble person has a far easier time of integrating facts-on-the-ground into their narrative(s), and we all know how predominant the truly humble are among executive-level management. One more element – when our narratives are inconsistent with reality in profound ways, we are said to be delusional.

Okay, Michael, you ask, what does all this have to do with June’s theme, of consultants and outsourcing? Well, I’ll tell you. The act of hiring a consultant is a tacit admission that the organization recognizes that at least some elements of its narratives that are in need of revision. However, if the script needing amending is within the purview of the organizational equivalent of the Child’s, then look out. It will not end well.

There’s the story I heard while in graduate school, of a quality consultant brought in to work with an automobile manufacturer. Frustrated in his attempts to call management attention to what he perceived were the basic problems with this firm’s product, he supposedly showed up to a board meeting with an example of this company’s piston, which was cast, along with a competitor’s forged and polished piston, and simply put them down on the table, side-by-side. The difference in quality was so stark that upper management…

…threw him off of the site, and forbade his return. The organization’s internal narrative could not stand the infusion of facts that pointed to a narrative of their being the creator of substantially inferior goods, and they responded in a most child-like fashion in order to maintain their comfortable delusion. The company named in the story eventually went bankrupt.

Of course, many (if not most) consultant relationships do not end poorly, with both the hiring organization and consulting firm benefitting from the eventual outcome. But in cases of extremes in this relationship – where either the organization’s narrative is perfectly sufficient (or even superior to that of the consultant) and no consultation is needed, or else the problem causing the hiring of the consultant is so deep-seeded and prevalent that it challenges the very basis for what the organization believes of itself – then it is very hard to see how any good could come of the relationship.

But then, that’s just one consultant’s (strikethrough) blogger’s advice…

In my blog from two weeks ago, I promised to present a way to advance a given capability (in this case, project management) within an organization following the structure inherent in Carnegie Melon University’s Software Engineering Institute’s (SEI’s) Capability Maturity Model® while avoiding the dreaded “slow roll” (Professor Bud Baker’s term) or silent veto, and that this method had its roots in game theory. But then, in last week’s blog, I took advantage of the occasion of Kristen Wiig hosting Saturday Night Live to lambast their writers for being highly formulaic in their sketch-writing, so it falls to this, the last week of May (and May’s theme) to provide this answer. And the answer is…

…rooted in Game Theory, like I said before, specifically the game known as the Prisoner’s Dilemma. There are various versions of the Prisoner’s Dilemma, the most common being that you are in a situation where you are in prison, and your jailer tells you that if you rat out (inform on) your cell-mate, he will reduce your sentence. Problem is, you know your cell mate will receive the same offer. There are four possible outcomes:

·         You both rat on each other, and both serve 11 years.

·         Neither of you rats on the other, and you both serve 18 months.

·         You do not inform on your cell-mate, but he informs on you. You serve 18 years, and your cell-mate walks free (this is known as the “sucker’s payoff”).

·         Similarly, you inform on your cell-mate, but he does not inform on you. You walk, and your cell-mate gets 18 years.

Conventional wisdom on the Prisoner’s Dilemma had the best tactic as always ratting out your cell-mate in order to avoid being on the receiving end of the Sucker’s Payoff.

In the 1980s, Robert Axelrod hosted a tournament for competing computer programs playing 200 iterations of the Prisoner’s Dilemma. As  you can imagine, programs employing all manner of strategies were entered, some, keeping with traditional wisdom, informing on the other program every time, others ratting out the first fifty times, but not the next one hundred and fifty, and so forth. One program, submitted by Anatol Rapaport and called Tit for Tat, won the tournament handily. The Tit for Tat program employed the following strategy:

·         The first iteration, it cooperated (did not inform).

·         Thereafter, it did whatever the other program did in the previous iteration.

After Tit for Tat won the overall tournament, some analysts tinkered with its underlying strategy, and developed versions that, say, cooperated the first five times, and then did the tit for tat thing, or else started off by ratting, and then going into the tit for tat strategy, but the alternates always lost to the original. So, the analysis yielded three primary reasons why Tit for Tat won the tournament:

·         It was initially nice – it cooperated the first iteration.

·         It retaliated immediately for defection.

·         It forgave completely and immediately for cooperation.

Many years after I had read the original analysis, and was trying to crack the nut of how to get past people in the organization who were opposed to the advancement of a particular capability by slow-rolling or silent veto, the solution hit me like a thunderclap. In the advancement of a capability (again, in this case, PM) within the macro organization, you really aren’t trying to get everybody to “do” project management: you’re really attempting to get them to cooperate, or at least not defect in the technical program that you are pursuing. It then falls to reason that, in order to secure that cooperation, the implementation phase of the capability maturation program should act like Tit for Tat:

·         It has to be falling-off-a-log easy to plug-and-play.

·         “Retaliate” is a bit strong, but you must be able to identify and respond immediately whenever anyone directly associated with participating in the implementation effort attempts to defect.

·         If the participants are cooperating, then they are golden, even if they are sending you schlock data. Better data can be taught – cooperation can’t.

Following these three steps won’t guarantee a successful implementation, but they will maximize your odds of one. Of course, there are many other factors that can derail your efforts, but I believe having an overall strategy that incorporates these three will improve your chances significantly.

The use of structure in the technical approaches we select in addressing managerial problems allows us to solve recurrent problems with known successful strategies. Often these structures will accommodate analogous situations as well, and we can engage them with a similar expectation of success. But what happens if the new problem isn’t all that analogous, or if the structure is unsound in the first place?

The NBC variety show Saturday Night Live first aired in 1975, and is one of America’s longest-running television shows. It has met with considerable critical and financial success in that time, owing mostly to its mix of talented writers and performers. One week ago Saturday, on May 11, SNL was hosted by former cast member Kristen Wiig, who performed in several sketches as characters she had played during her time as a regular cast member. Her performance reminded me of the many ways that SNL’s tendency to be highly formulaic in their sketch writing has made much of the show, well, unwatchable. Here are some examples of what I’m talking about:

·         Any and all “Gilly” skits. “Gilly” is a mischievous little girl, played by Wiig. She does silly and destructive things, after which her father gravely intones “Gilly!”, and she replies “Yeth.” And, “yeth,” that’s the extent of these skits’ humor.

·         A staple of athlete guest-host, the skit where a sports team is in the locker room at halftime, and dialogue establishes that they are significantly behind. The guest host/team leader tells the story of a previous team that rallied under similar circumstances, having been inspired by some dopey song, a recording of which is played (and usually danced to). In my opinion, this template is vacuous and stupid.

·         Tina Fey’s “impersonations” of Sarah Palin, usually on the Weekend Update segment. These involve no jokes or traditional humor, with the New York City audience howling with derisive laughter at what are essentially nothing more than a string of mean-spirited mocks and insults. When the SNL writers couldn’t mock Palin for anything she had actually said, they made up something for her to say (“I can see Russia from my house!”), and then mocked her for that.

·         “Garth” and “Ann,” supposed folk-music recording artists who readily offer to sing on Weekend Update, but don’t have any songs at the ready. Instead, Fred Armisted and Kristin Wiig sit there and make up songs on-the-fly, while trying to sing the same words and melody. It was never funny, but now it’s foursquare in the Unwatchable category.

·         The skits where a new girlfriend is brought home – usually by Fred Armisted’s character – to meet his extended family, who all greet each other by excessive kissing, usually open-mouthed, even among brothers. Any sign of discomfort at this bizarre behavior comes as a shock to this family. Again, started out as simply unfunny, and through repetition has become unwatchable.

·         “Pig,” the Target cashier, also played by Kristen Wiig. Pig comments excessively on the items that customers purchase, and will go and fetch things for herself when they strike her fancy. Early versions would have a manager step in and announce “Classic Pig!” when Wiig would proclaim some improbable use for various items. Male guest-hosts are invariably shoe-horned in to the skit as stock boys with an unrequited crush on Pig.

·         Film shorts featuring Laser Cats. Cute the first time, not so much the second, and now unfunny and careening into unwatchable, no matter which celebrity is snuck in to the film short.

·         Lady Gaga’s film short on being in a threesome with Andy Samberg and another male cast member (I can’t remember which, ‘cuz it was unwatchable).

·         The “Secret Word” skits. A take-off of Password, Wiig plays the “celebrity” member of one team, but always says the word that her partner is supposed to guess. This “celebrity” is a washed-up Broadway actress who, when not blowing the secret word, waxes interminably about some previous part she had played. Started cute, but through repetition has become unwatchable.

Since Kristen Wiig appears in many of these examples, I’m tempted to reverse-engineer the structure that SNL writers employ and describe it as being characterized by a certain laziness of thought, with an expectation that Wiig’s timing and comic ability will make up for it. I don’t know – maybe there’s even a skit template library that the writers invoke when they are fresh out of fresh ideas. The point here is that, even in the most successful of franchises, structures and templates and canned strategies, even the ones that had perhaps lead to previous successes, can end up resulting in very poor management decisions.

Even on Saturday Night Live.