Game Theory in Management

This is going to be a tricky blog to write, so let me make one distinction up front: when I use the word “ignorant,” I’m specifically referring to Merriam-Webster’s second definition, “Unaware, Uninformed.”[i] Other definitions tend to include an aspect of a lack of intelligence, or some other form of mental inadequacy, and, for the purposes of this blog, that’s not what I’m talking about. Now, we are all probably familiar with how learning can be contagious, particularly as a member of a high-performing team. In medicine, there’s even an axiom for disseminating proper technique, “See it, do it, teach it.” It’s why, in organizations that value quality and performance, the more mature PMOs will tend to act as a macro-organizational enhancement, steadily increasing the odds that the projects in the portfolio will come in on-time, on-budget.

But the dark side of organization-wide learning is the very real possibility that the cumulative learned skills of the Project Team or PMO could unravel, leaving it weaker than it had been previously. This effect is more likely to come about under two circumstances:

• For Management and Operations (M&O) contractors at facilities attempting to deal with a long-standing PM problem, bringing in managers – particularly high-level ones – from other, similar facilities can be iffy, especially in destinations that perform a unique function. The reason is because people new to the hiring facility will likely not be familiar with many of the nuanced barriers to template-derived management strategies or technical approaches. The new executive may have been extremely effective in correcting a similar problem at another place and time, but the hard fact in many of these instances is that the barrier that can render this carried solution completely ineffective is both subtle and undefeated. New managers and executives hired from the outside, in my experience, will place a high value on loyalty within their new organization, not necessarily talent, meaning that the very members of the Project Team who are best able to assist in offering up course corrections are also the ones who will likely be seen as opposing the new manager, thereby eroding their organizational standing. It also means that the really-not-that-analogous solution being bolted on to the current problems will drive out better options by force of leveraging organizational power, reducing or even eliminating the chances of negotiating those very nuanced yet undefeated barriers.
• Then we have the situations where the manager(s) determining the technical approach did not attain their position through merit. Very few true meritocracies exist. The only one I’m aware of is United States Chess, where your ranking in that organization is your current points accumulated. Your score is what it is, and it alone determines your rank in USC. So, given that in the business world, the people in positions to make the final determination as to technical approach and implementation strategy didn’t necessarily attain those positions through merit, it stands to reason that some of those determinations will be flawed, perhaps irretrievably so. Hatfield’s Rule of Management #24 (a) clearly states that the first of the three critical characteristics of managerial leadership is the ability to identify the optimal, or at least workable, technical solution(s) to the problems being addressed by the Team. However, those who have attained positions of managerial leadership deficient in this ability, sometimes by even the smallest degree, will not only tend to default towards more familiar template-based solutions, I have seen them actively seek to defeat a better technical approach should it be offered up by any other Team member. Consider what this effect will have in the aggregate: the person pushing the sub-optimal, template technical strategy/implementation approach is overcoming the person advocating for the superior, if not truly optimal approach.

In each of these scenarios, ignorance is advancing at the expense of the macro-organization’s ability to effectively handle novel or difficult managerial problems. Essentially, ignorance has become contagious, and is working against the organization’s ability to make informed decisions on a consistent basis. And the sure-fire indicator that the ignorance-contagion effect is unfolding in your organization? It’s when the new/not meritorious exec finally comes to the realization that their techniques have failed, and places the blame directly on the insouciance of the Project Team in carrying out their flawed management strategies. This “explanation” almost always carries with it the assertion that their strategy would have been successful, if only upper management would have provided sufficient support, or backing (i.e., threatened to fire those members of the Project Team who failed to miraculously make the flawed approach actually work).

But here’s the thing: those “insouciant” Project Team members taking the blame for the failure were most likely the most educated ones, recognizing that the technical approach being pushed by the PM was flawed. As the stigma of failure gloms on to the educated, and insulates the unskilled PM from that failure, ignorance advances, and the managerial effectiveness of the macro-organization retreats, rendering ignorance very contagious indeed.

[i] Retrieved from https://www.merriam-webster.com/dictionary/ignorant on March 26, 2023, 15:26 MDT.

Empathy demands I cringe a little bit for any employer who lists a job ad that includes as part of the winning candidate’s skill set the ability to “change the culture,” or be an “agent of cultural change.” This seemingly benign requirement is, in fact, a tacit acknowledgement that the existing organization is incapable of executing its business model satisfactorily, which, in turn, points to at least one of the following causes:

• The organization lacks the overall level of talent needed to execute the selected business strategy, or
• The organization itself is fine, but the business strategy is sufficiently flawed so as to preclude a successful execution as articulated.
• And, of course, both could be true.

Then we have the problem of what, exactly, are we talking about when the term “corporate culture” is bandied about? Investopedia is as good a source as any, and here’s how they define it:

Corporate culture refers to the values, beliefs, and behaviors that determine how a company's employees and management interact, perform, and handle business transactions. Often, corporate culture is implied, not expressly defined, and develops organically over time from the cumulative traits of the people that the company hires.[i]

I think this definition is good, but I would like to add to the “values, beliefs, and behaviors” list one more item: priorities. If the organization’s management and employees do not have a shared set of priorities, then even a superior business model, perfectly aligned with the economic environment in which it functions, is vulnerable to a failed implementation due to the lack of cohesion among those performing the actual work. For example, if a new restaurant chain has an equal mix of employees and managers who believe that their top priority is either to give customers a very pleasant dining experience or to, say, maximize shareholder wealth, then customers will have a very different experience at that establishment, depending on who serves them. Note also the reference to how corporate culture “…develops organically over time from the cumulative traits of the people that the company hires.”[ii]

I juxtaposed the serve-the-customer and Asset Managers’ goal as priorities in the previous example for a reason. Placing the priority on meeting (or exceeding) customer expectations with respect to scope, cost, and schedule is firmly within the Project Management domain, confirmed by the nature of the management information systems that support PM. For decades business colleges have taught that the point of all management is to “maximize shareholder wealth,” and I’m pretty sure that is still being taught today. Curious how that little axiom never seems to make its way into an organization’s Mission Statement, or Vision Statement if it is, indeed, the point of all management. Among the sixteen best Mission Statements according to Biteable, only one mentions a return on investment at all, and even then it’s somewhat tangential. That one belongs to Spotify, and reads:

To unlock the potential of human creativity — by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it.[iii]

None of the other Mission Statements on the list made mention of Asset Management objectives at all. But all sixteen did call out providing some sort of benefit to existing and potential customers, leading me to believe that PM is far more central in providing the basis for a coherent, successful corporate culture than Asset Management. This is true even for the very business colleges offering courses in the management sciences. I did a web search on the question “Why should I attend business college?” and none of the many responses included the faintest hint of “to shore up the college’s endowment.”

So, does this mean that PM is the optimal vehicle for changing corporate culture? Well, yes, but it’s complicated. While I do believe that corporate culture is downstream from the efficacy of the organization’s business model in delivering goods and services within the customers’ cost and schedule parameters, I’m also convinced that the whole “cultural” thing, as defined earlier, falls mostly within the realm of Organizational Behavior and Performance, which is (ironically enough) part of Asset Management. This means that, even with a superior business model/technical approach laid out by the PM, success is far from guaranteed, particularly if the organization happens to have a preponderance of Jungle Fighters and Company Men rather than Craftsmen or Gamesmen (the archetypes from Michael Maccoby’s excellent book The Gamesman [Simon and Schuster, 1976]). Essentially, if you want to “change the (corporate) culture,” don’t expect PM to get you all the way there.

But it’s the right place to start.

[i] Tarver, Evan, Corporate Culture Definition, Characteristics, and Importance, retrieved from https://www.investopedia.com/terms/c/corporate-culture.asp on March 12, 2023, 19:36 MDT.

[ii] Ibid.

[iii] Biteable, Mission Statement Examples, 16 Of The Best To Inspire You, 15 June 2021, Retrieved from https://biteable.com/blog/mission-statements/ on 13 March 2023, 18:39 MDT.

When I saw that ProjectManagement.com’s theme for March was Personal PM, I naturally assumed that most of the so-themed offerings would be along the lines of pointing out Project Management’s amazing capacity for scalability. After all, the exact same type of schedule logic (mostly finish-to-start) goes into properly ordering the activities in a wedding as it does in properly ordering tasks to build and launch a space shuttle. But there’s another aspect of Personal Project Management that goes beyond the applicability of its precepts in pursuit of private objectives, and it has to do with our ability as managers to separate our business techniques from our view of ourselves. It’s only natural to have an emotional attachment to our work, in addition to the intellectual and energy investment in making a living. How does one go about making a distinction between the two worlds? Well, let’s start by taking a look at Mario Puzo’s classic, The Godfather.

The line in the title (or a variant) is repeated several times in the movie. As noted, the version in the title comes from a scene where Tom Hagen is having an intense discussion with Sonny Corleone about the recently-thwarted second attempt on his father’s life, with a partial repeat of the quote happening seconds later. It makes a third appearance in two minutes and fifty-three seconds, when Michael states his plan to kill both Sollozzo and the corrupt policeman who broke Michael’s jaw and works as Sollozzo’s bodyguard, McCluskey. Sonny accuses Michael of taking his injuries from McCluskey personally, and invokes the axiom thirty-three seconds later, for a total of four. The quoting or direct reference to this axiom four times in around 3 ½ minutes of dialogue means two things, (1) that all parties to the discussion consider it valid, and (2) the tactics that they are discussing at least have the appearance of breaching that guidance.

So, why is this axiom widely-held, and generally accepted? If I were to attempt a paraphrase, it would be along the lines of “allowing personally-held beliefs to influence what would otherwise be an anodyne management science – based analysis and resulting decisions would expose that analysis and those decisions to irrelevant influences, increasing the odds of a bad outcome.” Since my paraphrase is 49 words long, and “It’s business, not personal” is much shorter and to the point, I can understand why hardened gangsters would prefer the axiom version.

Meanwhile, Back In The Project Management World…

I’ve had the unfortunate experience of being contradicted by a contractor/consultant (who was new to the PMO) during a high-level meeting, on a matter that (1) was trivial, (2) I was completely in the right, but (3) ended up making me look silly in front of my organizational superiors. I understood in an instant why this person had done so – it was fairly clear that this consultant was attempting to establish credibility, so as to increase the odds of future billable hours, and the opportunity to do so just happened to be at my expense. Alternately, this person could have been simultaneously snarky and wrong, excessively so on both counts, but I’ll give them the benefit of the doubt. But I came to understand that they were taking their Project Management rather personally, as if the basis of their analysis was somehow interwoven with their presented persona, in such a way that one could not have one without the other. This, of course, is in direct contradiction to the not-personal-it’s-business axiom, particularly in my verbose but more precise paraphrase. For if one cannot dispute a given approach to a PM-centric problem without challenging the expertise of the people pushing it, then virtually all subsequent attempts at evaluating other solutions to the problem at hand turn into little more than résumé-based hierarchical angling. With the discussion environment thus compromised, you’re almost guaranteed to come up with a sub-optimal solution. You would, in fact, be lucky to escape without selecting an option that would be, in a more rational room, easily identified as a mistake – hence the reminders in The Godfather to keep clear the distinction between the personal and business decisions.

Ultimately, the axiom we are discussing comes down to the efficacy of the Economic Man theory (essentially that people will always make decisions that will benefit them, personally and economically), and therein lies the problem. Many a calculated Game Theory solution has been shown to be unworkable in the real world due to reliance on the Economic Man theory, indicating that it’s really rather common for people to make business or management decisions based on personal, unquantifiable, entirely subjective elements.

And those elements won’t go away, even if you’ve got Tom Hagen reminding the Project Team emphatically that that shouldn’t be the case.

I think a lot of what passes for advanced Communications Management (ProjectManagement.com’s theme for February) can challenged by employing the Game Theorists’ favorite technique, the Payoff Grid, as it applies to the feudal era role known as the court jester, or fool. As a point of reference, although it is commonly assumed that the court jester’s primary duty was to entertain whatever court he was assigned, in many (if not most) royal courts the jester’s main purpose was to criticize the decisions made by the aristocracy, up to and including the king or queen themselves (e.g., the “Fool” character in King Lear). While offering such criticisms would be typically fatal to the dukes, earls, barons, thanes, or any other land-owning political players at court, the fool, who could clearly never represent a genuine threat to the king’s position, had some level of protection against retribution for his words to the actual emperor/empress. In short, if the king was about to pursue a clearly misguided action, but the powerful members of the palace were afraid to point out the folly, the court jester/fool would be the one to challenge such plans, relying on the convention of non-retribution for the words he spoke.

Meanwhile, Back In The Project Management World…

The analogy of the feudal court to the modern-day executive boardroom is a pretty easy one to make. In those instances where an executive is pursuing an objective with a technical approach that is clearly insufficient, or even destructive to the organization or project team, and that executive has power over the trajectory of his subordinate managers’ career paths, whom among them, bereft of the protection afforded medieval fools, would be willing to give voice to the needed challenges or criticisms? I believe that much of the Communication Managers’ assertions concerning the need to “engage all stakeholders” has its basis in avoiding this exact scenario, under the assumption that someone among the “stakeholders” who is not beholden to the person setting the technical agenda would be in a position to offer the needed challenge, thereby preventing the wasteful or destructive agenda from being pursued in the first place. Without reviewing the potential efficacy of this Communications Management tactic on its face, I would like to turn reader attention to its opposite, as shown by the following Payoff Grid:

As is the case with most Payoff Grids, two of the Scenarios (in this case, B and C) reveal a completely acceptable state of affairs. If the technical agenda is bad, and someone in a position to influence its pursuit points that out, as in Scenario B, it’s an appropriate communication. Similarly, if the technical agenda is fine, and no one puts forth a challenge or criticism of it, as in Scenario C, all is well. As I stated earlier, I believe that much of the Communication Managers’ codex is oriented towards avoiding Scenario D, which raises the question: what happens when those techniques are employed, but the situation on the ground is, in fact, more analogous to Scenario A?

Merriam-Webster defines “twenty-twenty hindsight” as

the full knowledge and complete understanding that one has about an event only after it has happened.[i]

I understand that this phrase is most often invoked after a decision was made, and the evidence that it was the incorrect one becomes obvious. But my target is the other side of the Payoff Grid. I get that, in the aftermath of a poor decision, the decision-makers are subject to criticism, some of it unfair, as virtually all serious management decisions are made based on incomplete information. My focus in on those instances where the optimal technical approach (and, in most cases, the accompanying implementation strategy) have been selected, but prominent critics challenge or criticize it, seeking to prevent its use. These can be especially damaging in those cases where a truly novel approach is being employed, with no previous success stories to justify its selection. In these instances, the inappropriately articulated challenges and criticisms end up harming the development and implementation of innovative PM techniques, all because of a lack of commonly-accepted criteria to cut off “stakeholder input” once the PM has selected the technical approach.

In short, some of the stakeholders’ input can be reliably used in forging the path to the identification of the optimal technical approach to resolving the project’s central problem, and other input can be rather neutral, neither helping nor harming. But some of this input can actually be detrimental, should it be allowed to gain traction, and the people pushing it won’t dress in stripes and funny hats to tip you off. This is something the PM will have to discern on their own, but can’t do so if they’re not aware.

Now you’re aware.

[i] Retrieved from https://www.merriam-webster.com/dictionary/twenty-twenty%20hindsight on February 19, 2023, 10:32 MST.

Back when I was spending a lot more time in classroom settings, teaching new Project Controls Specialists how to do their jobs, I would devote a good five minutes within the Performance Measurement module to discuss one particular aspect of preparing the documents germane to PM, specifically Baseline Change Proposals and Variance Analysis Reports. When I came to this particular point in the session, I’d turn off the projector, walk over to the white board, and write the word “his” on it.  Then I’d pick out someone in the class (usually the person who appeared to be least engaged) and ask them to read the word, which they would do.

“Is it misspelled?” I would challenge.

“No.”

Then I’d write the words “hers,” “theirs,” and “ours,” followed by the same questions, and getting the same answers, as the class slowly became more curious about this line of inquiry. Then, after erasing the previous words, I’d write the word “its.” It was at this point that most of the class would laugh, finally seeing where I was going with this little exercise.

“You’re laughing now,” I would begin, “but I can virtually guarantee that, within the coming week, I will see at least one instance of the impersonal possessive pronoun being spelled ‘it’s,’ in either a VAR or a BCP. For the record, ‘it’s’ is a contraction of the words ‘it is,’ which is something that we all should have learned definitively prior to graduating seventh grade. And, before anyone accuses me of being an insufferable grammar police nitpicker, which may or may not be a reasonable assessment of my persona, I would like to point out that I’m not the person for whom these communications are meant. It’s the customers who will likely make some rather unfortunate, negative inferences if they see errors like this. Remember, they rely on these documents to reliably inform them of the cost and schedule status of their project. If any aspect of these reports indicate that their author wasn’t paying attention in seventh grade English class, why should any of them believe that the same person understands the difference between a Cost Variance and a Schedule Variance? Or the proper way of computing an Estimate at Completion?”

The old writers’ admonition to consider the audience prior to picking up the pen has an additional layer when it comes to writing the documents germane to PM. Using the previously-stated examples of the Baseline Change Proposal and Variance Analysis Report, what are going to be the typical customer’s concerns when it comes to the reliability of these communications? I believe that

• …for the BCP, they may be on guard against a contractor attempting to gain an adjustment for some added cost that, in reality, was due to something the contractor could control, such as performance.
• …with something similar for the VAR, but more along the lines of shifting blame for negative performance away from the contractor, and towards unmanageable or unforeseen events.

To be clear, I’m not saying that this is what’s going on when these documents are prepared and presented, only that it’s at least a possibility that these concerns are in the back of the clients’ minds when they see them. In order to quell these fears, it’s incumbent on these communications’ preparers to write them in such a way as to demonstrate (a) a command of the issues and events leading to the BCP/VAR being created in the first place, (b) an acceptable level of expertise in PM strategies and techniques, and (c) sufficient proficiency in writing to convey both (a) and (b). Engaging in obfuscation or muddy writing is an indicator that the ideas being “conveyed” haven’t been thoroughly vetted, or thought through sufficiently to establish reasonable causation.

Whenever I’m on the hook to produce PM-specific documents, I try to remember to be mindful of voice. Psychiatrist Eric Berne, in his best-seller Games People Play (Grove Press, 1964), theorized three parts of the persona, namely Child, Adult, and Parent, and went on to posit that interpersonal conflict arises when the lines of communication between people become mis-aligned with these parts. For example, if a member of GTIM Nation were to post a comment on a technical aspect of one of my points, that would represent that person’s Adult communicating to my Adult. However, if I were to respond condescendingly, challenging that person’s education or depth of experience, that would represent my Parent addressing their Child, thereby crossing the lines within that transaction, and most likely leading to conflict. This aspect of PM communications may be the primary reason I find many paper presentations on the subject to be off-putting, as more than a few first-timers present a voice of absolute intellectual superiority as they spout long-known elements of PM, an approach I’ve nicknamed eat-your-peas-style hectoring. Their voice is that of a Parent scolding a Child, almost certain to generate resentment on the part of the listeners.

So, I’ll ask again: When preparing a PM-centric communication, who do you think you’re talking or writing to? And, after you’ve taken a shot at answering that question, one more remains: Is that really who you will end up talking to?