Game Theory in Management

In the United States, considerable political punditry pixel ink has been spilled on “The Swamp,” the nickname for the layer of bureaucrats whose collective decisions can seem to have a greater impact on public policy than those elected to office. But this hijacking of the authority to make key decisions within the organization is by no means confined to the civic sphere – it’s alive and well in the business sector, as well, and ignoring it only enhances its ability to shape the business model, often in ways that are counterproductive.

How did this management version of The Swamp get here in the first place? GTIM Nation knows of my reverence for the excellent Michael Maccoby, particularly his book The Gamesman; The New Corporate Leaders (Simon and Schuster, 1976). In it, Maccoby theorizes four basic archetypes in the workplace:

• The Craftsman doesn’t care so much about whom he works for, but cares a great deal about the quality of his output.
• The Company Man tends to assume the persona of the Team around him.
• The Gamesman doesn’t see his paycheck as food on the table or a roof over his head, but as a kind of token in some elaborate game he is playing. Because of this, the Gamesman archetype tends to (a) master the rules of this “game,” and (b) be more inclined to take risks.
• The Jungle Fighter gets ahead through cloak-and-dagger techniques, rarely through legitimate technical contribution.

So, how did the Jungle Fighter make his way into your organization, or, worse, your Project Team? He must have presented himself in his interview as being technically advanced, or at least more competent than the others applying for that job. I mean, he might have been straight-forward, and shared that his favorite workplace tactic was to engage in such toxic calumny that other Team members became afraid to even challenge the JF’s assertions in Team meetings, thereby assuming a patina of expertise, but I kind of doubt it. The very presence of any Jungle Fighter in the organization – and, I can assure you, there’s going to be at least one in any organization of size – means that some semblance of the dreaded Swamp is sure to follow.

Once this sort of unmerited managerial influence has a foothold, it’s enhanced by all of the members of the organization who have attained their positions through anything other than technical ability. I’m somewhat embarrassed to admit that, at one time, I sincerely believed that people advanced within their organizations based purely, or even mostly, on merit. Then I turned 14.

The reasons that people attain their ranks within a given hierarchy (other than entities like United States Chess) are often influenced by factors other than their technical capability. That’s not necessarily a bad thing, since each member’s ability to function within a team often makes the difference between success and failure. But being able to function at a high level with respect to inter-team relations does not make up for a lack of technical expertise, in my experience. If those in a position to determine, or even influence, the selection of the technical approach that the Project Team will be pursuing don’t know what they’re doing, no amount of interpersonal skills will save the project.

Meanwhile, In The Poker-Playing World…

In the game of poker, a “tell” is a change in a player’s expression or behavior that can serve as a clue as to their assessment of their hand. As with so many other games of skill with elements of randomness, some aspects of poker are highly analogous to the world of Project Management, and the presence of tells is one of them. If there are people in your organization in a position to influence the selection of the technical approach to the accomplishing of your Project’s scope, but are actually pretty clueless, how can they be identified? What are their tells?

It's my belief that one of the most obvious tells that someone who’s trying to influence the technical approach to accomplishing your project’s scope doesn’t really know what they’re talking about is a gross misjudgment of the level of rigor of the Project Management Information Systems, or PMISs. Most PM-types are wearily familiar with those who want little or no application of basic PM capabilities when some level is obviously called for, but the opposite is also true. Many projects that operate with highly detailed baselines, exhaustive Work Breakdown Structures, and over-regulated Critical Path schedules could operate just fine with far simpler information systems, but are prevented from doing so by their home organization’s policies and procedures.

Those pushing for little (or no) PM-based Management Information Systems are pretty much outing themselves as swamp critters, but what about those who insist on an overly burdensome system? A good litmus test here has to do with the question, Which is more important, attaining the scope on-time, on-budget, or provably following each and every requirement in the PM procedures? Of course, there are other tells (cough, insisting on a risk management [no initial caps] program, cough), but over-reliance on PM procedures to the point that they crowd out perfectly reasonable technical approaches to the Project’s central problem has to be one of the easiest to recognize.

So, look out, swamp people within the PMO! GTIM Nation knows how to recognize you when you bluff. You might just get called.

Yeah, I know it doesn’t seem that way. In fact, our workaday world often presents as the exact opposite, with the assertions of the Asset Managers and the whims opinions of the Strategic Managers always seeming to have more traction in the board room than those of we poor PM-types. But appearances can be deceiving, particularly in the management sciences, and this is one of those times. Believe it or not, the rest of the organization, either directly or indirectly, works for the PMO.

Let’s start with our friends, the accountants (a.k.a., Asset Managers). They know (or think they know) the value of the organization’s holdings, right down to the mechanical pencils in the supply cabinets. Interestingly, due to a concept known as “depreciation,” the last mechanical pencil in the box purchased one year ago is somehow worth less than any of the pencils in the box bought last week, despite no ascertainable difference in appearance or performance. But that aside, what is to be done with all of these assets? Do they generate revenue just on their own? Of course not. They only generate revenue when they are used in the pursuit of – wait for it – attaining scope. And, before anybody challenges me on the grounds that many investments, such as Certificates of Deposit or commercial paper holdings, generate revenue but are not matched against scope, I would argue that they are indeed matched to scope, albeit indirectly. Your Asset Managers might be holding the actual commercial paper or T-bill, but the person with its M1 equivalent is starting a business, or performing some other aspect of Project work.

The second type of management is PM. As I’m confident GTIM Nation is fully aware, it’s all about executing scope. And among the three types of management, which one is dedicated to the best way of executing scope? The answer is so obvious that it tends to generate a kind of low-level competition, or even resentment, against PM-types from the Asset Managers.

Finally, we have the Strategic Managers. I may be unique among management science writers in making the distinction between Asset, Project, and Strategic Management, but that doesn’t mean such a distinction is inaccurate or unwarranted. Even a rudimentary review of the types of information streams used by each type reveals that such a distinction is in place, and probably always has been. Within this structure, the Strategic Managers seek to maximize the organization’s market share, meaning that their actions and strategies are made with respect to the relative position of the organization’s competitors. If we set aside the activities of the advertisers, we have the proposal teams performing most of the work for the Strategic Managers. Of course, many Project Team members have been drafted kidnapped invited to participate in proposal preparation, but for those who haven’t had the honor, it typically involves responding to a Request for Proposal, or RFP, for – again, wait for it – project work consistent with the organization’s capabilities and experience. Since many (if not most) of the winning proposals are let on the basis of the lowest bidder who can perform the actual work, a kind of strange little dance goes on between the kidnapped Project Team members/ Subject Matter Experts and the Proposal Team Lead, where the head of the Proposal Team simultaneously seeks to assert technical competence (if not supremacy) at the most economical price they can muster. In a sense, those issuing the RFP are seeking to install a rather cold, hard filter, one that allows through the one contractor who has the most underpaid but competent workers.

Enter the PM-types. If the organization’s Project Teams can’t execute the work in the RFP for a competitive price, the Proposal Team is in a very difficult position, indeed. They can price the proposal at a point where they have some level of confidence that the organization can perform the work, and almost certainly fail to be the lowest bidder; or, they can price the proposal where they think it has a shot at winning, but will almost surely be at a price point where the under-performing Project Team will overrun. Conversely, if the organization’s Project Teams are efficient and effective, the Strategic Managers in general, and Proposal Team Lead in particular, are in a far superior position in relation to the competition. Not only will they be able to project a price point that has a shot at winning, they can point to the accomplishments of the Project Teams in accomplishing similar work in the verbiage of the proposal itself.

So, yeah, the PMOs might not appear to be very highly placed in the org charts, but both the Asset and Strategic Managers really need we PM-types to be on top of our game for them to have a shot at succeeding. No, we’ll never receive the kind of recognition we deserve with respect to the other two management types, but that’s okay. It’s all part of that “servant-leadership” business.

But, to the rest of the organization, the PMO has every right to say “you work for us.”

I’m of the opinion that the seminal double-entry bookkeeping body of knowledge (get it?) came about due to two drivers:

• A mostly mathematical exercise by Luca Pacioli, in the 15^th century,[i] and
• A method to fairly extract taxes from a rapidly expanding and more sophisticated business sector at that time.

Prior to double-entry bookkeeping, taxes were generally collected on a rather subjective basis. Unless one was a member of a feudal court, the display of personal wealth made for a natural target of the tax collector(s). As the wealthy sought to downplay conspicuous displays of affluence, tax collectors would have a more difficult time differentiating between those who ought to pay more, and those who had already paid their “fair share,” and then some. If you think about it, this entire dichotomy is the basis for the Robin Hood legends, where King John I of England was forced to raise taxes in order to meet the ransom demands for retrieving King Richard I from the Austrians. Since the actual collection of revenue was performed by the constabulary, this duty fell to the fictional Sherriff of Nottingham, the villain in the Robin Hood legends. Lacking a solid basis for such assessments, it would have been next to impossible to fairly and even-handedly perform this function. Notably, King John reigned from 1199 until his death in 1216, whereas Luca Pacioli didn’t publish his treatise until 1494.[ii]

But, once double-entry bookkeeping became common, specific laws targeting particular types of transactions or holdings could be passed, and evenly enforced. No more tax booths by the side of the road, demanding of passerby a percentage of their possessions based on superficial appearances. From a legal and financial point of view, it was brilliant, but it does raise the question: if not for the obligation to pay taxes, or to provide a consistent standard for valuing economic entities, would businesses today predicate almost all of their budget or money-related Management Information Systems (MISs) on the general ledger? My point is that I’m rather dubious that it got to that position based exclusively on its management utility, as opposed to its use for governments to raise money. It’s also easy for me to believe that, since every business had to use double-entry bookkeeping anyway, it was a relatively small management science/narrative step to assert that the point of all management was to “maximize shareholder wealth,” a bit of information that can only be derived from – you guessed it – the general ledger. And from there the expansion of the codex asserting double-entry bookkeeping as the ultimate authority when it comes to informed management decision-making just seemed to make sense.

I can almost hear rookie members of GTIM Nation saying “But Michael! There’s a vast difference between the knavery of the fictional Sherriff of Nottingham and modern-day Chief Financial Officers! For example, the Sherriff of Nottingham would make decisions about the collection and distribution of funds based on insufficient information and/or his own personal prejudices, leaving some interests overburdened and bitter, while others were unfairly and almost arbitrarily rewarded. Conversely, the modern-day CFO makes decisions or bases advice about the collection and distribution of funds based on the data in the general ledger, perhaps influenced his own personal prejudices. It’s completely different.”

Adding to the dynamic that provides the information from the general ledger appearing to be more valuable than its counterparts from the Project or Strategic Management realms is the immediacy of its apparent payoff. A generic employee approaching a generic manager and demonstrating that they had saved the company X amount of money appears to have made a strong case for their own personal contribution’s value. Not as clear is the immediate value of the Project Team member who informs their PM that they have averted a cost overrun in a specific Work Package. Success in the PM realm is often not realized until the project is actually finished, sort of like the way some colleges will award grades exclusively on the final exam. And, about that generic employee with their “savings.” Eliminating, say, a salesperson from the floor will “save” the company that person’s salary. It is also likely to frustrate customers who can’t get help during peak traffic hours with their purchase decisions, meaning that, in the mid-to-long term, such “savings” may actually hurt the organization in both the PM (customer-focus) and Strategic Management (market share) arenas.

Of course, I don’t anticipate the content of the GTIM blog to overturn the commonly-held notion of the supremacy of the general ledger in generating management information streams. I’m just posing some long-overdue questions about it. Please don’t send the Sherriff of Nottingham to take all my stuff.

[i] Retrieved from https://en.wikipedia.org/wiki/Double-entry_bookkeeping on June 4, 2023, 19:47 MDT.

[ii] Ibid.

How did the phrase “Project Management acumen” become subjective? I mean, it shouldn’t be, and PMI® has published scholarship to prevent it from becoming so, but somehow the common usage of the term seems to be heading away from the objective. Consider this blurb on Business Acumen, from PMI®’s website:

Business Acumen: Professionals with business acumen understand the macro and micro influences in their organization and industry and have the function-specific or domain-specific knowledge to make good decisions. Professionals at all levels need to be able to cultivate effective decision-making and understand how their projects align with the big picture of broader organizational strategy and global trends.[i]

I especially appreciate the phrase “…need to be able to cultivate effective decision-making…” How does one objectively score “effective decision-making?” If the PM doing the decision-making consistently brings in projects on-time, on-schedule, I would say that qualifies. That being the case, why does it seem that so many consultants, paper presenters, and seminar hosts point to anything and everything other than the successful project completion win rate in their portfolios? Don’t misunderstand – I have nothing against citing college degrees and certifications to establish PM cred. But what happens when a bunch of degreed and certified PM “experts” disagree on a central (or multiple) tenet of PM science? I’ve often said in this blog that you can put fifty Project Managers in a room together, and they won’t agree on the color of an orange. Let me add to that the notion that, of the fifty, most will hold themselves to be experts, with the dissenters worrying about their upcoming PMP® certification exam.

Consider one of the primary, if not the primary, tools of the risk managers (no initial caps), the Monte Carlo Simulation. Without getting too technical, suffice to say that, of the risk analysis software packages I have used, they all involve getting data from Subject Matter Experts, and these data typically include (with the Project’s/Task’s/Control Account’s cost and schedule baseline as a “most likely” starting point):

• If things go really wrong, what would be the cost/schedule impact?
• What are the odds of the worst-case scenario unfolding?
• What about if things just go medium-wrong? What would the cost and schedule impact be then?
• What are the odds of that scenario occurring?
• What if everything goes well? Are there any savings in time or budget that could be realized?
• And what are the odds of that happening?

Sometimes the data collection/SME interview process will pull more data similar to the above, but this is typically the basic data set that they’ll use. The risk manager or risk analyst (neither gets initial caps) then feeds this “data” into the Monte Carlo Simulator, and dials up the number of “random” outcomes. The resulting analysis is used to inform the recommended size of the contingency budget, likely at-completion dates or costs, or even the amount to be considered in the poorly-defined “schedule contingency.” Should anybody challenge the veracity of these figures, the risk managers will often remind them that a Monte Carlo Simulation method was used, resulting in a chilling effect on any common sense-blessed PM from speaking up in the first place.

Here’s the problem with all this.

None – and I do mean none – of the bulleted data points can be known with any precision. The polled Subject Matter Experts are usually speculating and guessing when passing these parameters. As cool as “Monte Carlo Simulation” sounds, the selected processing method becomes irrelevant, since the data feed is essentially a collection of guesses. Now, risk managers will point to the necessity of using a stochastic method for this type of analysis. Funnily enough, the first definition of the word “stochastic” from Wordnik is “Of, relating to, or characterized by conjecture; conjectural.”[ii] “Statistics Involving or containing a random variable or process.” has to wait for the second definition.[iii]

And yet, it’s been my experience that a plurality (if not a majority) of risk managers and analysts pretend to the business acumen high ground, even though the analysis techniques they push on the PM Universe are weak, if not out-and-out flimflammery. Hence my request that we coin a new term, a combination of acumen and flimflammery, “acuflammery.” Since the PMBOK Guide® lexicon’s format is pretty plain, I’ll assert the definition in Merriam-Webster format (the term will make it that far sooner or later, so I may as well):

Acuflammery noun

accu flamm ery ‘a kyu flam er ee’

: an idea or concept, particularly in the Project Management domain, that has the appearance of legitimacy, but is, in fact, an unsound analysis technique.

Synonym: snake oil.

And I can assure you, dear readers, that this term is by no means confined to the risk managers.

[i] Retrieved from https://www.pmi.org/certifications/certification-resources/maintain/pmi-talent-triangle-update on May 27, 2023.

[ii] Retrieved from https://www.wordnik.com/words/stochastic on May 27, 2023, 21:56 MDT.

[iii] Ibid.

Let me state right up front that I believe that the use of fictionalizing an idea from the sciences – especially and particularly the Management Sciences – is disingenuous. My first encounter with this approach to selling a supposedly scientific hypothesis or theory was when I read Walden Two (Hackett Publishing Company, 1948), by B. F. Skinner. Skinner, of course, was one of the seminal and most persuasive drivers behind the psychological theory of Behaviorism. How big was Behaviorism? According to VeryWellMind.com, “From about 1920 through the mid-1950s, behaviorism became the dominant school of thought in psychology.”[i] In Walden Two, a rural community has been established, with its internal governance based in Behaviorism. And, of course, this community thrives.

Eliyahu Goldratt took a similar approach to introducing the notion of “Critical Chain” Project Management with the publishing of his novel The Critical Chain (North River Press, 1997). Based on the Theory of Constraints, Goldratt’s characters engage in dialogue to lay out the various ideas that make up Critical Chain PM, mostly in a university setting. And wouldn’t you just know it? Those ideas effect successful outcomes in the real world (“real world” here being the difference between the fictionalized university and the fictionalized company where these ideas are implemented).

Compare and contrast this approach to what Waterman and Peters did in In Search of Excellence (Harper Business Essentials, 1982). They went to (then) successful companies, and noted what these companies did differently. No made-up characters, places, or events. This is the way Management Science is advanced. Not through untested suppositions looking for some organization with a claim to success that appears to be working its structure, and certainly not by a prefabricated hypothesis being set in a fictionalized place and time.

I can already hear GTIM Nation challenge “Michael! If you’re so against fictionalizing management science concepts, how do you explain Stanly T. Raspberry?” For the newer members of GTIM Nation, Stanly T. Raspberry is a fictional private detective that receives requests to investigate “cases” of egregious Project Management malfeasance. I introduced him back when I was writing my PMNetwork column, The Variance Threshold, and he has made several appearances in GTIM. The difference here, though, is that I’m clearly not expecting anybody to take ol’ Stanly seriously. The entire franchise started with a column entitled “Really Bad Management Writing,” and I’ve been using it as a device to mock both the fictionalization of management science ideas as well as some of the practices that I found to be, well, egregious.

However, there’s no denying the effectiveness of introducing a management hypothesis in a fictionalized setting, having that introduction and implementation proceed smoothly in the fictional organization, and the realization of the solution to long-existing problems leading to clear success. There’s even a Goldratt Institute, with points of contact in the United States, Malaysia, and Japan.[ii] This being the case, I can’t help but to wonder what would happen if I were to admit the efficacy of the PM-science-in-a-novel approach, dial down my loathing of that particular device, and write a novel about some aspect of PM that I believe is underappreciated (like Earned Value Management Systems’ ability to accurately forecast cost and duration Estimates at Completion) coming to the rescue of a fictionalized company or organization beset with rival information streams that are basically flim-flammery. The main problem with writing such a novel is … finding a truly underappreciated PM theory? No, that part is easy. The “theory” being pushed doesn’t even need to be valid, since, in fiction, the outcome is always in the novelist’s head. What is needed is an original situation for the underappreciated PM theory to work on as some sort of talisman, since the long-standing and familiar issues with macro-PM theory, like the optimal role of the PMO in setting guidance, or the level of robustness called for in a given organization, will never have a clearly articulatable theory that’s widely applicable. The central conflict/plot driving device here must be fresh somehow, like what PMs in charge of human-like androids face in their work that’s somehow applicable to what, say, capital projects and construction PMs encounter.

So, before anybody beats me to it, I think I’ll write a novel about a young, brilliant PM named “Michael,” who has been put in charge of a line of human-like androids, and has brought with him an appropriate recognition of an EVMS’ ability to accurately forecast at-completion costs and durations. He is opposed by risk managers (no initial caps) and accountants who stand to lose their corporate standing if Michael successfully brings in his scope on-time, on-budget, completely without their “help.” Then, I’ll reveal at the climax that the risk managers and accountants are actually androids themselves, from an earlier line that was discontinued due to their overly robotic, template-driven approach to PM. If real-life risk managers and accountants object, I’ll reply “It’s only fiction! Didn’t you see the whole “any resemblance to actual persons…” bit in the Introduction?
Also, I’m going to want exclusive rights to the action figure version of Michael.

[i] Retrieved from https://www.verywellmind.com/behavioral-psychology-4157183 on May 17, 2023, 20:10 MDT.

[ii] Retrieved from https://www.goldratt.com/contact , on May 20, 2023, 13:52 MDT.