Game Theory in Management

Nicknamed “The Prince of Paradox,[i]” philosopher and writer G.K. Chesterton asserted the following:

“In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, I don't see the use of this; let us clear it away. To which the more intelligent type of reformer will do well to answer: If you don't see the use of it, I certainly won't let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”[ii]

The shorthand version of this quote is “Don’t ever take a fence down until you know the reason why it was put up,” which is close to capturing the overall meaning, though I would add the observation that, where Chesterton thought the modern type of reformer would go up to the fence “gaily,” I would substitute “naively.” It’s an easy conceit that informs younger generations that all that was set up before with which they take exception was done so out of ignorance. Properly trained auditors know the basis for their comparisons, and appropriate methods for evaluating against any given audit standard. Poorly (or even un-) trained auditors simply show up and start condemning each and every condition or technique with which they disagree.

Meanwhile, Back In The Project Management World…

A common and frustrating characteristic of reformers, in this case those who would implement some more “advanced” PM capability, such as Agile/Scrum (ProjectManagement.com’s theme for November), is that they will often approach their work with the confidence that their proposed business model updates will work for their new organization, if only the targets of the reform would (a) recognize the superiority of the reformers’ approach, and (b) cooperate with it fully. This is pretty ironic, considering the practice of software engineers to conduct what’s known as A/B Testing. In situations where older code is undergoing significant additions or modifications, or when, say, a website isn’t performing as anticipated, a standard practice is to avoid implementing the modifications all at once, and instead update characteristics incrementally, constantly comparing the new version’s performance with the existing. By approaching the update in this fashion, the team avoids the scenario where they find themselves having worsened the situation from where it was when they began, with no idea precisely which change or combination of changes caused the reversal, and, therefore, no cogent path to reclaim their losses. Without a comprehensive knowledge of all of the other modules that interact with the one being changed, it’s almost guaranteed that a significant number of these modules will fail, perhaps causing the modules depending on them to also fail, initiating a cascading effect across the entire application. And, just to be clear, it is extremely difficult to get a handle on each and every connection among nodes in even a relatively simple network.

Somehow, though, this caution in tinkering with existing nodes in a network tends to evaporate when the discussion turns to implementing a novel PM strategy, such as Agile. Make no mistake: business models are highly complex networks, whether they came into existence through a master plan, or entirely holistically, by piecemeal. One might be able to change out, say, the software package for the general ledger with relatively few implementation issues, since the functioning of the GL is highly regulated. Not so with Project Management software packages or approaches, where even the appropriate level of system rigor tends to be a highly contested matter. If an organization finds itself in the software marketplace through, perhaps, some Project Team members developing an app that solves an acute problem afflicting entire portfolios, but that organization was ill-disposed towards setting up Work Packages and Control Accounts, it’s highly unlikely that they will suddenly embrace that very change just because they are now being asked or required to create Epics, Stories, and Sprints. And even in those circumstances where the organization has a fairly robust traditional PM capability, there may very well be legitimate reasons for not streamlining the configuration management/ change control process. It would, then, be a mistake to attempt an Agile management implementation until after those reasons can be discovered, evaluated, and addressed, lest they manifest in the new business model.

To be sure, all of this can be done. It simply requires the flexibility to be cognizant of the reasons behind the configuration of the existing business models. In short, it will require the Agile PM reformer to be, ahem, agile enough to hop over Chesterton’s Fence.

[i] Retrieved from https://www.christianitytoday.com/ct/2001/augustweb-only/8-27-52.0.html?paging=off#bmb=1 on November 11, 2022, 17:31 MST.

[ii] Chesterton, G.K., The Drift from Domesticity (1929).

Being the contrarian that I am, when I saw that ProjectManagement.com’s November theme was Agile PM, my thoughts (automatically?) went to compared to what? Agile PM, a favorite of the Information Technology set, was originally developed to accommodate the significantly more dynamic management environment where software projects are developed, since employing a traditional Baseline Change Control Board that meets once per month would be to condemn the typical IT project to an ossified configuration control-induced overrun/late delivery. I get that. By arranging the elements of the project’s scope into Epics and Sprints (roughly analogous to Control Accounts and Work Packages), the members of the Project Team with specifically assigned change control authorities could quickly modify the performance characteristics of that scope to account for unanticipated conditions or advances, enhancing the odds of an acceptable product being delivered on-time, on budget. Take a look at the list of antonyms for the word “agile,” from thesaurus.com[i]:

• dull
• ignorant
• lethargic
• lazy
• slow
• clumsy
• rigid (hence the reference in the title)
• stupid (really!)

…among others. Indeed, among the list of antonyms for ”agile,” I didn’t see any that had a positive connotation. So why in the world would anyone attempt to make the case against Agile PM? I’m glad I’m asking myself that question.

The problems inherent in Agile PM are pretty easy to uncover. A quick reading of The 13^th Annual State of Agile report makes them apparent. For example, the whole raison d’etre for Agile PM was to be able to deal with fast-developing changes in scope, right? Well, on page 11 of the report, under the open-ended question “How Success is Measured …with Agile Initiatives (emphasis in the original), we see this gem: “Product scope saw a decline over the past years going from 40% to 20% and falling to 12% this year.”[ii] For a business strategy designed to alleviate difficulties in modifying scope within the traditional PM structure, this is quite the poll question response. With respect to managing scope, its own practitioners appear to be losing faith in Agile’s ability to perform as advertised.

A glance at the topic of “Challenges Experienced Adopting & Scaling Agile” is also revealing. Survey respondents’ top three challenges were:

1. Organizational culture at odds with agile values
2. General organization resistance to change
3. Inadequate management support and sponsorship.[iii]

In addition to reminding GTIM Nation of Hatfield’s Incontrovertible Rule of Management #5, that one cannot advance a capability maturity by leveraging organizational power, I’ll add this quote from Nicolo Machiavelli:

“It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things.”[iv]

For every frustration the “traditional” PM-types have had in influencing organizational culture to do such basic things as setting up the general ledger’s chart of accounts to mirror the project’s Work Breakdown Structure, what the Agile PM practitioners attempt in business model influence space is even more difficult. The three “challenges” listed above are essentially the same complaint: the people we’re selling Agile to aren’t buying, and management won’t make them. I believe all three reflect the inherent difficulty in “initiat(ing) a new order of things.”

Finally, if we’re being brutally honest, I’m convinced that, should each member of your typical customer-attended sprint meeting OR Baseline Change Control Board be struck by a random flying sodium thiopental dart, at least one customer would admit to being on high alert to prevent the allocation of a cost adjustment for having overspent a Work Package or two (a “get-well” Baseline Change Proposal, or BCP), while the contractor is hyper-vigilant to prevent the addition of something that’s technically not in the baseline, at zero additional cost (scope creep). How this sub-rosa conflict plays out in a typical BCCB meeting tends to follow a familiar script, including lofty discussions on how contingency or management reserve is properly defined, estimated, and used. But how it’s played out in an Agile Planning meeting is a bit more convoluted. Instead of having a paragraph in a BCP template that addresses the nature of the change, with another spelling out its impact to the baselines, the Scrum Team will evaluate “User Stories” in the Sprint Review to evaluate completed tasks, and use those lessons to inform how to continue to work incomplete tasks. With these verbal User Stories – essentially, narratives – being, by definition, more fluid than their traditional, written-out versions, it seems to me that there would be an increased chance of either scope creep or get-well changes seeping into the cost and schedule baselines.

Sure, I’ll get with the ProjectManagement.com program and discuss some of the more gee-whiz aspects to Agile PM in later blogs. For now, I just had to go ahead and make the case for performing configuration management more traditionally, or, as the list of antonyms for “agile” puts it, “rigid.”

[i] Retrieved from https://www.thesaurus.com/browse/agile on November 4, 2022, 17:33 MDT.

[ii] The 13^th Annual State of Agile report, pp.11.

[iii] Ibid, pp. 12.

[iv] Retrieved from https://www.internetpillar.com/niccolo-machiavelli-quotes/ on November 4, 2022, 18:20 MDT.

I find myself thinking about the horror film genre, not because it’s near Halloween, and not because I like watching them (I don’t), but in the sense of trying to understand their attraction or, more precisely, where they derive their fascination among those who do like to watch them. The slasher ones are easy – nobody wants to be killed with a knife, particularly one wielded by a person wearing a hockey, “scream,” pin-head, or whatever that thing that “Jason” wears-type mask, all while seemingly able to walk through walls, unerringly know when a protagonist is alone and vulnerable, and is capable of surviving all manner of gruesome deaths themselves. Certainly the more complex sub-genre of these movies has to do with a description of a dystopian future, one where most people face extremely difficult daily challenges to simply survive due to some catastrophic failure of economics, foreign affairs, ecology, or … technology.

That we may experience in our lifetimes an economic downturn, war, or extreme weather event is scary, no doubt. But there’s just something about technology gone awry that’s frightening at a higher level. Robot butlers look really cool, until they band together to either enslave or wipe out humanity (I, Robot; the entire Terminator franchise, among many others). Curing disease is certainly noble, until non-human animals become the apex planetary species as an unintended consequence (Planet of the Apes franchise, Species, etc.). And let’s not forget the fears of self-aware supercomputers combined with advances in nuclear weapons technology becoming the ultimate buzz-kill (Colossus: The Forbin Project, etc.). These fictitious scenarios have a real fascination to them, unequalled by sharks, mummies, vampires, or werewolves in that, as unpleasant as interacting with any of these might be, they simply don’t rise to the level of creating a universal dystopian future for large swaths of the Earth’s population.

Meanwhile, Back In The Project Management World…

Have you ever noticed that, whenever an action/thriller movie features some type of technology that gets out-of-hand, it’s the Project Manager that’s usually tagged as the antagonist? For example, in Jurassic World (2015), in the dinosaur-themed park that must have required thousands and thousands of people to create and maintain, somehow the head of security, Vic Hoskins (played by Victor D’Onofrio) is the ultimate bad-guy for seeking to weaponize the critters when they (of course) escape their confines. In the aforementioned Colossus: The Forbin Project, the head designer/PM, Dr. Charles Forbin, is called out in the title of the movie, along with the fact that they specified that it’s about a project. I recognize we’re talking about fiction, but, in real-life analogous situations, you could be fairly confident that neither the designers of the dinosaur enclosures nor the person who thought it would be a swell idea to let Colossus communicate with Guardian (the President of the United States) would get nearly as much blame as Hoskins or Forbin for the ensuing disasters. When the technology works, its inventors/discoverers are heroes. When it causes widespread suffering, well, the PM should have had better motives, or more respect for the technology, dontchaknow.

All of which points to a new rule I want to add to Hatfield’s Incontrovertible List of Project Management Axioms, that it’s the Project Managers who are seen (rightfully) as being the person ultimately responsible for an activity’s actual outcome, whether it was part of the original plan or not. For example, when the aforementioned cloned dinosaurs start sprinting out of their clearly sub-standard enclosures, you wouldn’t expect to hear from the Asset Managers on the topic of the wisdom of awarding the barrier construction project to the lowest bidder. Nor would it seem plausible that the Strategic Managers would select that moment to remind everyone how a zoological park featuring facsimiles of animals long-extinct AND extremely dangerous could be expected to out-draw every other zoo in the world, combined. No, blame for fictional technology projects gone wrong and inducing a disastrous, if not out-and-out dystopian future gravitates to the PMs. It’s because we own the scope of our projects, particularly so when an outcome is bad, no matter how far removed from the original intent that eventual outcome becomes. Also, it’s interesting that we don’t see any risk managers (no initial caps) around to estimate the odds and impact of the dinosaur-like monsters escaping their containment, and eventually inflicting incalculable (get it?) levels of death and suffering on the world (as depicted in Jurassic World: Dominion [2022]). Before GTIM Nation reminds me of the Ian Malcolm character (played by Jeff Goldblum), I will point out that Malcolm’s character introduces himself as a chaos theoretician, not a risk manager, and quantified none of his predictions (though I will admit finding “life finds a way” as an entry in a risk register would be highly amusing).

To correct the tendency for PMs to receive a preponderance of blame for when some high-falutin’ project goes off the rails, I think the talented writers within GTIM Nation should send proposals to PMI® Publishing for sci-fi novels that feature a dystopian future avoided by a PMP®. Better yet, we should petition PMI® Publishing to commission such a work. Just think what the movie rights would be worth!

Predicting the future of Project Management is far more difficult than doing so for Asset Management. Double-entry bookkeeping, the basis for today’s Generally Accepted Accounting Principles, has been around for hundreds of years, since around the time of Machiavelli (a coincidence?), and hasn’t changed very much over that time span. Essentially, the accountants helping the pilgrims settling their affairs prior to boarding the Mayflower wouldn’t be that out of place in a modern accounting firm, save for the computerized versus pen-and-ink ledgers, and (maybe) clothes worn. This being the case, it’s a relatively safe bet that GAAP will, in another five hundred years, be eerily similar to accounting practices today. Conversely, none of those early settlers would have any idea what you were talking about if you were to ask about their Work Breakdown Structure, or Cost Performance Index. They simply would not understand you.

But, if you think about it, why would it be otherwise? After all, the whole reason double-entry bookkeeping came into existence was primarily for purposes of taxation, with its attendant management insights fulfilling something of a secondary role. Taxation has been with us since the dawn of civilization, and can be reliably predicted to stay with us right up until governments cease to exist (and, in the case of the Death Tax, a little bit afterwards). Another aspect adding to GAAP’s longevity is the fact that virtually all of its precepts are widely-known (hence the “Generally” in “Generally Accepted Accounting Principles”), if not out-and-out codified in law. With its foundations so solidly established, Asset Management is practically immortal.

Let’s compare and contrast these characteristics with those of Project Management via a simple thought exercise. What would the characteristics be of one company with outstanding talent within its Accounting team, barely competent (or even inadequate) capability in its Project Management Office, versus another company with the opposite talent profile? I think it would look something like this:

All of which brings me to another issue somewhat germane to PM and its future. If you had developed an algorithm that significantly increased the odds that you would win a large lottery’s jackpot, would you be interested in sharing that formula with others, or would you keep it a secret so as to maximize your own payouts? The answer is obvious, which leads to a follow-on question: If you had an insight into PM techniques, one that gave an advantage in achieving the benefits attributed to Company B in the above table, how eager would you be to share that outside of your own organization? Such information is considered, by definition, company sensitive, in that it is part of the structure that grants a competitive advantage. On the other hand, when has any organization throughout history gained a competitive advantage due to the discovery of a superior accounting practice? Before you answer with the Hostile Takeover phenomena, I would assert that such tactics do not stem from a novel evaluation of a given company’s assets to test if they are “undervalued,” as much as it’s a strategy to eliminate a competitor from a specific market.

Which brings us back to being able to accurately predict the future of Asset Management versus Project Management. New and reliably profitable techniques don’t get presented in the Asset Management realm because, with the exceptions involving avoiding taxes and a few others, they don’t exist, and they don’t get presented in the PM world because, if they really work, there’s little incentive for the authors of those papers to give away the metaphorical winning lottery numbers. In summary, the future of accounting is easy: I think it’s safe to say that it’s going to be fairly similar to the way it is now. The future of PM? Nobody really knows, because the ones who hold that future in their hands aren’t talking (outside of ProjectManagement.com’s blog pages, of course).

In the 1988 action film Die Hard, Bruce Willis plays the role of New York City detective John McClaine, who becomes caught up in an attempted terrorist takeover of the offices of the Nakatomi Corporation, where his estranged wife works. As one could imagine from films of this genre and era, there’s a fair amount of violence before (and after) the Los Angeles Police Department is alerted that something is amiss, but, even after an initial investigation, they remain unaware. This is only remedied when McClain drops the body of a slain terrorist many stories onto the hood of the police car driven by the investigating officer. Having done so, McClain looks out the shot-out glass pane that the terrorist just exited, and spits out the line “Welcome to the party, pal!” The still shot of Bruce Willis uttering that line has become the basis for a popular internet meme, typically meant to communicate a sense of disappointment (or even disgust) that someone assigned to a specific job should remain oblivious to critical and obvious developments well past the time that they should have at least started doing something about them.

Meanwhile, Back In The Project Management World…

I’ve written often about PM techniques’ unequalled capability to accurately predict such vital management information as how long a particular activity, task, or even project will last, or how much it will cost at completion. The use of action item lists, updated via responsible managers’ input along the lines of whether the activity in question is on-time or late, is a common way of trying to get a handle on when things will be completed, but it’s completely unreliable. Similarly, using the general ledger to provide a so-called “burn rate,” or amount the project is spending by reporting period (usually monthly), and then multiplying that figure by the number of reporting cycles (hypothetically) left in the project to derive an Estimate at Completion (EAC) only produces wildly misleading results, even when these figures are averaged out, or massaged via other Gaussian Curve methods.

No, the only valid way of deriving an accurate figure for activity/task/project duration or total costs belongs to PM, specifically Critical Path Methodology (CPM) for duration and Earned Value (EV) for both duration and cost. The simplest version of the formula is to divide the activity’s/task’s/project’s percent complete into its cumulative actual costs for a reliably accurate Estimate (cost) at Completion. This formula also works for duration: divide the percent complete figure into the amount of time that has elapsed since the work began, and you’ll have a usable end-date.

But here’s the thing: this simple and effective technique has been around for decades, if not longer. “If that’s the case, Michael” I can hear GTIM Nation say, “then why aren’t those techniques much more widely used, if not commonly-recognized as the standard?” I believe the answer has to do with factors that are outside nominal management science boundaries, and firmly in the realm of Organizational Behavior and Performance. Perhaps the most obvious example is provided by our friends, the Accountants, who typically hold that any piece of management information that is quantified in monetary units must originate from the general ledger, and Generally Accepted Accounting Principles, or GAAP. Think I’m exaggerating? Consider the use of the term “the bottom line.” Commonly used as shorthand for “I believe that X is the ultimate impact of the conditions/issues we have been discussing,” my guess is that it’s originally derived by how people read and understand a profit-and-loss statement, where the summary answer to how profitable a given organization is shown on the literal bottom line of that report. Since the standard Earned Value reports Cost/Schedule Status Report (C/SSR) and Cost Performance Report (CPR, Format I) have the aforementioned calculated Estimate at Completion documented in the far right-hand column, I think we PM-types should stop using the term “bottom line,” and substitute “right-hand column” instead. Also, no real project (as distinct from an organization, or function) spends money at a consistent level month-to-month, and pretending to the contrary doesn’t make it right.

Then we have our other friends, the risk managers (no initial caps). They have managed to convince themselves (and, sadly, many others) that the use of Gaussian curves will yield usable management information on what things will go wrong on a given project, and what the cost and/or schedule impact will be. Of course, the Earned Value and Critical Path systems will accurately inform on cost and schedule performance, whether they are influenced by things that management anticipated or not. And, again, this type of analysis has been around for decades. Somehow, the risk managers (no initial caps) have influenced the selection of analysis techniques away from the optimal and towards their, ummm, sub-optimal versions. It’s maddening.

All of which leaves us PM-types in the unenviable position of having to witness “managers” choosing the wrong analysis techniques, hawked by Accountants and risk managers, while remaining oblivious to the optimal PM ones. And, when these managers finally use these PM techniques, we can only hope to imitate Bruce Willis’ steady and mildly ironic tone when we say “Welcome to the party, pal!”