Exploring agile budgets and governance

As a seasoned agile consultant and partner at Building Better Software, I've had the privilege of guiding numerous organizations in agile budgeting and governance. In this article, we'll explore agile budgeting and governance and how team velocity can be instrumental in driving success.

Agile Investment

Agile development isn't just about writing code; it's about strategic investment. At Building Better Software, we emphasize viewing the cost of running a product team as an investment rather than a cost. For instance, let's consider a scenario where a company allocates $50,000 per month to a product team working to build a new e-commerce platform. This investment fuels the team's efforts in delivering a product aligned with customer needs and product vision.

Prioritizing Value

Central to agile budgeting is prioritizing the product backlog based on business value and ordering the work based on importance relative to other work items. Our approach involves collaborating closely with product owners and stakeholders to identify and prioritize backlog items that align most closely with strategic goals. For example, in a recent project, we prioritized features like a streamlined checkout process and personalized product recommendations over less critical functionalities, ensuring that the product team worked on initiatives with the highest potential for value creation.

Leveraging Relative Size Estimates

Effort estimation is critical in agile budgeting, and we rely on relative size estimates to guide this process. Each backlog item is assigned a relative size estimate, reflecting the effort required for implementation. For instance, the team might estimate that implementing the checkout process feature requires twice as much effort as implementing product recommendations. By leveraging these estimates, organizations can better understand the scope of work involved in each backlog item and make informed decisions.

Understanding Team Velocity

Team velocity serves as a vital performance metric in agile development. It represents the amount of work completed by the team within a given time frame. For example, if the team consistently completes 20 story points per sprint, its velocity is 20. Understanding the team's velocity provides valuable insights into its capacity and delivery trends, enabling organizations to make informed decisions about resource allocation and project scheduling.

Allocating Funds

Armed with backlog item estimates and historic velocity data, organizations can allocate funds effectively. For instance, if the team's monthly cost is $50,000 and its velocity is 20 story points per sprint, each story point costs $2,500. This dynamic approach ensures that resources are allocated to initiatives with the highest potential for value creation while optimizing budget utilization. The cost per story point is not a fixed cost and it must be re-visited whenever the team has the need to re-base the story points.

Tracking Progress with Transparency

Agile roadmaps and forecasts, driven by team velocity, provide transparency and enable stakeholders to collaborate with the team. By visualizing planned work and anticipated delivery dates, stakeholders can make informed decisions and anticipate changes. For example, stakeholders can see that the checkout process feature is scheduled for delivery in sprint 5, based on the team's velocity and backlog priorities.

Flexibility in Governance

Agile governance frameworks must be flexible to accommodate unforeseen challenges and changes in priorities. Despite careful planning and estimation, projects may encounter unexpected obstacles that impact delivery timelines. By embracing change and adapting to evolving circumstances, organizations can minimize risks and maximize project success.

Fostering an Agile Culture of Collaboration

Ultimately, success in agile budgeting and governance hinges on fostering a culture of collaboration and continuous improvement. By encouraging open communication, transparency, and a shared sense of responsibility, organizations can maximize the effectiveness of their agile practices and drive better outcomes for their projects and their business as a whole.

In conclusion, mastering agile budgeting and governance requires a holistic approach that leverages team velocity as a guiding metric. By aligning investments with strategic goals, prioritizing value, and fostering a culture of collaboration, organizations can navigate the complexities of agile development with confidence and achieve optimal outcomes. At Building Better Software, we're committed to helping organizations unlock the full potential of agile methodologies and drive lasting success in their software development endeavors.