Moving Beyond Hourly Estimates
Rasmus Kaae
Building Better Sofware with you - Agile, DevOps, Scrum, Kanban, OKR, Product Discovery - and much more!
In organisations working with agile product development, traditional budgeting methods often seem rigid and incompatible. An agile approach will enable flexibility and value delivery, prioritizing customer satisfaction over adherence to pre-determined plans. However, budgeting remains a critical aspect of organizational management, prompting the need for a harmonious integration of new principles with financial oversight.
Agile budgeting, when done right, aligns the financial allocation process with the iterative, value-driven mindset of agile. It hinges on the principles of transparency, collaboration, and empirical data analysis, while also ensuring that the development team can work without the lengthy process of detailed hourly estimates (that are deemed to be wrong anyways).
Embracing Relative Sizing
In Agile budgeting, estimates are not dictated by hours but rather by relative sizes. This approach acknowledges that precise estimations in hours can be wrong and often lead to unnecessary pressure and micromanagement. Instead, the focus shifts to the relative effort required for completing tasks, encapsulated in the concept of Story Points.
Story Points are abstract units that represent the complexity, effort, and risk associated with a user story or task. They provide a standardized metric in the team for guessing the size of work items without diving into details.
Establishing a Baseline: Historic Velocity
To start working with agile budgeting, it's important for teams to establish a historic velocity in terms of Story Points. Velocity refers to the sum of Story Points closed within a given iteration or sprint. By observing historic data and tracking the sum of Story Points per sprint, teams can calculate an average velocity. Typically this average velocity is "rolling" over the last 3-5 sprints.
This historic velocity serves as a metric for forecasting future work. It provides a reliable benchmark for the team's capacity and ensuring a stable pace of delivery.
Budgeting for Epics, Features, and User Stories
In agile budgeting, the estimation process extends beyond individual user stories to include Epics and Features. Epics represent large bodies of work that can span multiple sprints, while Features encapsulate sets of functionality. By assigning relative sizes to Epics, Features, and User Stories, teams can forecast the effort required to deliver value incrementally.
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The "cost" of an Epic is approximated by considering the base cost of the team and the relative size predicted by the team. This predictive approach allows for informed decision-making regarding resource allocation and prioritization.
Focusing on Value and ROI
At its core, agile budgeting is not merely about controlling costs but about maximizing value. By emphasizing collaboration and transparency, organizations can foster a culture of innovation and continuous improvement. Stakeholders and product owners play a pivotal role in aligning budgetary decisions with strategic objectives, ensuring that investments yield tangible returns on investment (ROI).
A Paradigm Shift in Budgeting
Agile budgeting represents a paradigm shift in financial management, reconciling the principles of agile with the imperatives of budgetary control. By embracing relative sizing, historic velocity, and a value-driven mindset, organizations can cultivate resilience and adaptability in the face of uncertainty.
As an Agile Coach with over 15 years of experience, I advocate for agile budgeting as a catalyst for organizational agility and sustainable growth. By empowering teams to focus on delivering value rather than adhering to rigid estimates, Agile budgeting fosters a culture of collaboration, innovation, and continuous improvement. It's time to transcend the constraints of traditional budgeting and embrace a more Agile approach to financial management.
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7 个月Great article, Rasmus. Here is a link to another good resource:. https://youtu.be/D2r2KryYAaY?feature=shared Although it's an hour long, it provides detailed instructions on leveraging historical story point data to plan delivery time or cost. The presenter employs an approach similar to old-school three-point estimation on the team's historical data.