Sunday, 30 June 2019

Understanding Cost in a SAFe World

In a textbook SAFe implementation, Lean Portfolio Management allocated a budget to each Value Stream and consequently each Agile Release Train (ART). The ART’s Product Manager works with the ART’s stakeholders to priorities the work that consumes that budget. The ART plans and executes against these priorities and no one worries about how much it costs to deliver any specific feature. However, there is often a difference between the ideal SAFe implementation and your current reality and one of those differences can be an expectation that the ART can articulate the cost of delivering a given feature. This is especially likely to be true if your ART is inside an organisation that still uses project based funding.

Organisations can be quick to respond to these challenges in the same way they have in the past by asking individuals to fill out timesheets with specific project and activity codes. In a world where we want delivery to be a team accountability and estimation to be in story points this feels like a huge step backwards. So what might an alternative look like if we were to use information that we have readily available and minimise the overhead on the teams to collect data solely for costing purposes?

An approach I have had a lot of success with is the cost per story point model. The idea is that I know the cost of the people working on the ART and I know the historical velocity of the ART and therefore I know the cost per story point. If I then want to understand the “cost” of a feature I can take the normalised points estimate from PI Planning and multiply it by the cost per story point and I will have a pretty good approximation. If I want to understand the “actual” cost of a delivered feature, I can ask the teams to advise of any significant surprises they had during delivery, that meant there was probably more or less effort required than what was estimated at PI Planning.

As simple as all this sounds, there are some nuances, that may or may not be material, but will certainly make your numbers more defendable. If you are geeky like me, you might find this whitepaper useful in building a robust cost per story point model for your Agile Release Train.




11 comments:

  1. I would love to encourage our company down this path, any real-world medium-sized companies doing things this way that would be interested in sharing how they got to this? I assume convincing Finance/Audit took some doing so any helpful advice would be appreciated! Thanks!

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  2. I don't agree. Each team on an ART can use story points in a different way ("we want to calculate our velocity by our own method"), and as each team evolves (at different rates) they should be able to deliver more story points in each sprint and PI. Too many variables.
    There is a better way by keeping the measure at an ART feature level. Feature size is estimated in units of "blocks" and we know how many "blocks" the ART was able to deliver in previous PI's. We know the total staff in the ART - so you can work out the cost per feature that way.

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    Replies
    1. HI Andy - SAFe suggests that story point estimation for an ART is normalised. Of course if you are not using normalised story point estimation the approach I have suggested probably wont work. I'm not familiar with the approach of estimating features in "blocks". Can you share more on this?

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  3. Goo article and I think either can work ! Depending on maturity and Suze of the portfolio

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  4. Story points are an intentional abstraction. As soon as you go down the cost per story point route, teams start to gamify story points to yield a higher return; an unintended consequence.

    If team/ART cost is relatively fixed, and annualized budgeting is used, relative feature sizing can be calculated against the cost. Put differently, if an initiative is made up of eg 5 epics/12 features, sized using any measure you like, divided into the fixed ART cost, you will derive the feature/epic/initiative cost without using story points. This avoids team gamification or unhealthy cross team comparisons in terms of team performance at the story point level.

    I have seen cost per story point reporting destroy team morale, provide unrealistic and unhelpful competition where teams start to focus attention on the wrong thing - which is to increase their story point yield, versus building the next most valuable thing for the customer.

    This is an optimal coaching opportunity for management to rethink what they really want to know and what really has value to the business in terms of measurements

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    Replies
    1. Interesting perspective. I would never advocate using cost per story point as a team level metric.

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