Agile Development Blog

This is the second post in our blog series, Measuring the Impact of your Agile Investments. The series focuses on measuring the impact that Agile practices have on business outcomes.

For many leaders, increasing the productivity of the development organization (delivering features the business needs and generating improved ROI) is their primary and over-riding goal. ‘Doing more with less’ is a mantra they preach to their teams continuously, and which colors every decision they make.

Yet few have a clear and consistent definition of productivity or an effective means of measuring it.

Productivity: a relative measure of the efficiency of a system in converting inputs into useful outputs.

Productivity: the ratio of the real value of outputs to the combined input of labour and capital.

Productivity: a measure relating a quantity and quality of output to the inputs required to produce it.

So, in simplest terms:

Productivity = Valuable Outputs / Costly Inputs

Be Careful What you Wish For

While I am a ardent believer in the value of metrics, it is important to keep in mind the potential for unintended consequences. Individual and group behaviors will evolve to meet your measures – not necessarily your goals. So ensure that the measures you use promote the behaviors you desire.

Most documented productivity metrics in software development define a unit of output as either a KLOC (thousand lines of code) or as a Function Point. Both have significant disadvantages.

KLOCs are generally favored for the simple reason that they’re unambiguous and easy to measure. However, they can unintentionally promote poor design and coding practices. Elegant, efficient, maintainable software takes more time to write, and takes fewer lines of code. Therefore, a KLOC metric inadvertently creates a disincentive for building high-quality software, and rewards poorly thought through designs and shoddy craftsmanship.

While Function Points don’t necessarily promote poor design and craftsmanship, they have their own unique challenge – they are famously difficult and expensive to calculate and measure.

Perhaps even more importantly, both KLOCs and Function Points ignore the core aspect of ‘Value’ inherent in our definition of output – and therefore productivity.

It has been stated that 64% of the features and function in the typical software system are rarely or never used (Standish 2002). Calling the code that delivers these features and functions “productive” may be a mischaracterization.

Similarly, those features and functions that ARE commonly used are generally not of uniform value. The Pareto Principle would suggest that 80% of the value is delivered by 20% of the effort. Yet KLOC and Function Point-based metrics treat all features and functions (and code) delivered as interchangeable. This promotes focusing on the easiest and lowest technical risk; rather than the most valuable, most innovative and greatest business risk…

Output is a measure of the value delivered, not the effort expended.

A number of people in the Agile community have written about an alternative unit of output measure – Value Points.  While the simplicity and value focus of this model is appealing, it has challenges when scaled beyond a few teams. In order to be meaningful at the organizational level, you must normalize the relative value point scale across teams and programs – which can be difficult and expensive.

Also, the Value Point approach does not easily translate to initiatives and/or divisions that may not be delivering in an Agile manner. Having a common measure of output, and therefore productivity, is critical to measuring the impact of your Agile investment.

So, the approach we recommend is to associate a percentage of the total value of a given initiative to each Minimally Marketable Feature (MMF) or production release. These percentages can then be applied to a any monetary business justifications (ROI, NPV, Discounted Cashflow, etc.) to arrive at an expected dollar value realized from each release.

Hence,

Productivity = Total Value Realized (delivered to production) /  Total Cost of production (labor)

Using this approach, your organization (be it a Scrum team, a multi-team Agile program, a waterfall project, or even an entire product development group) base-lines their productivity for a period of time and monitors the change over time.

Example:

The division has 3 initiatives in progress:

• Initiative A:  Total Expected Value $5MM; being delivered by a Scrum team with an iteration run-rate of $70,000.
• Initiative B:  Total Expected Value of $25MM; being delivered by 5 Scrum teams with a combined iteration run-rate of $400,000.
• Initiative C:  Total Expected Value of $50MM; being delivered according to a project plan and resource matrix that charges $2.5MM to the project in the 1st quarter.

In Q1:

• Initiative A: Released to production monthly and delivered a total of 60% of Expected Value; or $3MM. 25% of the backlog has been burned-down in terms of story points. Total Cost $210,000. PRODUCTIVITY = 14.29
• Initiative B: Released to production quarterly and delivered a total of 65% of Expected Value; or $16.25MM. 35% of the backlog has been burned-down in terms of story points. Total Cost $1.2MM. PRODUCTIVITY = 13.54
• Initiative C: Completed requirements definition and is 50% done with Detailed Design, and delivered 0% of Total Expected Value. Total Cost $1.2MM. PRODUCTIVITY = 0

*undelivered work is WIP, and therefore not yet productive.

Aggregate Division Productivity for Q1 = 7.38

As you can see, it would be relatively straightforward to predict Q2 productivity – at the initiative as well as division levels – by assessing the various product roadmaps and traditional project plans. Those projections could then be used to:

• drive discussion about trade-offs on where to allocate limited capacity and maximize productivity
• staff and fund initiatives where productive potential is high, and to cancel successful projects whose greatest productive potential has already been harvested
• inform intelligent business decisions – which is WHY we’re measure outcomes

By understanding the productivity of the development organization (its efficiency in delivering features the business needs and delivering improved ROI), leaders can effectively drive improvements and business decisions that maximize productivity – Doing More with Less.

The next topic I’ll address in the Measuring Impact series is Quality. Most organizations claim to have a Quality focus, yet few take a holistic view of Quality or appreciate the strong correlation between Quality and our other Outcome Metrics – Productivity, Responsiveness, Customer Satisfaction, Employee Satisfaction and Predictability.

How are you measuring the impact of your agile investments? Please share your ideas and feedback in the comments.

Isaac Montgomery is the harried father of twin sons, the adoring husband of Angie, a frustrated hack on the golf course, and an Agile Coach at Rally Software. He blogs at Leading Results, you can follow him on twitter at @iwmontgomery

Welcome to our new blog series, Measuring the Impact of your Agile Investments. This series focuses on measuring and quantifying the impact that Agile practices have on business outcomes. We’ll explore how putting comparable metrics in place allows organizations to steer improvement efforts in the right direction and realize the biggest payoffs of Agile.

“How do we measure the success of agile?”

It’s one of the most common questions we hear from senior leaders.  And it’s a critically important one for agile evangelists working to justify the organization’s investment in agile and maintain momentum as other priorities compete for leadership attention. The agile community’s typical response to this question has been some form of an agile maturity assessment – such as the Nokia Test. These tools are clear, easy to use and can be extremely effective in helping organizations assess their adherence to good agile practices.  Yet, when used in isolation, they can leave senior leaders unfulfilled – and miss an important opportunity for aligning agile to fundamental objectives.

For business leaders, the question isn’t how well are we doing agile?  The question is how well is agile doing for us?  What impact is agile having on business results? These are the questions senior leaders really want answered.

My response has typically been: “How did you measure your impact on business results before Agile?”

Which is generally met with awkward silence and a muttered admission of: “Not very well.”

The conversation then moves toward why measurement is expensive, why you can’t show progress if you don’t have a baseline, and why you need to be very careful about what and how you measure – lest you create unhealthy behaviors and unintended consequences. Someone ultimately quotes Einstein, we nod our heads thoughtfully, and finally move on to other topics. Crisis averted!

But the question remains: “How do we measure the success of agile?”

And, if Agile Success = Business Success, then the real question is: “How do we measure business success?”

Which is the question we’re beginning this blog series to address.

While every organization will have their own unique objectives and priorities, most can be encapsulated as some combination of these:

• Productivity
• Quality
• Responsiveness
• Customer Satisfaction
• Employee Satisfaction
• Predictability

In the posts to follow we will examine each of these Business Outcomes and look at:

• How can we measure the business outcome?
• What agile practices are effective levers in improving the business outcome?
• How can we measure our agile levers as leading indicators of improved business outcomes?

The first topic I’ll address in the Measuring Results series is Productivity, because for many leaders, increasing the productivity of the development organization is their primary and overriding goal.

Isaac Montgomery is the harried father of twin sons, the adoring husband of Angie, a frustrated hack on the golf course, and an Agile Coach at Rally Software.  He blogs at Leading Results, you can follow him on twitter at @iwmontgomery

In this 20-minute interview with Michael Vizard, I do a wide survey of why Agile development practices can be so effective at cutting the costs of development and operation of strategic IT applications. Michael asked some great questions, including whether the current economic recession will stimulate change in the development process or cause it to stagnate, how people will train and staff for the coming changes, and how today’s ALM tools differ from what he refers to as the “old guard,” who are starting to claim that their tools also support Agile development.

Read related posts on:

Can you afford the software you are developing? (from Israel Gat’s blog)

Cutting costs through productivity improvements, and

WHY do you develop and operate software?

Let me know what you think!