A Leading Indicator of Competitiveness
Velocity is a key indicator of an organization’s productivity and competitive potential to make things “Better, Faster, Cheaper.” Everyone struggles with improving velocity and managing the required capacity to achieve it because demand usually outpaces supply. PMOs often try to implement very complex processes to alleviate the pressures of getting everything done. Unfortunately, most are doomed from the beginning from lack of adoption and distractions that impact the pipeline of expected results.
And there are many distractions in an organization that conspire to destroy velocity. Distractions keep people from working on the right things and the result is lack of focus, which limits throughput. Focus is the commitment of resources to achieve an outcome. Lack of focus can have very dramatic consequences, especially at the strategic level. Most companies can define a task and be committed to getting it done. However, most struggle when applying the same principle to a set of performance objectives, strategic priorities, programs, or even projects. This means that the most important pre-requisite to better velocity is creating a clear strategy and roadmap of outcomes that can provide the proper focus and commitment of resources. This is followed closely by a well defined and clear “Up Front Homework” policy for managing all demand so we know what work is most important to the roadmap.
Without these two pre-requisites in place there is little hope of improving velocity and distractions will continue to impede results.
The “Up Front Homework” policy is sometimes referred to as demand management. It has several key requirements and ensures that we can choose the right things to work on.
- Alignment — How does the demand align to strategy and roadmap of outcomes?
- Demand Priority — Usually in terms of alignment, benefit, cost, and effort.
- Balance — Demand must be routed to appropriately managed service areas so that strategic demand does not have to compete with operational or regulatory demand.
- Estimate of Effort — A simple and effective way to understand effort.
There are many great articles on creating business cases and prioritizing work, so we will not go into much detail here. For the purposes of improving velocity, let’s assume we can prioritize our work and align our capacity properly. That is to say: we know what to work on, and have a balanced and dedicated staff to work on strategic objectives as well as operational activities. For example, 40% on the strategic roadmap, 30% on customer support work, and 30% on operational work. (PowerSteering applies a similar ratio to our own internal software roadmap.)
Now we can turn our attention toward measuring and improving velocity. First, we can define velocity as the actual output / planned output. Even though this is a pretty common formula, many organizations get it wrong. They assume actual output is the time spent working on things when in fact it’s not. Actual output is the planned output that is completed.
Let me repeat that! Actual output is the planned output that is completed.
This is a subtle but very important point. With this single concept velocity is now a measure of true output using the same terms as were used in estimating the effort. A quick example may help illustrate the point:
Assume these three tasks over the next week:
- Develop Specifications. Effort = 40
- Perform Market Study. Effort = 50
- Customer Review. Effort = 30
My planned output is three deliverables and effort totals 120.
At the end of the week assume we completed items 1 & 2 but item 3 is not completed.
So my actual output is two deliverables and effort of 90 regardless of how much time was spent producing the outputs.
Measuring velocity in terms of effort we have 90 / 120 or 0.75.
In terms of deliverables velocity is 2/3 or 0.66.
Notice how velocity can have a different basis and can apply to any component of the output we choose to measure. This means that we can define effort using any units we desire from simple deliverables to more complicated concepts such as work days, dollars, or bananas.
This simple principle is useful for developing an efficient and easy to implement capacity management processes that provides the proper focus on outcomes and can dramatically improve velocity.
Stay tuned for the follow up to this when I walk through the steps needed to manage capacity using velocity as the primary planning vehicle.