Projects employing Agile Methodology are in the perfect position to improve upon what traditional methods offer in cost management. Rather than project cost being planned to the most minute detail, Agile projects must loosen their grip to facilitate changes. But if the project manager is not careful, project cost will easily get out of hand.
Too many changes or too large of a change can hinder the cost of a project that is unprepared to accommodate them. For example, projects in Information Technology are often overrun because of "black swan" events that provide an unpredictable and dramatic cost increase [1, p. 287]. As a project manager, it is important to discern where to play defense, and how to navigate through any challenges presented.
Fortunately, project managers enact various control strategies to better control cost. After all, most executive board members may not understand the technical side, but they do understand finances [1, p. 289]. To keep your project funded and see your project to completion, grab the steering wheel and let’s get back on the road. Together, we will explore positive avenues to take, and where we may encounter common issues.
Best Practices
Photo: Ivan Samkov | Reference: [7]
Plan and Evaluate the Short Term
Each sprint is an opportunity, and it is easier to effectively manage and control cost around a sprint. Each discussion at the end of a sprint is a chance to reflect and make changes. The team and project stakeholders must invest their time in these meetings to ultimately keep project cost from climbing [2].
Create budgets around sprint-to-sprint or month-to-month time periods [3].
During sprint planning, explore changes to reduce the amount of work needed to complete a request from the product backlog [2].
During testing, learn where to take risks, take initiatives, and make important decisions in future sprints [2].
Determine what your team is willing to do for that sprint to ensure the appropriate outcome is reached [2].
Graphic: Allison Dunny | Reference: [5] | Created using LucidChart
Perfect the Just-in-Time Estimation
Before work begins, Agile projects are evaluated in a more ambiguous top-down approach so that a "lightweight" estimate is determined [1, p. 316]. When a sprint begins, refinements are made to the scope as-needed, and the team modifies their estimations on a sprint-level with more precision. They do this by using collaborative granular (bottom-up) methods, such as "planning poker. [2]"
Create a plan for work and commitments [2].
Make priorities and cash flow decisions when there are more unknowns [2].
Don’t explore the details of features that are not in the immediate scope. Keep estimates broad and complex until needed [2].
Don’t allow only the technical team to estimate without guidance and experience, as they can skew their projections [1, p. 299][2].
Graphic: Allison Dunny | Reference: [3] | Created using LucidChart
Consistently Measure Progress
The team must determine how much progress can be made per sprint. They must also measure what is taking place. It is good practice to calculate information used in EVM (earned value management), which is a technique to determine project performance based on scope, time, and cost information [1, p. 307]. One way to display this information in an Agile project is to create a burndown chart and measure the burn rate with the following specs:
Display time on the horizontal axis [3].
Display work on the vertical axis [3].
Total work starts at the top and works down toward completion [3].
An "ideal work line," or baseline, is drawn to indicate goals at each iteration [3].
Progress is measured and displayed via story points [3].
A second line, called the "actual work line," is drawn to show current progress [3].
Photo: John Schnobrich | Reference: [6]
Maximize Decision Making
Alongside the EVM, the project manager should divide work and cost into value streams, or a series of steps used to implement the product of the most value to the project stakeholders [4]. Using this information allows the project manager to be better prepared to make decisions on account of value, as opposed to strictly sticking with feature-based tracking [2].
Common Mistakes
Underestimating
Cost management in Agile still involves making estimates, even though they are approached differently than in traditional projects. Naturally, even within Agile, it is more challenging to be able to control or handle any aspect that has not been factored into the project.
Humans often underestimate their own abilities and the abilities of the team they are working with. They will also ignore extra costs that otherwise impact on the bottom line [1, pp. 298-299]. When considering the entire project, underestimating will deceive upper management, and will negatively impact the success of the project or even the reputation of the team [1, p. 299].
Overpromising
If the team promises they can remain within a fixed budget and scope, the project ends up restricted to a slower and more complex change process. Typically, this forces the team into a position to have to work faster to meet milestones. The thought process behind this is to achieve a lower project cost, while still obtaining a quality final product [2].
Overpromising causes all parties to lose [2]. Like underestimating, overpromising also inaccurately demonstrates projections, and adds factors that already puts the team behind. There are multiple factors at stake, and upper management requires the best representation of the work and cost. They may be working toward creating a bid to win a contract or to receive adequate funding [1, p. 299].
Not Focusing on Value
Often the focus of the project or the sprint itself is misunderstood. This allows a portion of the budget to be spent on areas that provide little value to the project stakeholders, thus wasting everyone’s time and driving up cost.
Instead, it is critical to pay attention to the product backlog and assess the value of the deliverables. The team must aim to use time and effort in the most efficient manner. Working with this approach promotes efficient problem-solving and keeps progress moving forward [2].
Final Thoughts
With the right discipline, the team and project stakeholders will remain on the same page in controlling project cost. Cost is data heavy and relies on monitoring metrics to ensure expectations are being met as closely as possible. These metrics are also critical in determining where a project went haywire [2].
Much of when cost goes wrong stems from poor planning, but when everything moves forward anyway, the project manager is then left to build a house in the middle of a wildfire. A lack of communication and transparency is only fuel for out-of-control cost. You must resign yourself to the fact that it is not about being able to predict and prevent every problem, or every revelation within a project. Rather, controlling cost in Agile projects is about having the tough discussions as a team, learning, and taking action.
References
[1] K. Schwalbe, et al, Information Technology Project Management, 9th ed., Boston, MA, USA: Cengage, 2019. [Online]. Available: https://ebooks.cenreader.com/#!/reader/b2aef31a-bf2f-4c23-a0fa-63a64a662287/page/758a39896cdf87baf7a6aadddffd418f (Accessed February 14, 2024).
[2] M. Mayfield. “Controlling Costs in an Agile World.” Medium. December 27, 2018. https://medium.com/dlabs/controlling-costs-in-an-agile-world-60c1b4aa3851 (Accessed February 23, 2024).
[3] M. Corbin. “Effective Ways to Manage Cost in Agile Project Management.” Teamly. January 26, 2022. https://www.teamly.com/blog/cost-management-in-agile-projects/ (Accessed February 23, 2024).
[4] M. Richards. “Value Streams.” SAFe. June 30, 2020. https://v5.scaledagileframework.com/value-streams/ (Accessed February 25, 2024).
[5] No Author. "Planning poker." Praxis Framework. https://www.praxisframework.org/en/library/planning-poker (Accessed February 26, 2024).
[6] J. Schnobrich. Image provided by Wix/Unsplash. https://unsplash.com/@johnishappysometimes
[7] I. Samkov. Image provided by Pexels. https://www.pexels.com/photo/handwritten-people-desk-laptop-7213435/
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