My visit to the birthplace of Lean

As I write, I’m sitting on the Shinkansen Bullet train from Kyoto to Tokyo, my head full of insight and inspiration from a week spent ticking a big item off my bucket list – a lean study tour of Japan.  It was wonderful to share this experience with my entire leadership team, and I cannot recommend it highly enough to anyone who is or aspires to be a Lean|Agile change agent.  My hope in the following article is to share enough about the experience to inspire you to make the pilgrimage, and just a couple of the many ways in which it has challenged and changed me.

After a great deal of Googling, we elected to join a tour run by Shinka Management, an Australian company who specialises in assisting the exchange of knowledge of Lean and TPS between Japan and the rest of the world both through hosting Japanese visits and delivering consulting and training services abroad. 

Our week began in Tokyo on Sunday afternoon, where we were delighted to discover we were the only Australian members of the tour group of 20 and meet our core hosts Paul, Eri and Dave.  After some introductions, we were taken through a detailed look at the week ahead and treated to an introduction to Japanese business etiquette before heading off to continue the conversation over dinner (the trip includes all meals, travel and accommodation). 

Monday morning began with a series of trains and buses efficiently moving us towards our first destination in Gifu prefecture and accompanied by highlights of the pervasiveness of visual management in Japan demonstrated in the public transport system.  The learning then began in earnest at Shinka’s training centre where we were introduced to Hattori Sensai, a 30-year Toyota Veteran who delivered the bulk of our classroom training for the week. 

Less than 5 minutes into the introduction I had my first new Toyota insight as we came to understand that Hattori Sensai was a “Jishuken” leader, one of a handful of TPS experts that moved from plant to plant within Toyota implementing rapid and concentrated kaizen improvements (humorously translated to us as “Kaizen ninja”).  This was not a term I’d read in any Lean book, and as I came to understand their role I struggled to understand how we’d missed it.  Those who demonstrate early aptitude for Kaizen are enrolled in the Jishuken development program, and then play a key role both as “those sent to solve the hardest problems” and also to act as “kaizen sharing agents” bridging the company boundaries within Toyota (My previous view of “Toyota as one company” was dismantled as I learnt they were actually many companies under one umbrella with distinct differences).  Dave provided superb translation as Hattori Sensai shared numerous insights about the TPS way of thinking and his experience consulting with non-Japanese companies attempting to adopt lean.  I very quickly discovered that the many “Lean books” I had read tended to talk about the author’s insights into “a part of Toyota at a given point in time”, and gaining understanding of cultural and historical context was critical particularly when it came to adaptation.

Hattori Sensai illustrating transport oriented supply chain optimisation

We then proceeded to our first factory visit for the tour – Gifu Auto Body which did final body assembly for the HiAce line and some larger vehicles.  This was the plant where Hattori Sensai had spent the majority of his working life, and his intimate working knowledge enriched the insights immensely as well as providing numerous moments of humour as he “felt the pulse on the gemba” and collared people on the floor who had worked for him to give them a bit of stick over issues he was seeing.  Here I had my second real insight into Toyota.  I had a picture in my head of a factory that felt like a hugely automated laboratory.  I came to understand that Toyota valued ingenuity over infrastructure investment, and the vast majority of their kaizen was about stretching what they had (some advice they offered Elon Musk which he ignored and learnt the hard way).  We then returned for a little more training before concluding the day with more chat over dinner.

Tuesday was again a mix of classroom training and site visits.   We visited Metal One Isuzu, an incredibly impressive steel-processing plant.  They run a model of “Factory as a showroom”.  Salespeople invite prospective clients to the factory, then shut up and allow the factory itself and the operators (all of whom are trained in customer service) to inspire confidence.  At this point, we were starting to understand how much “attention to every detail, no matter how minor” pervaded the way of working.  There was a huge amount of stress on safety, and my favourite moment of the tour involved the “operator-designed and made” safety awareness experiences and the follow-up story from our host Paul.  The factory uses different coloured helmets to indicate role on the floor (as visitors we were in light green).  Each staff helmet has three small safety cross stickers on the side.  As part of Isuzu’s safety culture, if a staff member observed a colleague violating a safety standard or taking an unsafe action they were required to talk to their colleague about it and remove a sticker from their helmet.  The loss of all three stickers would result in the helmet being traded for a pink helmet and safety bib, which was to be worn for a period until the unsafe behaviour had stopped.

Visual Management Boards, the factory floor and the dreaded Pink Helmet at Metal One Isuzu

Tuesday also gave us a session with another of Shinka’s ex-Toyota people, Hyoda Sensai (who had managed the Gifu Auto Body plant and had also served as a Jishuken leader).  The session with him flew by, focusing on leadership and the role of management.  At this point, “a constant sense of danger” at last became crystal clear for me.  Hyoda Sensei stressed how easy it was to allow waste in the good times, which tended to result in crises during bad times.  Balancing a water bottle on the edge of a table, he asked us to imagine that we were the bottle and the drop from the table to the floor was a cliff.  We were then asked how hard we would fight to maintain our balance and find inventive ways to avoid the drop.  After a moment he then moved the bottle back to the middle of the table and repeated the question.  Of course, the urgency had disappeared.  The moral of the story was that a key responsibility of management was to create challenging situations for their teams to maintain that constant sense of danger.

Hyoda Sensai illustrates the "constant sense of danger"

Wednesday brought a visit to Suzaki Industries in the morning.   As well as other clients, Suzaki is a tier 2/3 supplier to Toyota.  Our connection to supply-chain thinking began with a view of a truckload of steel from Isuzu being unloaded, and proceeded to be led by Chairman Suzaki.  His introductory speech contrasted the joy of working with Toyota as a pull-based customer to the challenges of his push-based customers before proceeding with a fascinating walk through the plant and incredible insights into their use of Kanban and endless kaizen-based ingenuity.  We concluded the tour with an hour in a team-room where Mr Suzaki explained how when the bubble burst in Japan in the late 80’s his company was on the brink of disaster.  Until then, the view in Japan had been that manufacturing demand would continue to grow endlessly and many companies had allowed themselves to “grow fat” and let waste creep in.   He had massively overinvested in automation to support production expansion, and when demand shrank overnight due to a massive exchange rate shift he had a factory full of machinery that would never pay for itself.  He described his “Rescue” by Toyota – not in the form of a financial bail-out, but through mentoring.  They informed him they relied on him as a quality supplier and wanted to ensure he succeeded and proceeded to invite him for intensive mentoring at Gifu Auto Body (one of those mentors being Hyoda Sensai).  Yet again the resounding message was “ingenuity over automation” as he described how much less automation was present in his factory today then 30 years ago.

Chairman Suzaki explains production scheduling (left), kanban tickets (centre) and standard work definitions (right)

The afternoon provided an incredible simulation humorously led by Hattori Sensai to help us put the notion of standard work and kaizen problem-solving into practice, in particular highlighting the risk of attempting to improve before you understand the outcome you’re trying to achieve.  By this stage, I’d come to another of my paradigm shifts in understanding.  After years of believing that Kaizen was “about the 1%”, both of our sensai had stressed the belief among the Jishuken leaders that “you could always get at least 30% improvement in a kaizen initiative” (notwithstanding that this is usually achieved by adding up many 1%’ers).

The Coactivation team experiences a rather different type of Kaizen

Thursday commenced with a phenomenal simulation illustrating the operation of Kanban across the supply-chain before we boarded a bus for some welcome downtime on the 3 hour journey to Kyoto for what I personally found to be the most inspiring visit of the tour to Omron Taiyo, a joint venture between Omron corporation and Japan Sun Industries aimed at integrating people with disabilities into the workforce. 120 of 134 staff had some form of disability (physical, intellectual or emotional) – sustainably and profitably producing healthcare equipment, power supplies, switches and other components.  By this stage, the metaphor of “the cliff edge” was front-of-mind on every visit and Omron Taiyo exemplified it as the relentless ingenuity required to support paraplegics, people with one arm, and those with other less visible disabilities in the workplace.  The endless hunt for any edge of improvement was tangible walking the floor, right down to spreading panoramic pictures on the back of binders in filing cabinets to encourage them being placed back in the right position and save 3-4 seconds for people looking for a binder. 

Briefing at Omron Taiyo

After a “night off” in Kyoto, Friday began with a visit to Takatsuki General Hospital to explore Lean in healthcare.   The hospital proudly informed us of the 3000+ improvement initiatives they had implemented under TQM and their use of Quality Circles to build the improvement mindset along with explaining some of the challenges of adapting from the manufacturing to healthcare context.  Their cliff-edge, a rapidly growing percentage of elderly population (65+) living longer and longer stressing the healthcare system.  As we toured behind-the-scenes in the most startling hospital environment I have ever seen, I found myself wishing my wife (who is a nurse) was with me and looking forward to sharing what I had seen with her and enriching my layman’s view of the differentiation.

Kaizen outcomes, therapy innovation, & the masked Coactivation team (plus honorary teammate from Belgium)

Friday afternoon brought a final debrief followed by a celebratory closing dinner and some late-night Kyoto bar-hopping.  I have a number of blog posts I’d been holding off on until after Japan, and look forward to delving more deeply into some of the insights of the trip in those.  If there was one thing that was reinforced every day as a contrast between the Agile world and TPS it was an obsession with data.  We tend to be far too “fluffy and fuzzy”, and the usefulness of hard data whether it be for optimising workflow based on effective demand forecasting, optimising the deployment of your workforce, scheduling work, identifying waste, or steering improvement was amazing to see in action.  

Effective Change Control "by Release" in SAFe

“Control by Release … Control by turning loose within well-understood parameters.  Control by trusting the process.  This doesn’t mean anything goes” – Artful Making, Rob Austin and Lee Devin

Under a “traditional” delivery model, organizations employ a combination of gating and detailed scope, cost and timeline commitments to facilitate governance, change control and executive oversight of strategic product spend. 

With SAFe, the move to Lean Budgeting and outcome-based metrics enables the elimination of much of the overhead and inefficiency inherent in the traditional approach.  SAFe 4.6 crystallized this with the introduction of the four Portfolio Guardrails:

1. Guiding investments by horizon
2. Optimizing value and solution integrity with capacity allocation
3. Approving Significant initiatives
4. Continuous Business Owner engagement

The opening quote is from one of the books that profoundly influenced me early in my Agile career – Artful Making.  The notion of “Control by Release” has been a core component of my coaching toolkit for many years, particularly in the context of decentralization.  In this post, I will explore the “Control by Release” aspect of each guardrail as we determine “what to do” then move beyond into the tools that help us during PI execution while we “are doing”.

Guiding Investments by Horizon

This guardrail controls the percentage of investment capacity that can be consumed by a particular horizon of investment idea.  “Release” is achieved by not constraining the ideas under consideration, but "control" ensures innovative horizon 3 and “coming attraction” horizon 2 ideas are not drowned out by the all-consuming “demand of today” in horizon 1.
 
Horizon allocation authority often exceeds the remit of the Portfolio itself, requiring validation at the enterprise level – particularly given the high-risk nature of horizon 3 investments.  However, once established it releases the Portfolio team to more futuristic investments within the agreed constraint.

Optimizing value and solution integrity with capacity allocation

Another percentage-based control tool, this is typically applied more at the Solution and Program levels.  A classic scenario is B2B digital products – often stuck in the following dilemma:

• “Without the B2B providers we can’t attract B2C consumers” 
• “Without B2C consumers we can’t sign up the  B2B providers”.  

This is a level well above “what feature should we build” – it’s a strategic tool.  “For the next 2 PI’s, we want to invest heavily in the B2B space with 70% of our capacity”.  We thus achieve "control" by specifying the percentage of ART capacity to be consumed by B2B features and "release" by the fact we have not actually talked about what B2B features should be considered. 

This decision is often not within the remit of Product Management.  It will need validation by their Business Owners, Portfolio Management or some combination of the two – but once set they are released to find the best features to use that capacity for.

Approving Significant Initiatives

The Product Manager for an ART has significant remit when it comes to feature selection.  In mature SAFe most features built are independent features identified in service of product strategy rather than derived from Epics.  The Product Manager is empowered to identify Features and facilitate their prioritization (through WSJF), but accountable for the economic outcomes achieved by the ART justifying the spend.  There is a level of safety and control in this as we know that the Feature should have a quantifiable, rapidly measurable benefit and has to be small – small enough to fit in a single PI for a single ART. 

However, what happens when the Product Manager encounters a big idea – something too big to be a Feature - an Epic.  This attracts more due diligence, approval and monitoring at the Portfolio level.  “Before you start down this path, we need to validate it.” 

The Product Manager is “released” to pursue a range of small valuable investments, but works within the “control” that if the investment passes a certain threshold higher authorities must become involved. 

Continuous Business Owner Engagement

Late last year I dedicated a whole post to this.  How do we “release” the Product Manager to do the job they’ve been appointed to do?  By providing the “control” of engagement with executive business owners for involvement in moments where key constraints are established.

There are 4 clearly defined “control” events for this in SAFe:

• Business Owners collaborate to define the Cost of Delay for candidate Features and thus “control” the priorities whilst having “released” the Product Manager to find features to present for prioritization.
• Business Owners collaborate to “control” tradeoff decisions during Management Review at PI planning whilst having “released” the teams to identify the tradeoffs required, then accept the committed objectives to establish a “control” around commitment expectations for the PI.
• The System Demo (attended by the Business Owners) demonstrates progress in the previous iteration, and should illustrate alignment to the agreement reached at PI planning.
• The PI Demo where achieved outcomes are assessed against committed objectives by the Business Owners

Beyond Portfolio Guardrails

Each of the guardrails provides controls on what we choose to do, at varying levels of seniority, regularity and granularity.  However, what happens once we are “doing?”  Or, in more traditional language “how do we apply change control during execution?”.
 
The “hippy agilist” inside me gets nervous about tackling the second half of this post.  Surely I’m not going to start talking about the dreaded “change request”.    What about Agile principle 2 – “Welcome changing requirements, even late in development”?  Unfortunately, I have probably seen this principle abused more than any other (albeit, the sustainable pace of principle 8 is definitely the most commonly ignored – typically in the context of abuse of principle 2).  All too often, it is interpreted as “I thought this was agile and I could change my mind anytime I liked” without accepting that the change might impact cost, timeframe or other commitments.

So, how do we enable the “release” to embrace changing requirements whilst maintaining the “control” to ensure this occurs in a responsible fashion?

Establishing Guardrails for ART execution

We have the hints for these controls from the Portfolio.  A decision-making framework must address the following:

• At what point does a Team need to escalate a decision or notification to the Program level?
• At what point does an ART need to escalate a decision or notification to their Business Owners?

The answer in both cases lies in the controls we have established:

• Committed PI Objectives
• Capacity Allocation

Both have been validated and accepted by the Business Owners.  The ART has been “released” to make any change it likes within these controls.  For example, it has pre-agreed with the Business Owners that if the PI runs into challenges the stretch objectives can be sacrificed without consultation.  However, to examine some example “control triggers”:

Capacity Allocation for BAU

The application of capacity allocation to BAU/Unplanned work was explored in detail in my recent post on BAU and Unplanned work, but to illustrate a change control example:

• A team was given a capacity allocation of 10% for BAU/Unplanned work
• The Product Owner is now “released” to prioritize any stories they feel are important (be it minor enhancements, tech debt remediation or minor production defect fixes) so long as they fall within 10% of the team’s capacity each iteration.
• In the event that BAU and Unplanned work threatens to exceed the capacity constraint (eg a string of urgent minor enhancement requests from a noisy stakeholder), we trigger the “control”.  It’s no longer a team decision, and must be escalated to Program Level.
• At the Program Level, there may be a “System-level” solution to it that can still be constrained to the ART.  For instance, redirecting some of the work to another team or sacrificing a stretch objective due to the importance of the unplanned work.
• If there is no ART-level solution that doesn’t compromise committed objectives and the Program Team cannot politically refuse the BAU work, it must be escalated to the Business Owners to make the decision: “Are we willing to sacrifice a strategic committed objective for this unplanned work or will we exercise our executive authority to defer the unplanned work?”

Significant change in Committed Objective

We know that teams don’t commit to delivering either their plans or their stories at PI Planning – they commit to achieving their committed objectives.  The stories and plans constitute a current belief as to the best way to achieve the objectives.  There’s more to this story than meets the eye though:

• Whilst objectives are meant to be “SMART”, they rarely are.  This leaves interpretation very much open, and its easy for a Product Owner to wind up in a world of pain with subject matter experts, stakeholders and product managers arguing that there is implicit scope in the objective that the team never planned for.
• The objectives are “in a system context”.  Business Owners accept “the overall objectives for the ART”, and make tradeoff decisions to optimize the whole rather than the parts.  Implicit in the process of arriving at this is that the team’s plan reflects the rough percentage of the team or ART capacity that will be consumed achieving the objective.  (ie In the plan, there were 78 points of estimated stories associated with it).  We know estimates are guesses, but if we are suddenly dealing with 150 points of stories there is no doubt we are in a world of pain.  This could occur due to ugly surprises, missed stories, or interpretation arguments but however it happens there’s no doubt we’re in pain.  Whether it’s caused by dysfunction between the Product Owner and Team, Product Owner and Product Manager, or Product Owner and Stakeholder this objective may compromise a number of others.

A common technique is to establish a “size threshold” type control.  For example, in the event that the total estimated size for the Feature varies by more than 20% from that established at PI planning, it should be escalated to Program Level for review.  Often, it can be solved at the Program Level through effective tradeoff decisions (by resetting expectations, swinging other teams to the rescue or sacrificing stretch objectives).  However, if it cannot be resolved we’re now in a position where following through on one committed objective compromises one or more others – and that’s a Business Owner decision.  Once again, it should be escalated.  They may lend their executive support to downscoping the work, or elect to sacrifice another objective to support it continuing in its inflated state.

An objective cannot be met.  

This seems to happen most often due to an issue with an external dependency (eg delayed infrastructure, rejection of design by ARB).  As soon as the ART is aware that an objective cannot be met, this must be escalated to the Business Owners.  Notwithstanding the importance of transparency, its quite possible that they can swing their executive weight behind moving the blockage.

Conclusion

If I had read this post 10 years ago, my response would have been “that’s far too structured to be agile”.   My views have become a little less simplistic over the years as I’ve worked with large organizations and government agencies who need evidence of documented controls in place and are looking for “simpler, less wasteful, but still responsible”.

But, to be honest, what motivates me most to address it is helping “teams in pain”.  I’ve worked with a number of ARTs in recent years who have struggled massively with achieving 50% “Release Predictability” let alone 80% even with obscene levels of overtime.   There are numerous contributing issues, but uncontrolled scope creep is a recurring culprit.  Teams trying to collaborate with their Product Owners accept too much change with the Product Owners bright new ideas.  Product Owners struggle to push back when their Product Manager keeps reinterpreting the goalposts of their Features thanks to fuzzy PI objectives and absent/incomplete Feature Acceptance Criteria.   Product Owners struggle to say no when senior stakeholders come up with great ideas.  It’s not fun, and teams enjoy neither the overtime pressure nor the feeling of failure when they miss their objectives time after time.
 
The truth is, every change involves a decision and every decision is a tradeoff decision.   A team will make a trade-off that leads to team-level optimization, a Program Team will make a trade-off that leads to ART-level optimization, and Business Owners will optimize still more broadly.  Good backlog discipline and effective leveraging of the controls built into SAFe enable the right trade-offs to be made at the right level at the right time, and satisfy the auditors that effective controls are in place!

Practical Finance and Cost Allocation in SAFe

SAFe provides some wonderful yet daunting guidance when it comes to funding and the application of Lean Budgets.   As of SAFe 4.6, we have 3 key tenets of Lean Budgeting:

1. Fund Value Streams, not projects
2. Guide Investments by horizon
3. Participatory Budgeting

My purpose in this article is not to restate the SAFe recommendations.  They’re well documented at in the Lean Budget article.  As always, however, I’d rather talk practice than theory – in this case in the area of “Fund Value Streams, not projects”.

In summary, the theory is that we provide guaranteed funding to establish a standing capacity (in the form of an Agile Release Train), then use a combination of “guardrails”, Epic level governance and Product Management accountability to ensure that this funded capacity is well used (building valuable features) and tune it over time based on results achieved.

When I take a room of leadership through this approach its usually pretty confronting, and often provokes strong reactions.  Then I share a story from an early SAFe implementation.  It was with an organization that didn’t have Lean or Agile friendly funding, we just had a stable ART with stable teams that were fed by projects.  And we built a record for “100% on time/on budget”.  We did it in a very simple way.  When something was delivered under budget, we still charged the quoted price, and as such we were able to build up a buffer fund.  When something ran over budget, we drew down on the buffer fund.  It was closely managed, and it all came out in the wash!  By the conclusion of the story, that same room who was reacting strongly a few minutes earlier is suddenly grinning (in some cases rather nervously).  I’m pretty sure every organization I’ve worked with in the past 10 years has survived historically using some variation of this technique.

Some SAFe implementations are lucky enough to start with capacity funded ARTs fully following the framework guidance, but in most cases they’re still realistically project funded.  It’s either a really big amorphous project being used as a masking umbrella to the standing funding model, or quite literally the single ART is being funded by numerous projects and needing to charge back.

And to take it a bit further, even if we are capacity funded we usually need more granular data on how the money is spent.  At minimum, we generally have some work which is Opex funded and some Capex funded.  We also want some data on how much our features are costing.   Hopefully we’re not falling into the trap of funding feature by feature, but when your ART is costing $3-5M per PI the organization will require us to be able to break down where those millions are going.

About now, the timesheet police come out!  Somebody somewhere figures out a set of WBS codes the ART should be charging against (I recently heard an example where a theoretically capacity funded ART had up to 15 WBS codes per Feature), and everyone on the ART spends some time every week trying to break up the 40 hours they worked across a bewildering array of WBS codes that will then be massaged, hounded and reconciled by a small army in a PMO.

There’s a much simpler, less wasteful way.  We’ve used it time and again, blessed by Finance department after Finance department – once they understand the SAFe framework.  I’m going to start at the team level, then build it up to the ART.

Team Level Actuals

We usually work this on a “per Sprint” basis, and need to know two things:

• What did the team cost?
• What did they work on?

What did the team cost?

Figuring out what the team cost should be straightforward.  Given that we know if you’re part of an Agile team you’re 100% dedicated, all we need is your daily rate and the days you worked.  Specifics of how this daily rate is calculated for permanent employees versus contract/outsource vary too much to provide specifics, but for each of your agile teams you should know your “burn rate per sprint”.  You then need a way of dealing with leave and (hopefully not) overtime.  We’re not trying to totally kill timesheeting here, but we can be much more simplistic about it.  Each team member should only have one WBS code to allocate their time against – the one that says “I worked a day as a member of this team”.  Thus, using your knowledge of burn rates and actual days worked you have total cost for the team for the sprint.

What did they work on?

If you’re part of an Agile team, the only thing you could possibly work on is your backlog!  So, we know that the entire team cost should be allocated against their backlog.  From  a funding perspective, aggregating this is based on effective categorization of backlog items: by parent Feature, item type or both.  Consider the following example:

The Sprint in Aggregate

Velocity: 28

Based on a team burn rate of $100K/sprint, we then have:

• Feature A: $36,000
• Feature B: $46,000
• Production Defects: $11,000
• BAU: $7,000

If your world can’t cope with ragged hierarchies, you can create “Fake Features” for the purpose of aggregation.  I quite commonly see features like:

• Feature C: “PI 3.1 Production Defect Fixes”
• Feature D: “PI 3.1 BAU Work”

The richness and detail of your aggregation basically depends on your “Story Type” classifications.  For example, typically work done on exploration/discovery can't be capitalized, which would lead you to introduce a story type of “Exploration”.

Applying the results

At this point, we have all the costs against the temporary WBS associated with their team.  All that remains is to journal the costs across from the temporary WBS to the real WBS based on your aggregates.

If you’re clever, you’ll automate the entire process.  Extract the timesheet data, extract the backlog data, calculate the journals and submit!

Dealing with the naysayers

At this point, some people get worried.  The size of the stories was estimated, not actual.  What happens if Story 1 was estimated as 3 points and was actually 5?  What about stories that didn’t get accepted?  Can Fibonacci sizing really be accurate enough?  Our old timesheets recorded their time spent against different activities in minutes!

It’s time for a reality check.  I’m going to illustrate with a story.  I was recently facilitating some improvement OKR setting with the folks responsible for timesheets in a large division (still mostly waterfall).  One of the objectives they wanted to set involved reducing the number of timesheet resets.  I asked what a timesheet reset was and why it was important to reduce them.  Turned out it was when a timesheet had been submitted and was some way through the approval process when they realized there was an error and it needed to be reset to be fixed and resubmitted.  Obviously, this was a pain.  I asked them how often it happened and why?  The response: “Usually when there’s a public holiday we get a lot of them.  Everyone enters 8, 8, 8, 8, 8 (hours worked) and the approver approves on autopilot then half way through their approval run remembers the public holiday!”

Everyone (and most especially finance) knows timesheet data is approximate at best.  The person filling it out knows they worked 8 hours, guesses their way through how much they spent on what, and finds whatever hours are left unaccounted for and chooses something to attach them to!  And the person approving it does little review, knowing they have no meaningful way to validate the accuracy.

While the backlog aggregation will always have a level of inaccuracy, few will argue that it is any less accurate than the practices employed by their timesheet submitters (unless you’re a law firm steeped in the 6-minute charging increment).  And at this level, your CFO should realize that any variation is not material to the overall investment and is accepted under GAAP (General Accepted Accounting Principles).

Moving from Team to Train

On the surface, life gets a little more complex moving from team to train.  You have lots of people in supporting roles not necessarily working on specific features.  Again, however, it’s not all doom and gloom when you look at prevailing practices.

In many an IT organization, pre-Agile daily rates attract a “tax” used to cover the costs of those less directly attributable such as management, governance, QA teams and the like.  Every project they’ve ever estimated has attracted a percentage surcharge (or a series thereof).

In the same vein, we can calculate a “burdened run rate” for the teams.  We do this by taking the burn rate for every member of the ART not associated with a delivery team, summing them, then distributing them across the team burn rates.  In theory, they exist because the teams couldn’t be delivering value without them – so they must be contributing in some fashion.  Consider the following example:

Support costs can either be distributed proportionally to burn rate or on a flat per team rate (usually based on discussion with Finance).  Assuming a flat per team rate, we can restate the example above as:

This becomes more nuanced in the case of a support team who does directly cost attributable work.  The classic example is the System Team.  They should be spending a certain percentage of their capacity in general support and the rest building enabler features (hopefully DevOps enabler features).  In this case, we can use the team-level backlog aggregation approach illustrated above provided we can see their support work clearly categorized so we know which percentage of their cost to distribute to burdened burn rates and which percentage to attribute directly to features.

All that remains is for our supporting staff to timesheet against a temporary “I worked on this ART WBS”, and we have the means to attribute our costs at the ART level just as we did for the team.

We get one other thing for free.  I like the word "Burdened" when it comes to burn rates.  There's usually a world of potential waste to be eradicated in burden costs.  Calculating some heuristics allows your CFO to start asking some rather pointed questions about whether ARTs are really "running lean".

Conclusion

I work with one small client who has none of the “enterprise fiscal responsibilities” of most SAFe implementations.  In theory, they have no need for any of the above discipline and in fact ran their early implementation without it.  But then they wanted to start analyzing cost/benefit on the features they were building.  In fact, it was the delivery folks who wanted to know the answers so they could change up the cost/benefit conversations when feature requests came in.

I don’t think it matters how “ideally Lean or Agile” you are, if you’re in the type of enterprise using SAFe you will need to be able to allocate your costs across Opex and Capex, and need to analyze your Feature costs to tune your investment strategy and provide data to your improvement initiatives.  The techniques illustrated in this article require good backlog discipline and some walking through to get blessing from your Finance departments, but they’re far from rocket science.  And best of all, they work regardless of whether you’re project funded, capacity funded, or some combination of the two!

Because, in the end, I have one experience with Leaning up governance.  Until you have a viable alternative that enables the organization to fulfil its fiscal and governance responsibilities you’ll never dislodge the onerous, wasteful practices of the past.

Dealing with Unplanned and/or BAU work in SAFe

In the Agile world in general, we have long preached the move from “Project mindset” to “Product mindset”.   “Wouldn’t the world be simpler if we just talked about work instead of projects and BAU?” is a mantra on many an agilist’s lips. 

Whilst the notion of forming teams and trains that “just do the most important work regardless of its nature” is a great aspiration, it comes with a number of caveats:

• Funding and capitalization are generally significantly different for the two
• Planning and commitment are difficult when some (or much) of the team’s work is unplanned

Enterprises have typically solved for the problem through structural separation.  The first step into Agile is often to move from separate “Plan”, “Build” and “Run” structures to separate “Plan and Build” and “Run” structures.  Projects are fed through “Plan and Build”, then after some warranty period transitioned to “Run”.  Funding is separate, and “Run” is driven more by SLA’s than plans.

A truly product-oriented mindset requires the establishment of teams and ARTS that can “Plan,Build and Run”, and this post will tackle in-depth the issue of planning and commitment and introduce some tools for tackling the funding side of the equation.

Funding

I’ll tackle the topic of funding in greater detail in a future post, but the short version follows.  If a backlog item is categorized, the categories can be mapped to funding constructs.  We can then take the burn-rate for a team, the percentage of its capacity dedicated to each funding construct, and allocate funding accordingly.

Planning and Commitment

Both the PI cadence of SAFe and the Sprint cadence of Scrum seem to invalidate the incorporation of BAU.  After all, if we fix our Feature priorities for 8-12 weeks in SAFe and our Story priorities for 2 weeks in Scrum how do we deal with the unplanned?

Known BAU work can be represented by planned backlog items, but the answer to unplanned work lies in the effective utilization of Capacity Allocation.  We can reserve a given percentage of the team (or train’s) capacity for unplanned work, and plan and commit based on the remaining capacity. 

Team-level Illustration: Production Defects

One of the first benefits we find with persistent teams is that we can feed production defects back to the team responsible for introducing them.  This provides them with valuable feedback, typically dramatically improving quality. 

We might reserve 10% of team capacity to cater for this.  Thus, if the team’s velocity is 40 they would only plan to a velocity of 36 and reserve 4 points for production defects. 

Mechanically, the following occurs:

• If less than 4 points of production defects arrive, the team pulls forward work from the following sprint.
• If more than 4 points of defects arrive, the Product Owner makes an informed decision: defer new feature work or defer low-priority defects.

My preferred implementation of this technique is slightly different.  A number of times, we have reserved the 10% for a combination of Production Defects and Innovation.  If the team has shipped clean code, they get to work on their innovation ideas rather than pulling forward work!

ART-level illustration: BAU work

When staffing ARTs, we often find that some (or many) of the key staff are only available “if they bring their BAU work with them”.  In these cases, we plan the known BAU work and apply PI-level capacity allocation based on the percentage of their capacity we feel is needed to cater to expected “unplanned BAU” loads and withhold this when planning out the PI.

Dealing with fluctuations in unplanned work levels at the ART/PI level is a little more consequential.  Whilst the sprint-to-sprint mechanism of the production defect illustration still applies, we need to be monitoring for potential impact on PI objectives.

• If less than the expected amount of unplanned work arrives for the team, we have the option to either use the spare capacity to absorb work from other teams struggling with their PI objectives or pull forward Features from future PI’s.
• If more than the expected amount arrives, we are monitoring impact on committed objectives.  We can cater to a certain amount by sacrificing capacity allocated to stretch objectives, but if we are at risk of compromising committed objectives this should trigger a management decision to determine whether to defer or deflect the unplanned work or compromise a committed objective due to the significance of the unplanned work.

Discipline is a must

Applying these techniques will quickly run into a challenge.  Teams are often sloppy with BAU/unplanned work.  They “just do it”, viewing the effort of creating, sizing and running backlog items for it as unnecessary overhead.  This leaves us without the visibility required for the deliberate, proactive decision making illustrated above and often somewhat embarrassingly at the end of the Sprint or PI apologizing for missing a commitment “because BAU was more than expected” without any hard data to back it up and even more importantly without having given the Product Owner/Product Manager/Business Owners the opportunity to intervene and deflect the unplanned work to enable us to maintain the commitment.

Further, I find most teams dramatically underestimate the capacity consumed by BAU work.  We’ve routinely worked with teams who set a capacity of 30% aside for BAU, then when they’ve finally missed enough objectives to buy into actually tracking their BAU work find it to be 50-60%. 

However, the true benefit of discipline goes further – the data generated is a goldmine.

Reaping the Benefit of Discipline

Whilst the first benefit of discipline is obviously that of gaining an accurate understanding of your capacity and being able to more confidently make and keep commitments, exponential gains can be realized once you start to analyze the data generated.  A key first step is developing an awareness of failure demand and value demand.

Failure Demand vs Value Demand

“Failure demand is demand caused by a failure to do something or do something right for the customer” – John Seddon

The first illustration that was given to me for failure demand many years ago was in the context of call centers.  It’s the 2nd and 3rd phone call you have to make because your issue wasn’t fully resolved on the first call.   If we take a typical agile team or ART, we can find many examples:

• A late-phase defect is caused by failure to “build quality in”.
• A production defect is caused by failure to deploy a quality product
• A request for information is caused by failure to have provided that information previously or failure to have made the requester aware of where the information is published
• An issue is often caused by failure to effectively mitigate a risk
• Time spent issuing reminders or nagging is failure demand, as more effectively establishing the awareness of the “why” and clearly setting the expectation would have avoided it.
• Managing the politics of a missed commitment results from both failure to meet the commitment and failure to effectively manage the possibility that the commitment would be compromised.

“Value demands are demands from customers that we ‘want’, the reason we are in business” – John Seddon

Value demand for teams and ARTs should be obvious – the features and stories the teams are working on!  However, this can become a little more nuanced very quickly:

• Is work done on an improvement initiative value demand?  Our customer probably didn’t directly ask for it.  In fact, many improvement initiatives are effectively failure demand as they are driven by addressing previous failures.
• A great deal of BAU/Unplanned work is falsely perceived as value demand.  “I run this script or extract every morning”, “We produce and consolidate this report every month” are all great examples.  In theory someone values the result of the script or extract, and values the report – but the need to dedicate capacity to it results from a failure to automate it, or failure to fix a broken process.

Applying the Insights from Demand Patterns

Assuming we’ve had the discipline to channel all demand on a team through their backlog, and the further discipline to categorize it appropriately as failure or value demand, we can now start to drive significant improvement on the following basis:

• If I reduce failure demand, I have more capacity to devote to value demand
• If I find a more effective way to respond to value demand, I have more capacity to devote to value demand

In “Four Types of Problems: from reactive troubleshooting to creative innovation”, Lean expert Art Smalley defines a hierarchy of problem types and accompanying resolution strategies.  Three of these are pertinent to this situation:

• Type 1: Troubleshooting – “Reactive problem solving based upon quick responses to immediate symptoms”.
• Type 2: Gap from Standard – “Structured problem solving focused on problem definition, goal setting, root causes analysis, counter-measures, checks, standards and follow-up activities”
• Type 3: Target Condition – “Continuous improvement that goes beyond existing performance of a stable process or value stream.  It seeks to eliminate waste, overburden, unevenness, and other concerns systemically,  rather than responding to one specific problem”.

When you form a good Agile team, their ability to jump to each other’s aid, rally around problems and move from individual work to teamwork tends to exhibit a lot of troubleshooting – particularly in the case of unplanned work.  Good troubleshooting skills are fundamental to any team.  As Smalley comments, “to address each [issue] with a deeper root cause problem-solving approach would require tracking and managing a problem list that runs, literally, hundreds of miles long.  No organization can hold that many problem-solving meetings … in an efficient manner”.

Our response to most failure demand is to apply troubleshooting techniques.  However, while these will help us survive the prevailing conditions they won’t help us change them.  Change requires the use of Type 2 problem solving techniques.  We need to leverage our data to identify recurring trends, and act to remove the root cause of the failure demand.  Smalley devotes great attention to problem definition, and opens with two pieces of critical advice when framing the problem for attention:

• “The first step is to clarify the initial problem background using facts and data to depict the gap between how things should be (current standard) versus how they actually are (current state).
• “Why does this problem deserve time and resources?  How does it relate to organizational priorities?  Strive to show why the problem matters or else people might not pay attention or might question the problem-solving effort.”

As we are successful with the reduction of failure demand with our Type 2 activities, we can move on to Type 3 problem solving, driving activity to establish new target conditions.  If we accurately understand the capacity being devoted to various types of value demand we can more accurately assess whether the value being generated justifies the capacity being consumed – triggering informed continuous improvement.   An enterprise PMO we have been working with provided a wonderful example recently:

They had historically applied a QA process to every project the organization ran.  This, of course, was characterized as “BAU” work.  It had to be done every time a project passed through a particular phase in lifecycle.  As they gathered data on how much of their capacity it actually consumed, they started to question the value proposition.  How regularly did the QA check actually expose an issue?  What were the typical consequences of the issues exposed?  What other high-value discretionary activities were unable to proceed due to capacity constraints?  Eventually, they were able to make an informed decision to move to a sampling approach, freeing up more capacity to devote to high-value initiatives they had been frustrated by an inability to proceed with.

Conclusion

Capacity allocation allows us to deal with BAU/Unplanned work, but my experience has been that it never works well without the accompanying discipline of actually channeling that work formally through your backlog.  It might require some creativity to make it meaningful (eg a single backlog item for the sprint representing the capacity devoted to a daily BAU activity).  Beginning with the reduction of failure demand in BAU/Unplanned work will both improve performance and free capacity which can then be devoted to true continuous improvement initiatives.

However, the usefulness of the Sprint or PI cadence-driven cycle seems to fall apart at the point where more than 30-40% of capacity is being reserved for unplanned work.  Some form of cadence-driven alignment cycle will always be valuable, but adaptation from the standard events and agendas will be necessary to make them meaningful and Kanban is far more likely to provide a useful lifecycle model.  The ARTs I have worked with in this situation have tended to wind up with shortened planning events far more focused on “priority alignment” than detailed planning.

Above all, the benefit comes from the mindfulness generated in the presence of data reflecting “where you really spend your time” as opposed to “what your value priorities are”, and the accompanying discipline of acting on that data to achieve better alignment.