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Budget Management in the Agile World

For all the Project Managers turned Scrum Masters this might be a refresher if you have had budget management responsibilities in the past. As a Scrum Master your responsibility is to protect the team. One of the things that you might have to protect the team from is budget and scope discussions.


Measurement is still a key component of any project effort. As a Scrum Master, you are using burndowns as a lead measure; whereas, velocity is both a lead and lag measure. A lag measure for the sprint but velocity can help you predict when a feature set will likely be completed. I use likely because there are unknowns accounting for by using spikes that potentially could produce new enablers for the architectural runway. Why is this important? Because discovered items change the scope of the project. In addition, normal story elaboration creates new stories to be worked which could be deemed as an increase in scope.

Value Measurement

A simple planned budget vs. actuals approach enables you to determine budget at completion. Like sprint velocity, this is a lag measure. So, there is no predictive component for spending in relationship to discovered. A more comprehensive measurement tool is Earned Value Management. In addition to planned budget and actuals, this measurement tool also incorporates percentage completion on scope. The addition of the percentage complete component now makes this a lead measurement. So, if you have under spent and are behind schedule you can likely add new resources to the effort to close the schedule gap. However, if you have overspent and are on schedule, this gives an indicator that you will likely have a budget overrun. This is an effective tool when working on projects with known scope.

Earned Value Management is impacted by changes in scope. In the Agile world, how do you manage scope? Well it's in the Epics and Stories. However, Stories are constantly evolving due to story elaboration. So, if you are using a tool such as Jira. These items are considered a scope change. So, you have to account for these changes in any earned value management process in Budget management.

So, what do we do?

Understanding this expected change in scope, you must:

  • allow for a percentage change (e.g., 10%). Otherwise, increases will appear as though your earned value will change between reporting periods.

  • clearly identify new work vs. story elaboration. Ensure that you have a Change Management process to support material changes in the work effort.

In the end, we are using a rigid tool to manage a flexible software development methodology. If you must use this metric, your organization will have to incorporate some flexibility into reporting. Ultimately working software is the final goal.

Let's brown brag the conversation.

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