Managers using the cost accounting method<\/a>\u00a0to estimate\u00a0projects are often lost when it comes to calculating the cost of Agile Scrum projects. Where the cost accounting method typically uses cost of time per project task as a key variable, Scrum\u00a0uses effort estimates<\/a> and “time boxes”. To make matters worse, effort estimates assigned to tasks within these boxes are often measured by Fibonacci numbers<\/a> or \u00a0fruit, dog breeds, etc. It is easy to understand why managers can become frustrated. They are expected to reliably estimate the number of tasks, \u00a0the time and cost involved and all Scrum gives them is a list of dog breeds.<\/p>\n Based on input from the book,\u00a0\u00a0\u201cAgile Estimating and Planning\u201d by Mike Cohn, I’ve identified\u00a0a simple model that works for me. I’m sharing it in the hope it may take the edge off\u00a0the uncertainty involved in estimating your projects managed by the\u00a0Scrum Framework.<\/p>\n The model is flexible enough to add any variable relevant\u00a0to the\u00a0project. PMI<\/a> offers this high-level list…<\/p>\n The number of tasks is managed by the Sprint\u00a0Backlog. Time is managed by the length of the sprint (“time box”). Cost is calculated by multiplying the sum of the variables by the sum of the effort applied to the sprint.<\/p>\n Variables<\/p>\n Pseudo Excel Formula<\/p>\n C = (((E \/ W) * L) \/ S)<\/p>\n The benefits of calculating project costs based on historical\u00a0throughput are self-evident. If not I recommend you get a good book on Lean\u00a0manufacturing<\/a> such as, “The Goal” by Jeff Cox and Eliyahu Goldratt or “Going Lean” by Stephen Ruffa. The model uses the throughput average (mean) and not the median. Since a hallmark of Agile Scrum is continues improvement (Kaizen<\/a>), our calculations should include sprints of exceptional performance.<\/p>\n I may cover this in more detail in a later post, but cost predictions reported by the model become more accurate as stories are better defined. The more general a backlog item or Epic the higher the effort estimate.\u00a0\u00a0As the stories are broken down with enough detail to create a solution and fit into a Sprint, the lower the effort estimate may become. This may mean, for example,\u00a0an Epic originally estimated at 89, may actually require stories totaling only 55 points. On the other hand an Epic at\u00a0infinity clearly indicates no estimate is possible, until its requirements are better understood. Epics totaling more story points than fit into available sprints (“time boxes”), confirm compromise is\u00a0required.<\/p>\n By reaching improvement goals set during the retrospective, the model also reflects the reduced cost of production. Lower production costs present the organization with a number of market advantages such as lower cost resulting in larger market share.<\/p>\n There is the added benefit of team participation. Teams want to succeed and they love a good challenge. After the team gets comfortable with estimation by\u00a0comparing\u00a0Fibonacci numbers\u00a0thy will certainly\u00a0be happy to commit themselves to a story point per sprint benchmark.\u00a0You can even use this as a game between teams. This moves production cost calculations from something done behind closed doors and out into the open.<\/p>\n It is not necessary to throw Agile Scrum out the window when calculating project costs. Embracing this framework along with Lean ideas and leveraging Kaizen<\/a>\u00a0an organization will soon learn, accurate projections come by being Agile.<\/p>\n Click here<\/a> to view an example of this model.<\/p>\n Books I used to develop this model:<\/p>\n Fibonacci Numbers & Dog Breeds? Managers using the cost accounting method\u00a0to estimate\u00a0projects are often lost when it comes to calculating the cost of Agile Scrum projects. Where the cost accounting method typically uses cost of time per project task as a key variable, Scrum\u00a0uses effort estimates and “time boxes”. To make matters worse, effort estimates<\/p>\nA Simple Model<\/h2>\n
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Basic formula<\/h3>\n
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The model requires the following steps.<\/h3>\n
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Benefits of this Model<\/h2>\n
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