Your budgeting kills agility!

Agility is much more than teaching teams to deliver in sprints.

If your goal is to tackle the challenges of today, you’d better become agile on all levels.

Traditional budgeting often works somewhat like this:

👏 Management decides to pursue a business opportunity
🤦 They ask product managers for a cost calculation
🤦 Product managers ask teams for an effort estimation
🤦 PM & teams break down work packages to do so
🤦 A rough cost estimation is handed back to management
🤦 Management says “too expensive, we had about 25% less in mind”
🤦 PM & teams descope, “adjust assumptions” and do some magic to fit the expected target budget
🤦 Management grants the budget

Why, in all the world why, did they do all this expensive dance?

After all, management knew from the get go, HOW MUCH they wanted to spend on this opportunity.

Furthermore, they’re now stuck with a fixed scope and roadmap. And all that was created without empirical data at the time of least information in any endeavor.

I want to propose a different approach to budgeting:

👏 Management decides to pursue a business opportunity
👉 Management communicates how much they’re willing to bet/invest to seize this opportunity
👉 Project managers and teams try to create as much value as possible within this budget
👉 They focus on producing the highest value stuff first
👉 They constantly adapt plans & forecasts on the basis of empirical data
👉 Management can end the endeavor prematurely and shift funds, if the IRR of another one is higher

This latter approach is more flexible, requires less upfront work and is less risky. In short: it’s agile.

How does your company do budgeting?