Agile Memes

The Hidden Agile Killer: How Traditional Budgeting Methods Undermine Innovation

May 5, 2024 | Budgeting, Leadership, Meme, Transformation

How agile can you be, if your budgeting process is still stuck in waterfall land?

Sadly, many agile transformations are stopped in their tracks by the budgeting process.

In order to fund a “project” (hint: it’s most often actually a product development!), companies sometimes require detailed cost estimations based on detailed plans.

They essentially force their “agile” teams to plan their backlog for the next months or years in detail 😳

And once we spent so much work on this detailed plan, we’re reluctant to change it. Additionally, changing the plan would actually mean it wouldn’t fit the budget calculations anymore – our constant “actual vs planned” analyzes would freak us out.

So what happens?

πŸ™„ We spend lots of time estimating things we yet have little information about.

πŸ™„ We establish a change request process. This is the opposite of embracing change.

πŸ™„ We use reviews and demos as “actual vs planned” assessments rather than to get feedback and learn.

πŸ™„ We discourage disproving our assumptions or invalidating hypotheses through early customer feedback.

πŸ™„ We make following the plan our highest priority, and defer responding to change to next year.

The solution?

πŸ‘‰ Change your budgeting process
πŸ‘‰ Stop basing budgets on detailed cost estimations. Think like an investor and look at the possible gains – how much are you willing to bet?
πŸ‘‰ Stop tying budgets to detailed plans. Feel free to tie them to fixed timeframes and team sizes. Calculating a budget should be a matter of minutes not weeks.

How does your company do budgeting?