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Use Risk Management to Make SolidCommitments08OCT,2008

Commentary onThe Art of Agile Development'sRisk

Managementpractice.

Makingand meetingcommitments. Over and over, when I ask executives

what they want from their teams, I've found this to be one of the top

priorities.

That's why the Risk Management practice inThe Art of Agile

Developmentis one of my favorites. It's all about being able to make and

meet commitments, and we have three great tools in there: risk multipliers,

risk-adjusted burn-up charts, and project-specific risks. Today, I'll show you

how to use the first two to make solid commitments to your executives.

Risk Multipliers

Risk multipliers account for common risks, such as turnover, changing

requirements, work disruption, and so forth. These risk multipliers allow you

to set a date, estimate how many story points of work you'll get done, and

be right. It's a simpler version of the risk curves you'll see in good books on

estimating and project management.

RISKMULTIPLIER

CHANCE RIGOROUS PROCESS RISKY PROCESS DESCRIPTION

10% 1 1 Ignore--almost impossible
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50% 1.4 2 Stretch goal--50/50 chance

90% 1.8 4 Commitment--virtually certain

(As we explain in the book, these multipliers are estimates gleaned from DeMarco &

Lister's RISKOLOGY simulator and Todd Little's detailed analysis of hundreds of

projects. I'm guessing somewhat at how accurately they apply to XP. The most

accurate approach is to calculate your own risk multipliers from past project

history, but most companies don't track that data.)

The way this works is that you take your iteration velocity and extrapolate

out to your delivery date. That's the best estimate of how many story points

you'll finish under ideal circumstances. So if your velocity is 14 and you have

ten iterations left, you predict that you'll finish 140 more story points beforeyou release.

Then you apply the risk multipliers according to the type of process you're

using. If you have a solid velocity and get everything"done done"every

iteration, you get to use the "rigorous" column. Otherwise, you use the

"risky" column.

To continue the example, let's say your team has a rigorous approach. To

make a commitment, you apply the multipliers, like this:

CHANCE STORY POINTS FINISHED DESCRIPTION

10% 140 (140 1) Ignore--almost impossible

50% 100 (140 1.4) Stretch goal--50/50 chance

90% 78 (140 1.8) Commitment--virtually certain

This allows you to make commitments to stakeholders and executives. "Weare virtually certainto finish 78 more points by our release date, so

we're committingto delivering features A, B, and C. We have a50-50

chanceof completing 100 points, so we're planning on features X, Y, and Z

as a stretch goal."

The Risk-Adjusted Burn-Up Chart
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The risk-adjusted burn-up chart allows you to track your commitments

alongside your progress. It's based on Phil Goodwin's burn-up chart, which is

a variant of Scrum's burn-down chart. Here's how it works.

Start by drawing a chart with iterations on the bottom and story points onthe left. Mark the release date with a dashed line, as shown.

At the start of every iteration (typically, every week), plot two points on the

chart. At the bottom of the chart, plot the number of story points that are

"done done". At the top of the chart, plot the total story points--"done done"

plus the number remaining in the plan. This gives you a standard burn-up

chart.

Now add the risk numbers. Calculate your probability of completing variousnumbers of story points using the risk multiplier approach described in the

previous section, and then plot those numbers on a vertical line. You can

either draw the vertical line on the release date and change it every week

(as shown in the figure above), or you can draw it on the current iteration

(as I'll show in a moment).


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The result is an information-rich chart that shows you three trends:

1. Completion progress;2. Changes to the plan; and3. What you can commit to.

Example

Here's an extended example of these ideas in practice. Imagine a team of

six programmers. They've been working together for a while now and have a

solid velocity of 12. They start a new project that's due in six weeks. After

playingthe planning game, they have a prioritized list ofminimum

marketable featuresthat looks like this:

FEATURE COST TOTAL

A 34 34

B 7 41

C 13 54

D 2 56

E 6 62

F 26 88

Based on their past velocity of 12 and their history of getting iterations

"done done," the team calculates the following estimates:

10%: 72 (12 velocity 6 iterations 1 risk) 50%: 51 (12 velocity 6 iterations 1.4 risk) 90%: 40 (12 velocity 6 iterations 1.8 risk)

They report this to their stakeholders by saying, "We committo delivering

features A and B, and we'll work on feature C as a stretch goal. Features D

and E are unlikely to make it, and we almost certainly won't have time to do

feature F."
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(Sorry about the image quality. Also, the 10% and 90% should be reversed.)

Iteration 1

The team signs up for 12 points and the iteration goes smoothly. They

deliver 12 points. The customers leave the plan unchanged in hopes that the

team's predictions are wrong. The team recalculates their risk-based

projections:

10%: 72 (12 finished + 12 velocity 5 iterations 1 risk)

50%: 55 (12 finished + 12 velocity 5 iterations 1.4 risk) 90%: 45 (12 finished + 12 velocity 5 iterations 1.8 risk)


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(The 10% and 90% should be reversed in this picture.)

Iteration 2

It's a national holiday and most of the team is out for a few days this week.

The team uses all of theirslackbut is unable to get everything done. They

deliver 7 points, but they keep their projected velocity at 12, knowing that

the holiday was an unusual event.

10%: 67 (19 finished + 12 velocity 4 iterations 1 risk)

50%: 53 (19 finished + 12 velocity 4 iterations 1.4 risk) 90%: 46 (19 finished + 12 velocity 4 iterations 1.8 risk)

They report the news: "We are still committed to delivering features A and

B, and feature C remains a reasonable stretch goal. Features E and F will

definitely not be done and we're removing them from the plan."
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(The 10% and 90% are correct in this picture and all the remaining ones.)

Iteration 3 & 4

Iterations three and four proceed without incident and the team delivers all

12 points each time.

10%: 67 (43 finished + 12 velocity 2 iterations 1 risk) 50%: 60 (43 finished + 12 velocity 2 iterations 1.4 risk) 90%: 56 (43 finished + 12 velocity 2 iterations 1.8 risk)

The team reports, "Great news! The work's been proceeding smoothly and

we've finished features A and B. We're now working on features C and D,

and we're adding feature E back in as a further stretch goal."


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Iteration 5Disaster strikes! A critical database crashes and everyone is pulled to work

on it. The team only delivers 6 points this iteration.

10%: 61 (49 finished + 12 velocity 1 iteration 1 risk) 50%: 56 (49 finished + 12 velocity 1 iteration 1.4 risk) 90%: 55 (49 finished + 12 velocity 1 iteration 1.8 risk)

The team's report: "Due to the unexpected problems this week, we're not

going to get to feature E after all, and any problems on the scale of thisweek's will mean canceling feature D, too. However, we're committed to

delivering feature C and we're going to do our best to get feature D done for

you."


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Iteration 6No problems arise and the team gets all 12 points done, for a grand total of

61 points completed. They finish features C and D and spend the extra

points adding polish to existing features and documenting their work. Rather

than being upset that the team didn't get the whole plan done, stakeholders

are happy that their expectations were exceeded. Everyone gets a big raise

and they all live happily ever after.


10/11

The end.

PS: One of the cool things about this technique is that it automatically

accounts for Steve McConnell's famouscone of uncertainty. Look at the

risk bars over time and you'll see how they become smaller and more certain

as time progresses, just as McConnell predicts.

Further Reading

Estimate Inflation: A Cautionary Tale.A follow-up example that shows

what not to do.

HOMEBLOG|PERMANENT LINK

I work with people who want to be great. People who are willing to take

risks, rock the boat, and change their environment to maximize theirproductivity, throughput, and value. If that's youparticularly if you're in a
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