Budget Poker

Since it is mid-year that means time to plan for next year’s program budgets. This process seems like one big game of poker. The teams picks their cards and determines their hand (budget). But they are playing against the house (portfolio planning teams) and can’t reveal their cards too early for fear of losing the game. So they may have to bluff and add contingency to their estimates. The house knows this game and then decides to cut all estimates by a percentage. So more padding gets added. Thus “the game.”

The question becomes how to not get into this game every year of padding estimates, hiding money and cutting funding. There is always more demand for money than exists and so companies need to plan smarter. The rise of Scaled Agile portfolio planning shifts the focus to fixed cost and capacity with variable (but prioritized) scope. This will help to reduce the volatility of estimates since portfolios will only be paying for fixed capacity teams and therefore should be able to plan better. The challenge is in determining cost for specific scope because Agile doesn’t plan that way.

They key is transparency of information and trust. Knowing how much something really costs to do the work, the management overhead and any associated costs is critical to identify the true cost. And teams need to trust that if there is not funding for a particular scope, that they would still have work to do especially in an agile world where teams are longstanding.