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Agile software development and traditional cost accounting don’t match.
 
— Rami Sirkia and Maarit Laanti

Lean-Agile Financial Planning with SAFe: The Original White Paper

“Agile software development and traditional cost accounting don’t match.” So begins this important, original white paper from Rami Sirkia and Maarit Laanti, describing the move from traditional, project-based resource allocation and cost accounting to a leaner, faster, lower-overhead, decentralized, and far more empowered financial management model. This white paper spawned the collaboration that resulted in the SAFe Lean-Agile Budgets article.

Looking for more details on more effective cost control without the overhead and the non-Agile behaviors that traditional budgeting and cost accounting beget? One that scales to hundreds and even thousands of people? Here’s a few hints:

  1. Avoid flawed, long-horizon cost estimates (except at the macro, value stream investment level)
  2. Ignore detailed project (feature level) cost planning and stop doing variance analysis. If features are adding more or less value, then simply continue (increase) or discontinue (decrease) the investment. (If you have a cost “overrun,” maybe you should!)
  3. Keep cost and resource optionality on your side. If, based on customer feedback, you are doing the right thing within your cost center (Agile Release Train budget), why report financially, and worse—wait, wait, wait for approvals—when priorities change, since the overall program costs are the same?
  4. Make everything, including what people are working on, and shifting backlog priorities visible. This is the surface area for legitimate corporate governance.
  5. Enable “unallocated” classification in capacity plans. You trust people will be working on the right backlog priorities months down the road, why try to predict what those might be and force them into a legacy financial planning model that no longer really applies?

If these concepts make sense to you, or even challenge your thinking about traditional accounting, grab a cup of coffee, download and read the full white paper!

Editor’s (Dean) note: I know these folks from a prior project life. Maarit was an Agile program change agent, and Rami is a financial planner. Together they pioneered this change at their employer. You can reach the authors at ramisirkia@ovi.com and maarit.laanti@nitordelta.com. I believe this white paper is a watershed moment in understanding how to provide financial governance while keeping programs Lean and able to adapt to rapidly changing market needs. We appreciate their contribution to the state of the art in Agile budgeting.