3 step program to prioritize on value

The more and more people and organizations we talk to about aligning their teams, we come to understand setting your own prioritization value model can be a daunting task. Or be perceived as one. Understand what is needed to get there, is a major step in any Agile Transformation: prioritize on value.

The Value Bucket Model

We did a post on the Value Bucket Model before. The model prioritizes work on a score and this is calculated by value divided by work size. Value defines what it brings to the organization in terms of money, cost, customer happiness, efficiency and such. Work size is not a direct money parameter, but the time one or more teams are busy to deliver the value (or enable other to do so).

How to create the model for your organization?

Everyone is unique. Al least everyone think they are and this is true when looking at specific details. But for the most part we are alike. The same logic applies to organizations. Different drivers and detail focus points but in general we see the same everywhere we go: the sales department will want to get revenue and margin and nowadays even have happy customers. HR departments are focused on retaining the best employees and keep sick leaves low and customer service aims for happy customers with a little as effort as possible (so low number of contacts and as short as possible).

But, since we acknowledge there are differences, the meaning of value is different for every organization. We give workshops to our customers and prospects to learn what value is for them and basically the steps we will show you now, is our guideline for these workshops.

1. What defines value for your organization

So we determined that the drivers for organization are similar but the devil is in the detail. Hence, this is why competitors are often battling each other on really small differences each sees in the market. These minor differences can have a huge effect on the performance of your company. In a previous post we drew up a list of value parameters. The first step in our program, is to set yours. Which parameters are important to your department (yes department, since not every department has the same objectives).

2. Normalize value to 1-5 or 1-10 scale (optionally using Fibonacci)

So now you have the buckets that define value for you. Let’s assume they are revenue, cost saving, risk, compliance and customer satisfaction. Comparing the first two could be quite easy, they are both financial inputs. But risk or compliance are not. Nor is customer satisfaction. How to compare the buckets to each other?

Normalize every bucket to a 1-5 scale where 1 means a low impact and 5 obviously a large one and what makes it a 1 and what a 5 (and all in between).
To make the estimates relative to each other you can also use the Fibonacci sequence often used to size User Stories.
The Fibonacci sequence looks like: 0, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144. As you can see, higher values tend to get more weight.

Different types of value have different metric. So what does a 1 or 5 mean?
For financial values it (again) is rather simple: 1 = the lower bound of financial effect an initiative has and 5 the upper. A timed value (risk could be assessed in the timely manner) can be done in months or weeks. One could use t-shirt sizing (XS, S, M, L, XL) for size type values and boolean for Yes or No (so no 1-5 but 0 or 1).

Normalizing your value buckets is the most difficult part of the 3 steps. You want to try to make it as objective as possible so that anyone translating actual values to the normalized ones, all give the same answer. This is not always possible but you should aim for it.

3. Weigh different values to each other

Having every bucket result in a 1-5 score for actual values makes it possible to calculate a total value for an initiative (or epic). The most simple way is to sum all buckets. But is revenue more important to you than avoiding risk? Assign a weight to every bucket to set how much it accounts for in the total value.

Going from value to priority

So now you can calculate the total value for every initiative you have. Does that set the rank for your priorities? It could be but we think one thing in the equation is missing: how much work is it?

We see work as the number of sprints (short, bi-weekly iterations with committed work) per team needed to get the job done. You can extend this simple manner with the percentage of the team members used (often not everyone of a team will need to work on it).

Who carries the model in the organization?

Just creating the model by an individual doesn’t work. Mostly Product Owners, team leads or Product Managers type roles will benefit greatly from working with a value model like this. So creating the model with a representative set of people in this kind of roles is key.

But not the only key. Management determines the direction of the organization so the value model should embody this direction. To make sure this is the case, management should be part of the workshop creating your model. They must carry the model in the organization for full adoption.

Set in stone?

Organizations grow, learn and change direction all the time. Evaluating your value model from time to time is very important. If you do this too late and the model no longer represents the direction of the organization, is loses effectiveness. So a yearly checkup is a good idea!