Too Much Work in Progress? How to Use Cost of Delay to Rank and Choose

If you're like my clients (or me!), you have too much work to do. (I'm beginning to think “too much work” is the norm.)

But how do you decide what to do first, second, and third? And never?

Cost of Delay.

When we use Cost of Delay, we don’t need long and involved calculations, or too-far-off predictions. Instead, we can use a given team’s real data (cycle time), and the real effects of delaying work.
Join Johanna Rothman as she explains the four costs of delay, how to calculate them, and how to avoid ranking traps, such as the sunk cost fallacy.

(There's a slide at the very end with links to all the blog posts and newsletters you might want to read after you review the deck.)

Transcript

1. Too Much Work in Progress? How to Use Cost of Delay to Rank and Choose Johanna Rothman https://mastodon.sdf.org/@johannarothman www.jrothman.com jr@jrothman.com
2. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman What’s Your WIP*? • How many of you are “working” on at the “same” time? • Projects to ship to a customer of some sort (multiple “primary” projects • Efforts (investigate this, please…) • Initiatives or background research (not af fi liated with primary work) • Anything else? • Count them all and put the number in the chat. I can anonymize your answers. • * WIP is short for Work in Progress 2
3. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Multitasking Costs Time and Money • Impossible to predict anything: either time or money • Little’s Law explains why: WIP is a function of how long things take times the time it takes you to fi nish • Multitasking extends cycle time and lowers throughput • Everything costs more 3
4. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman What Happens with Multitasking 4
5. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman More Multitasking Effects • People have feelings!! • Work dissatisfaction • Personal frustration • A small story from my long-ago past … 5
6. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman No. • It’s a complete sentence • We need to be able to say no in a reasonable way. • Some ways: https:// www.jrothman.com/mpd/portfolio- management/2017/02/visualize-your- work-so-you-can-say-no/ • “No” or “not yet” is an issue of ranking 6
7. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Manage the Project Portfolio at All Levels • Expose all the work • Make sure you have it all • Rank the work (a big challenge) • Only assign one project to an entire team (sometimes an even bigger challenge!) 7
8. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Rank: Start with the Zeroth Question • Zeroth question: • Should we do this work at all? • Is this work still valuable? • If the work is no longer valuable, skip it and move to the next piece • Old work might not have value any longer 8
9. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman WIP & Aging Connected in Portfolio and Roadmaps • The higher the WIP, the longer everything takes • The longer everything takes, the older the un fi nished work gets • Which is more valuable, the older work or the newer work? 9 Average Lead Time = Average Work in Progress Average Throughput
10. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Is old work still relevant? 10
11. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Cost of Delay Focuses on Value • Cost of Delay is: • The cost the organization incurs when they delay a product release • Speci fi c costs on next slide 11
12. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Four Separate Costs of Delay • Cost 1: People Costs • Cost 2: Sales Introduction Costs • Cost 3: Delay to Maximum Sales • Cost 4: Overall Sales Reduction 12
13. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman How to Calculate the Costs of Delay • Cost 1: People Costs (Still have to pay people) • Multiply: (Weekly salary costs for all the people on the project) * (Number of weeks delay) • Cost 2: Sales Introduction Costs • Multiply: (Weekly anticipated sales) * (Number of weeks delay) • Cost 3: Delay to Achieve Maximum Sales • Multiply Max sales and subtract anticipated maximum sales for the number of weeks of delayed introduction (area under the curve) • Delay 4: Overall Sales Reduction • Area under the curve of anticipated maximum sales over lifetime minus lower sales 13
14. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman How High WIP Affects Each Cost • Cost 1: If you continue to pay people and continue to multitask, you might be in the Sunk Cost Fallacy • Cost 2: Do you expect a big splash or a longer launch? Big splashes create much higher CoD • Most orgs can easily determine Costs 1 and 2. (I rarely bother with Costs 3 and 4 because no one remembers calculus and areas under the curve) 14
15. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Cost for That First Time Delay • Cost 1 is about cycle time • If you measure velocity, you have no idea how long things will take. Points do not tell you how long things take. • However, you can ask the team to offer a guess about how long they think they need • Assume you have 6 people, each of whom make the same weekly salary of $2000/ week. The team costs 6 * 2000 * number of weeks. • A 4-week delay costs $48,000 15
16. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Cost 2: Lost Revenue from Delayed Release 16 Customers pay $1000 Expected Sales Expected Revenue Week 1 50 $50,000 Week 2 100 $100,000 Week 3 200 $200,000 Week 4 (& onward) 300 $300,000 Take the maximum sales of 300 and expected revenue of $300,000 (because we can’t depend on the delay not a ff ecting max sales) Multiply that by 4 weeks = $1.2 Million
17. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Add Costs 1 and 2 Together • A four-week delay (given our salary and sales numbers) is: • $48,000 in salary costs • $1.2 Million in missed sales • That’s why I rarely need to use Costs 3 and 4. Costs 1 and 2 are so high, managers say, “oooohhhh.” • (Also, Costs 3 and 4 are totally predictive and a late release changes all predictions) 17
18. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Use CoD to Rank Adoption/Internal Projects • Internal waste often has much higher costs • Sad story of a broken build system in a 3000-person organization • $5.4 Million per week (salary costs plus delay for shipping the external product) • Time literally is money 18
19. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman How to Rank with CoD • Start with the zeroth question: Is this work still valuable? • Write down all of this: • Weekly salary costs for everyone you need to pay to release the product/feature • Number of features remaining until you can release • Cycle time/feature (or team guess from before) • Then add in the expected weekly revenue (next slide) 19
20. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Example Comparison of Four Projects, Part 1 • When teams don’t know their cycle time, everything is suspect • Project C looks like a winner, but I don’t buy the revenue or the 3- week cycle time. Can we trust these numbers? • Turns out Project C needed more people 20
21. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Example Comparison of Four Projects, Part 2 • Project D looks like WSJF (Weighted Shortest Job First). A possibility. • After discussion, the client chose, based on risk due to cycle time: • Project C • Project D • Project A • Project B 21
22. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Collaboration and Low WIP Matters • Break this feedback loop with: • Reduce WIP explicitly • Increase collaboration to reduce WIP & increase throughput • Monitor aging • All of that will reduce your various Costs of Delay and make it easier to rank work 22
23. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Links You Might Enjoy • How to see how long things take: https://www.jrothman.com/mpd/2019/09/measure-cycle- time-not-velocity/ • Why story points lead you astray: https://www.jrothman.com/mpd/2024/04/how-to-move- from-story-points-and-magical-thinking-to-cycle-time-for-decisions/ • How to measure WIP: https://www.jrothman.com/mpd/2023/03/how-to-measure-all-your- work-in-progress-to-make-better-decisions/ • Flow Metrics: https://www.jrothman.com/newsletter/2024/01/ fl ow-metrics-and-why-they- matter-to-teams-and-managers/ • Series that prompted this talk: https://www.jrothman.com/mpd/portfolio-management/ 2024/08/how-to-calculate-the-cost-of-delay-to-rank-all-the-work-part-1/ 23
24. © 2024 Johanna Rothman https://mastodon.sdf.org/@johannarothman Let’s Stay in Touch • Pragmatic Manager: • www.jrothman.com/ pragmaticmanager • Please link with me on LinkedIn • https://www.linkedin.com/in/ johannarothman/ • https://leanpub.com/ divingforhiddentreasures-spanish 24