AO – Agile Organizations

The Role of Coherence, Budgeting, and Portfolio Management in Agile

Understanding value-driven approaches is crucial in Agile. These approaches include PX (People Experience), CX (Customer Experience), and SX (Service Experience). These areas are among the most emphasized goals in Agile. These areas are well-documented and widely understood. However, when it comes to business contexts, there is often a disconnect, especially regarding budgeting, funding, and return on investment.

I often encounter a common misconception in my consulting work. It is the belief that a line of business (LoB) is merely a service for the organization. This is an age-old and stubborn idea. The belief is that these lines exist solely to support the “real” value creation flow. They are also thought to mitigate risks and threats. While this can be valid in theory, the problem arises once the budgeting process begins.

The Complexity of Budgeting

Budgeting is often misunderstood. It involves estimating annual expenses, planning projects, and determining staffing needs. Once budget negotiations conclude—usually centered around headcount—you launch into the fiscal year. Quarterly controls then demand budget cuts, sometimes for strategic reasons, but often driven by external pressures. Meanwhile, new customer demands and board requests compel prioritization and reallocation.

Teams, especially those practicing Agile, face pressure to do more with less. They believe that “Less is More.” They also think that fewer people can deliver more. This often leads to a cycle. Necessary investments are cut. Teams are pressed harder. The organization risks losing coherence. Unfortunately, this scenario is far too common.

Why Portfolio Management Matters

Portfolio management is essential, as it aligns organizational metrics (OX) with the broader enterprise strategy (EX). The top-down deployment of strategy from EX influences OX design tactics—organizing resources and initiatives accordingly.

Effective portfolio management gathers data from strategic goals, projects, transactions, and platform activities to ensure the right investments are funded. To do this properly, you need visibility into actual, expected outcomes, ROI, and time-to-market.

Examples of Portfolio Management in Action

In one government project, portfolio metrics included:

• Managing capacity
• Identifying outsourcing candidates
• Workflow consolidation and optimization
• Setting up governance models

Visibility was critical: workflows needed to be transparent, work explicit, flows visualized, and constraints identified and removed.

In finance, portfolio management helped:

• Allocate resources to high-value initiatives
• Base budget negotiations on factual data
• Highlight where value was generated
• Enable early, frequent deliveries
• Control budgets with flexibility

Key points for effective portfolio management include:

• Strategic project selection based on alignment and risk
• Optimizing maintenance budgets
• Managing project portfolios dynamically
• Ensuring the right resources are in the right place at the right time

From Traditional to Agile Cost Tracking: AgileEVM

In 2008, I explored the work of Tamara Suleiman and Brent Barton. Their work focused on AGILEEVM, which is an adaptation of Earned Value Management (EVM) for agile projects. Its goals were to:

• Be lightweight and leverage existing metrics
• Add decision-making value for teams and stakeholders
• Be cost-effective and accurate

Instead of complex, new tools, AGILEEVM focuses on native agile indicators:

• Product Backlog: List of features delivering value
• Velocity: Work completed per sprint
• Backlog Size: Total estimated value
• Stories and Story Points: Effort estimates from the user’s perspective

Metrics for Agile Portfolio Management

The core objectives are:

• Measure outcomes, not just outputs
• Maximize business value
• Prioritize work effectively
• Organize delivery efficiently
• Reallocate resources to optimize ROI

Key formulas include:

• Sprints to complete = Backlog Size / Velocity
• Expected % complete = Completed Sprints / Planned Sprints
• Planned value per sprint = Expected % complete × Total Budget
• Actual % complete = Completed Story Points / Total Planned Story Points
• Earned Value = Actual % complete × Total Budget

Most of these data points can be gathered easily. Manual entry is minimal. Automation is straightforward using tools like Jira.

Practical Tips

• Keep sprint lengths stable to ensure consistency.
• Maintain stable, dedicated teams; avoid adding members mid-sprint.
• Establish and stick to a budget—estimating in business value and story points.
• Consider portfolios at the level of product or team backlogs—multiple projects or initiatives grouped together.
• Use visual boards to track areas like customer experience, service delivery, and organizational activity, applying swim lanes for clear measurement.