People and teams have traditionally been measured based on outputs. But this is ineffective, because teams can produce a lot without delivering significant value to their customers or their organization. While measures such as sizing and velocity, for example, can be used for predictability and capacity, those measurements fail to demonstrate value delivered, only the amount. Instead, teams need to focus on outcomes over outputs to help them deliver greater value.
Understand What Is Valuable
Organizations measure many different things. In general, these measures fall into three categories:
- Activities: These are things people in the organization do, such as perform work, go to meetings, have discussions, write code, create reports, attend conferences and more.
- Outputs: These are things the organization produces, such as product releases, content creation, reports and product reviews.
- Outcomes: These are desirable things a customer or user of a product experiences. They represent some new or improved capability that the customer or user was not able to achieve before. Examples include being able to travel to a destination faster than before or being able to earn or save more money than before. Outcomes can also be negative, as in the case where the value a customer or user experiences declines from previous experiences, for example when a service they previously relied upon is no longer available.
The problem most organizations face is that measuring activities and outputs is easy, while measuring outcomes is much more difficult. The choice of what organizations measure often reflects this reality. Organizations may gather a lot of data, but still have insufficient information about their ability to deliver value. However, delivering valuable outcomes to customers is essential to reach organizational goals. For example, working more hours (activities) and delivering more features (outputs) does not necessarily lead to improved customer experiences (outcomes).
For this reason, my firm Scrum.org has created the Evidence Based Management (EBM) framework. EBM looks at ways of measuring value and, based on what is learned from the resulting measures, drive required changes to increase potential value delivered in the future. Below I will dive into some of the key ideas of the EBM framework.
4 Key Value Areas
These areas examine the goals of the team or organization (Unrealized Value), the current state of the team or organization relative to those goals (Current Value), the responsiveness of the team or organization in delivering value (Time-to-Market), and the effectiveness of the team or organization in delivering value (Ability-to-Innovate). Focusing on these four dimensions allows organizations and teams to better understand where they are and where they need to go.
1. Current Value: The Value the Product Delivers Today
The purpose of looking at Current Value is to understand the value delivered to customers and stakeholders at the present time. It considers only what exists right now, not the value that might exist in the future. To continually reevaluate for current value ask these questions:
- How happy are users and customers today? Is their happiness improving or declining?
- How happy are your employees today? Is their happiness improving or declining?
- How happy are your investors and other stakeholders today? Is their happiness improving or declining?
2. Unrealized Value: The Potential Future Value if the Needs of all Potential Customers or Users Are Met
Looking at Unrealized Value helps maximize the value that the organization realizes from a product or service over time. When customers, users or clients experience a gap between their current experience and the experience they would like to have, the difference between the two represents an opportunity. This opportunity is measured by Unrealized Value. Questions to ask here are:
- Can any additional value be created by our organization in this market or other markets?
- Is it worth the effort and risk to pursue these untapped opportunities?
- Should further investments be made to capture additional Unrealized Value?
Related Article: Can Scrum Values Help Your Hybrid Environment Thrive?
3. Time-to-Market: The Ability to Quickly Deliver New Capabilities, Services or Products
Measuring Time-to-Market provides the data required to help minimize the amount of time it takes to deliver value in the future. Without actively measuring and managing Time-to-Market, the ability to sustainably deliver value in the future is unknown. Questions to ask in this case:
- How fast can learning occur from new experiments and information?
- How fast does what is learned drive change in how things are done or built?
- How fast can new ideas be tested with customers or users?
4. Ability to Innovate: The Effectiveness to Deliver New Capabilities That Might Better Meet Customer Needs
The goal of looking at the Ability to Innovate is to maximize the ability to deliver new capabilities and innovative solutions. Organizations should continually reevaluate their Ability to Innovate by asking:
- What is preventing the delivery of new value?
- What prevents customers or users from benefiting from new innovations?
Related Article: Why Goal Setting Helps Improve Employee Well-Being
Setting (and Adjusting) Goals
Knowing how and what to measure is good, but doesn’t provide value on its own. The measurements are there to help understand the current state so that you can set future direction and focus. Now that the information is available, the next step is to leverage it to create goals. Goals can be set to give everyone something to strive for. Measuring on an ongoing basis allows them to know if they are improving or declining. Using this evidence enables conversations to continue toward the goals and you can adjust plans and goals as new evidence arises.
Goals need to be revisited as new information is made available and they should be shared with those doing the work, stakeholders and even customers and users if possible. This creates transparency that will enable conversations and adaptation of plans in the future.
Measurements for one team or organization may be very different than those of another. It is highly dependent on the goals, type of deliverable and team makeup. Using what is measured is the end goal of putting measurements in place. Without a reason to use this information, you're just going through the motions. By setting goals and using measurements to understand the ability to achieve goals, any adjustments needed and to start conversations is where the true value of measuring comes in. And by measuring value rather than outputs the focus shifts from what people are doing to what how important that work is and how well it will be received once delivered.