Monthly Archives: July 2015

Gaming of Weighted Lead Time

This post is in response to Kent McDonald’s excellent question on the Weighted Lead Time post. The question deserves a longer response. Kent asked… “What are some of the behavior changes you have seen from teams or organizations when they started paying attention to this metric?”

I spent over two years at Skype working on metrics at the organisational level, especially operational metrics. I learnt two key lessons:

  1. All metrics will be gamed. In fact Robert Benefield, an expert in game theory, gave the following advice. “All metrics will be gamed, when you design a metric, start with the behaviour you want and then create the metric so that when it is gamed, you get the behaviour that you want”. A variant of lead time is a great example. The easiest way to game lead time variants is to create smaller units of work which is exactly the behaviour we want.
  2. The other thing that was etched into my memory is that any individual metric can be gamed. As a result, it is necessary to create a system of metrics that provide constraints to prevent gaming.

Coming back to Kent’s question. Weighted lead time can be applied at three significant levels:

  • Team: This should not be used as a metric. Each team will attempt to locally optimise which will lead to higher weighted lead times for initiatives.
  • Initiative: This is the metric that should set for each team. Each team should be the average of the weighted lead time of all initiatives they are part of.
  • Organisation: It is harder for teams to impact this directly but it can be gamed.

There are a number of ways that weighted lead time can be gamed, the most obvious are deliver work with no value, or to deliver a low quality solution. The product metrics should ensure delivery of value. It is important that the organisation has an effective quality metrics from the customer’s perspective (A huge subject). Given that the value and quality are not gamed, how else could a team game the weighted lead time metric?:

  1. They could avoid being part of initiatives that are cross team and likely to take longer to release value. This is actually the kind of behaviour we want. We want teams to find the simplest solution with fewest dependencies “Everything should be as simple as possible but not simpler.”. It needs to be carefully monitored during the Capacity Planning session, i.e. monitoring of the “but not simpler” rule. Once again, product metrics are key to ensure the initiatives are effective.
  2. Teams work on initiatives in the wrong order. They might prioritise initiatives that only they are working on to improve their WLT. As Capacity Planning produces an ordered backlog, we were able to create a “wrong order-o-meter” to see if teams were working on things in the wrong order. We weighted the effort they engaged in based on the initiative’s order in their backlog. A high score did not mean the team had the wrong behaviour, it simply indicated that someone should have a look and understand why the team was working on initiatives in the wrong order.

So Kent. the answer is that the metric can easily be gamed. You need an eco-system of metrics and processes and informed people to make this stuff work. Sad to say, its not a silver bullet, just another useful tool for the toolkit.

 

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Weighted Lead Time

Duration is a technical term from financial bond mathematics. Its not a great name. Weighted Lead Time (thank you to Dan North) is a more expressive name. Weighted Lead Time does not replace lead time and cycle time as measures, its a compliment. However I will argue why I think its a useful metric at all levels of the organisation.

  1. A CEO level metric that any financial astute investor (Private Equity, Venture Capital) will understand.
  2. Super easy to calculate. The second half of this blog will show you how to do it in Excel.
  3. A metric that makes sense when you look at it from different perspectives. It can be easily broken down and analysed from any perspectives to provide insight.

A CEO Level Metric
Weighted Lead Time (WLT) takes all the cash amounts invested over a period of time and replaces them with a single cash flow at a single point of time. An investor understands that if nothing else is known, an investment that takes a long period to generate a return is more risky than an investment that takes a short period to generate a return. An investor understands that an organisation where the WLT is increasing is becoming more risky (and possibly more risk averse) whereas an organisation where WLT is falling is becoming less risky.

Obviously it is easy to game this metric by failing to improve product metrics which is why it is only one of the metrics that an investor would look at.

The Super Easy Metric
WLT is super easy to calculate. Consider the following story level extract from a tracking system for three teams “red”,”blue” and “green”. The three teams have been involved in three initiatives “XFactor”,”NewMute” and “Xcaliber”.

Time Tracking Extract

Three of the fields are “calculated”, Investment, time and time*Investment.

Investment (I) is the cost of delivering the story. There are many ways to calculate this, such as the percentage of the sprint (calculated using story points or the count of stories). The worst way is to ask all team members to enter their time into a time tracking system as this will lead to all sorts of unnecessary pain and gaming.
The units for this do not matter, Man days, Team Weeks or Dollars or Euros all work.

Time (T) is the number of days from starting the story, and the date the investment delivers a return. Even though software may be released into “production”, that does not count. It is when the value is released that counts.
Instead of the start of the story, it is acceptable to use the start of the sprint when the commitment of investment occurs.

time*Investment (T*I) is Time multiplied by the Investment.

Simply highlight the data and create a pivot table in Excel. Three pivot tables are shown below:

WLT Pivot Tables

In each case the SUM of the Time*Investment and Investment are shown in the body of the pivot table. Weighted Lead Time (WLT) is calculated as the SUM(Time*Investment) / SUM(Investment) in units of days (The investment units cancel out which is why we do not care what they are).
The first pivot table shows the WLT of each initiative and the Grand Total (119 days) shows the WLT for the whole organisation (which is also on the other two).

The pivot below shows the WLT for each team.

The pivot table on the right shows the breakdown of each initiative by team.

The key metric is the WLT per initiative. The WLT per team is useful analysis tool but setting it as a target can lead to behaviour that leads to improving the WLT of the team at the expense of the Initiatives. The team level metric should be the average WLT per initiative for all the initiatives they are involved in.

**WLT from Different Perspectives**
As can be seen from the example above it is easy to see WLT from different perspectives. It can be seen and easily understood from the initiative, team or whole organisation perspective.
Compare that to Lead Time or Cycle Time. The lead time and cycle time for initiatives change as the configuration of the investments change. Lead time and Cycle Time cannot be aggregated to an organisational level value or broken down by team in a simple way.
Lead time and Cycle Time are great metrics but they really assume a manufacturing paradigm where the nature of the work is static.

WLT is not a replacement to Lead time and Cycle time, it is a complement. WLT is super easy to calculate, and a nifty metric that can be used in many contexts and communicated to the investors.