The Lost Objectives of Governance

You can apply the same analysis to governance. The real objectives of governance are to ensure that:

• Goals, bets, and initiatives meet their customer value goals.

• Decision-making rights required for accountability are effectively allocated and managed.

• Initiatives are in compliance with internal and external regulations and standards (e.g., safety, auditing, accounting).

As with software delivery, the objectives of governance have gotten lost in the blizzard of documentation.² Jim once spoke at a conference put on by a major software engineering organization (he was on a panel debating the viability of this heavyweight approach). An indication of the extent to which documentation permeated the thinking was the conference feedback form—more than 20 pages in length.

2. This chapter concentrates on portfolio governance, rather than overall technology governance.

A company that developed clinical trial medical software interpreted the Food and Drug Administration (FDA) requirement to map requirements to code to mean it had to complete the requirement specifications, then map them to code—eliminating the possibility of using iterative development. The company had to be convinced that it could do iterative development and then finish the mapping at the end. Similarly, many companies have misinterpreted Financial Accounting Standards Board (FASB)³ for capitalizing costs and erroneously restricted agile development in that area.

3. FASB: Financial Accounting Standards Board. These standards have to do with categorization of costs to expense versus capital accounts.

The intention of lightweight governance is not to eliminate documentation, but rather to focus on the primary objectives of governance through appropriate delegation of decision rights and establishing clear accountability. Executives have a fiduciary responsibility to monitor investments. This oversight task is an important one—it keeps their organizations from making critical mistakes.

Establishing Lightweight Governance

Traditional portfolio and project governance stressed documenting deliverables (such as design and requirements documents) and completing activities. When using this approach, preparing for deliverable reviews with executives could be both exhaustive and scary. This phase-gate approach to managing risk delays progress and damages morale, as the process focuses on fiduciary control and a prescriptive plan. Adoption of agile delivery practices has worked against creating this type of environment, but unfortunately it has crept back in, as enterprises have tried to expand agile’s reach to larger projects and across their organizations.

This emphasis on portfolio control is similar to traditional project management’s focus on schedule and cost. With this approach, constraints, rather than value to the customer, become the focus. In EDGE, the focus is outcome oriented—geared toward customer value, innovation, and adaptation. Financial control, while important, is not the primary focus. The executive team’s focus should be how to help the organization be faster, more innovative, and more adaptive—rather than slowing the process down. Every level of the executive teams should encourage speed and learning—which is exactly the intent of the “Establish lightweight governance” guideline.

EDGE governance is characterized by two key things: value monitoring, rather than activity monitoring; and speed and flexibility, rather than heavy process and documentation. Governance in your organization should be about steering value creation first. While governance certainly has a strong fiduciary aspect, management and executive reviewers provide unique perspectives and experience that can assist in effective delivery. Improved results come from collaboration and contribution, rather than strict control.

Existing management frameworks, including governance, are the biggest roadblocks to business agility and product mindset. Many existing frameworks are documentation and process heavy, as people try to convince themselves they can predict the future by conducting extensive analysis. Many heavyweight practices arose, in part, because of mistakes—and the attempt to eliminate future mistakes. Unfortunately, those mistakes were often caused by events that couldn’t be predicted when the plans were made. And you can’t eliminate mistakes—no matter how many upfront documents or processes you implement. What you can do is to increase your ability to recognize mistakes earlier and respond rapidly, thereby mitigating losses and reducing risks.

Transformational initiatives—those requiring innovation—depend on learning faster, so small mistakes don’t evolve into big ones. Approaching management frameworks like portfolio and program management from this new perspective demands leaders who are comfortable with being uncomfortable. It’s not a place for the faint of heart.

Governance in EDGE stresses a regular cadence of Periodic Value Reviews (PVR). PVRs provide the framework to ensure that funds and resources are being used as intended and that progress toward goals, bets, and initiatives is being made. Your Value Realization Team (VRT) facilitates these reviews and ensures they are happening at an effective cadence. For an example of PVR cadence and participants, see Figure 8-1.

The three levels of review correspond to the LVT: goals, bets, and initiatives. The reviews give you a chance to determine if your current investments are still the right ones and to make decisions about changing investment strategies. At each level, reviewers decide whether investments should be stopped, pivoted, or expanded, or new investments should be made. Information they review includes progress on value created (Measures of Success [MoS]) for goals and bets, progress on delivery for initiatives, and investments made in each portfolio.

PVRs should have similar objectives to those of an agile delivery team’s review:

• To encourage learning and early risk mitigation through short feedback cycles

• To make decisions based on value delivered first

• To decide, for each investment, whether to continue, adjust, stop, or pivot

The cadence of PVRs might be quarterly for goals, monthly for bets, and biweekly or weekly for initiatives. However, determining the cadence for your organization should begin by discussing the question, “How do we adapt fast enough?” It’s not enough to have frequent reviews—your organization must be willing to make difficult allocation or reallocation decisions during these reviews. As we know too well, it’s hard to kill initiatives (or bets or goals). It’s hard to make decisions to reallocate funding from one bet to another. These decisions take courage, insight, and judgment (bolstered by MoS data). Putting a “lightweight” process in place doesn’t make hard decisions easier; in fact, it may make them harder because they have to be made quickly. The importance of lightweight governance is that it helps build organizational discipline through regular value reviews, and gives teams a forum in which to suggest new paths forward and assess the relative value of goals, bets, and initiatives.

Periodic Value Review

The PVR process shown in Figure 8-2 ensures an organization has an easy way to monitor and steer investments. The owner teams review value by evaluating the MoS.

In traditional portfolio management processes, rollups of portfolio status reports are used to communicate progress and surface problems that might be affecting the portfolio. These review processes tend to be focused on measures of activity (e.g., milestones achieved, budget spent), rather than on customer value achieved (e.g., customers can now view the status of their orders at payment).

EDGE replaces activity reviews with a PVR. At each level of the LVT, the owner teams review the value they’ve created during the period by showing the impact on the MoS. Because they’ve been delivering incrementally, they can demonstrate actual value creation (or lack thereof). This real-time feedback is a key differentiator of EDGE.

In traditional portfolio management, an organization has only visibility into the activity performed and knowledge of the original solution plan. It has very little opportunity to determine if it’s prudent to continue on the original path, change direction, or stop the madness, because the result isn’t known until the end. This is the fundamental failure of traditional portfolio management approaches: The organization has no ability to steer until it’s too late. Its focus is on achieving the plan, whether or not that plan is still viable.

With a PVR, the owner teams consider the deliveries made, the value produced (MoS), the investments made, the work in progress, and the top of the backlog. This is a complete picture of the portfolio intended to provide enough information to support a value-based conversation between the stakeholders and the delivery team. The tone is collaborative and focused on continuing to foster the organization’s strategy and vision.

Rebalancing the Portfolio

Rebalancing the portfolio occurs when information presented in the PVR indicates a change in the current investment. As an example, suppose a competitor releases a new product that requires an immediate response. That response might be to set up a new bet and take funds and teams from another opportunity to address it.

Specific questions to think about during the reviews include the following:

• Are we delivering the value anticipated for our MoS?

• Are we within our established constraint boundaries?

• Are investments in line with expectations?

• Are there any red flags?

• Are there any roadblocks that this review team can assist with?

• Are there any new external factors that we should be aware of?

• Are teams coming free soon for any other reason?

• Have we gained enough value that we should move on to the next backlog item in the portfolio?

The last question is particularly important—when should investment stop? you always have two choices, as shown in Figure 8-3: (1) continue and invest more or (2) stop and free up capacity to explore the next most valuable idea. Each review team should ask the question, “Do you want 100 percent of the value for 100 percent of the cost, or 90 percent of the value for 70 percent of the cost?” Often the last 10 to 30 percent of the cost provides minimal additional value. If enough value has been achieved, stop work on that item and move on to something new.

If opportunities aren’t delivering value, the organization can choose one of three options:

1. Invest less.

2. Stop pursuing an opportunity.

3. Pivot to a more valuable opportunity.

Investing less means setting new investment targets, adjusting staffing, and possibly adjusting MoS again. Stopping pursuit of an opportunity frees resources to take up the next most valuable opportunity. Pivoting means to use what you have learned to and continue a different way.

This regular and frequent response to feedback, shown in Figure 8-4, gives organizations unprecedented control over achieving business outcomes. Rebalancing—like all of EDGE—is incremental and iterative. Organizations needn’t wait years to change direction. PVR teams have the opportunity with every PVR to react to their learning—to invest more in ideas that help, and to eliminate investment in ideas that don’t.

Periodic Value Review Dashboard

In a PVR, the portfolio owner team reviews the portfolio for the previous period, illustrating the deliveries made, the value produced (MoS), the investments made, and the work in progress, and providing a glimpse into what’s on the top of the backlog. This is a complete picture of the portfolio that’s intended to provide enough information to support a value-based conversation between the stakeholders and the team responsible for delivery of value from the portfolio. Figure 8-5 is an example dashboard that consolidates this information on a single page.

Final Thoughts

The term “lightweight governance” should in no way be interpreted as less important governance. However, it is another one of those areas where bureaucracy and excessive documentation tend to grow over time. Governance is critical to organizations. You leave yourself open to big problems if governance is done poorly. But just as agile software development has shown that much of the bureaucracy was unnecessary, so you can streamline your approach to governance to meet the demands of today’s fast-moving environment. Meeting customer value, regulatory, financial, and safety goals is still core to your management responsibilities.