In previous conversations, I have talked about optimizing for cost rather than value. Short version, its better to optimize for value because optimizing for cost is a race to the bottom. In this post I am going to talk about the ROI of Agile Coaching.
In talking to some prospective clients, they have told me that they really want coaching but they cant get the budget for it. So I usually run them through a 5 minute ROI exercise.
Let’s say we have a team of 10: 1 product owner, 1 scrum master, 6 developers, and 2 testers.
Let’s say the fully loaded cost of this team is about $2,000,000/year.
Let’s say this team creates $4,000,000 in revenue per year for the company.
Let’s say Agile Coaching increases the teams throughput by 5%
That means in the first year, the coaching has brought us an additional $200,000 in value.
So if the coaching costs less than $200,000, its a worthwhile investment, right?
One issue with this exercise is that its overly simple. Of course, its a simple exercise. Another issue, and a dirty little secret, is that most companies have no idea how to measure value, they only know how to measure cost. Therefore, they have no idea how to measure an increase in value. Dollars are a good all around measuring stick for cost and value, but not every company is optimizing for dollar value. Sometimes they are optimizing for something else (such as decreased risk or increased value or increased speed).
In any case, no matter what you are optimizing for, you have to have a way to measure it. This goes for coaching as well. You need to have a objective baseline for the engagement, and you need to have a objective benchmark for your goal. When you start to look at it in that way, it becomes much easier to justify the investment.