Portfolio metrics provide direction

Agile portfolio metrics are integral to prioritization and validating the flow of work. The term portfolio has many uses in a software development organizations, ranging from product portfolios to application portfolios.  I have even seen scenarios where organizations put all their development, enhancement and maintenance efforts into a single bucket for prioritization and queuing until there was the capacity to work on them.  We will use an inclusive definition of the portfolio to include, at a high level, all the software development and enhancement work in an organization. Products, lines or business, and even applications are often used to define portfolios.  I break Agile portfolio metrics into five high-level categories.

  1. Portfolio Mix metrics provide portfolio managers and the organization with an understanding of how the organization allocates work across different teams or classes of service.  For example, one organization I have worked with classifies the work in their portfolio as innovation (big bets that might leapfrog competitors), grow the business (extensions of current applications or products), run the business (work that maintains current products or applications) and expedited (high priority or squeaky wheel).  Data for this category is often “harvested” from the business cases.
  2. Demand and Capacity metrics provide feedback on the organizational capacity and the demand placed on the capacity. Metrics are often focused on flow and might include work-in-process limits and value flow.  Much of the data for metrics in this category is captured based on observing the movement of work through the portfolio lifecycle.
  3. Value metrics provide feedback on the economic value work in and delivered from the portfolio. Data for these metrics comes from market share and accounting data, including the cost of work performed, sales, margin contribution, and cost avoidance.
  4. Portfolio Health metrics provide feedback on how satisfied stakeholders and team members are with the work performed. Health metrics often use satisfaction surveys (customer and team), net promoter scores and quantified risk metrics as a sign of portfolio health.  One organization I recently observed measures backlog age as a proxy for portfolio health.  Satisfaction data is often gathered via survey tools, while risks data comes from calibrated estimates identified for the work.
  5. Financial Management metrics leverage funding and budget information.  The data comes from accounting systems and project tracking systems, depending on where the work is in the portfolio lifecycle.

Agile portfolio metrics are only useful if they provide value. As our re-read of Hubbard’s How to Measure Anything has made plain, just because we can measure something, does not mean we should. All measures must have economic value or they are not useful.  Metrics and measures add value if they reduce uncertainty so that we can make better decisions.  The five categories of metrics are targeted at providing data for different decisions.