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The five Agile Portfolio Metrics Categories as whole represent a framework that can be populated with a wide range of specific measures that target specific information needs. The final category in the framework is focused on financial metrics, how we account for the money spent. 

Financial Management metrics provide feedback on the “who”, “what”, “when” and “how much” questions applied to money.

Basic Focus/Question: How much money is the organization spending, and on what?  Alternate versions of the question include:  What is the rate of spending on an initiative? How does the spending affect the balance sheet (CAPEX v OPEX)? How has the valuation of the organization’s assets changed?

  • Budget is the estimate of expenditures for a specific period of time. At a portfolio level, budgets represent the approved funding levels.  Portfolio budgets are often broken down between OPEX (operational expenditures) and CAPEX (capital expenditures). 
  • Spending is the budget’s alter-ego; tracking what is actually spent. The combination of the two measures creates the budget variance metric. Organizations break spending down, as with budget, into CAPEX and OPEX categories.  Each category of spending hits an organization’s balance sheet and income statements differently. CAPEX and OPEX can impact reporting of profits and losses.  We will explore the distinction in the future; however, recognize that accountants and executives can and do get very cranky if they have to report “bad” news.
  • Burn rate is a metric that combines the rate of spending, budget and estimated amount of spending to complete an initiative.  Graphically, the burn rate metric is often shown like a burndown chart (or burnup) or cumulative flow diagram.  The metric seeks to provide the answer to the age-old question, “do we have enough money in the budget to finish what we started?”
  • Value to Spend is the ratio of the estimated value (or money earned) for every dollar spent.  This is a useful trigger metric to determine whether to an organization should continue spending on a specific initiative or should pivot to another piece of work with a higher value to spend ratio.
  • Time Accounting metrics are often considered in the financial category reflecting the accounting reflecting the link between effort and cost.  

Expendable resources typically bear the most scrutiny (with the exception of attention). Money, in all of its various forms, is expendable; therefore is one the most measured and monitored commodities in any organization.

Douglas W Hubbard in How to Measure Anything, Finding the Value of “Intangibles in Business” Third Edition wrote that there are three reasons to measure.

  1. Measurement informs key decisions.
  2. Measurement data has its own market value that can be sold for a profit.
  3. Measurement provides information to satisfy a curiosity.

In most organizations the only reason that matters is the first one.  Organizations and portfolio managers must test agile portfolio metrics using this single-minded rational.  Does the data collected and the metrics we create from that data help make better decisions?  Having a well-rounded, balanced approach to portfolio metrics is often useful for ensuring that a decision is not made based on a myopic perspective.  In the end the value from measurement, reduced uncertainty, must outweigh the cost. Every organization must continuously evaluate what is being measured and be willing to pivot when the cost to value ratio changes.

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