Velocity is one a key metrics used by Scrum teams to measure the rate at which an Agile team delivers value to the customer. In his book “Escape Velocity – Better Metrics for Agile Teams”, Doc Norton explains why velocity is not the ideal metric for Scrum teams. In this quote, he explains that Velocity is a lagging indicator. These metrics tend to be weak indicators for the short-term and are much more reliable for confirming long-term trends.
Velocity is also a lagging indicator. It is a measure taken at the end of a series of steps. We plan, we prioritize, we work, we test, and then we measure.
Lagging indicators are abstract
Lagging indicators tend to be aggregate or abstract. They don’t provide detailed insight into the operations, rather they provide an indication of results. Net profit is a lagging indicator for a company. While it tells us about how the company is doing, it gives us no indication of why the organization was or was not successful.
Let’s look at another lagging indicator; unemployment. The unemployment index is a lagging indicator. It tells us whether or not unemployment is on the rise or decline, which in turns tells us if the economy is doing poorly or well, respectively. An increase in unemployment means a sagging economy. A decrease in unemployment means a growing economy. But there is nothing about unemployment that tells us why the economy is performing in a particular manner or how we might go about making an adjustment to economic policy to bolster growth. Moreover, the way to bolster the economy is not to focus on unemployment, but to address the underlying issues.
Historically, policies focused on training and jobs creation have had little or even negative impact on employment among the populations the programs target. Those that did create new jobs, such as the Works Progress Administration of the 1930s and the Public Employment Program of the 1970s and 1980s, did little to impact generation of jobs outside of those directly created and funded by the programs. Essentially, these created an artificial drop in unemployment, but did not address underlying causes. Each program resulted in a corresponding increase in unemployment once government funding ran out.
Whereas, policies focused on addressing broader monetary and fiscal trends can result in a boost in Aggregate Demand, which then leads to a decrease in unemployment.
Similarly, one of the problems with velocity as a lagging indicator is that while it can tell how much work we delivered over a given time period, it cannot tell how well the team is doing at ensuring consistent delivery or at improving their process overall. For some teams, velocity may be an indicator of team health or at least capability, but it provides no insight into root causes. Moreover, attempts to increase velocity directly tend to either create artificial increases that are not sustainable or result in other more detrimental issues. Whereas, efforts to address underlying causes more often than not result in improvements in velocity. Managing story composition and limiting work in process results in smoother flow, which leads to a more stable velocity and the ability for a team to mature into more rapid delivery.
A stable or slightly increasing velocity is usually considered a good thing. When managers see a stable velocity from iteration to iteration, they may become complacent and forgo any improvement efforts. But the reality is that there are actually numerous factors that impact a team’s ability to deliver and the current velocity trend may be more a matter of coincidence than performance. We will look at a number of factors that impact velocity in later sections.
Lagging Indicators are poor short-term predictors
Lagging indicators⁴ tend to be weak indicators for the short-term and are much more reliable for confirming long-term trends. Let’s take a look at “velocity” in a different industry. For retail, we can use sales volume as our “velocity”. Sales volume is a lagging indicator which tells us something about how we did in the prior period, but does not give us any indication as to why sales was high or low.
Source: Escape Velocity – Better Metrics for Agile Teams, Doc Norton, https://leanpub.com/escapevelocity
Leave a Reply