The Invisible Taxes Organizations Pay
Organizations are always on the lookout to cut costs and scale back when they have unfavorable reporting periods. Hiring freezes, and cutbacks in training and traveling tend to be popular and convenient. These costs are tangible and easy to track. These are only marginal to the true savings they could get by removing the ‘invisible taxes’ most organizations are paying without even tracking.
Organizations are spending valuable money on invisible costs. Cost of delay, cost of multi-tasking, and cost of meetings. In organizations running agile, these costs are amplified due to the impact of short time boxes.
Cost of delay — Today’s biggest impediment and cost to agility is the impact of teams waiting for decisions. I see numerous product development teams carrying unfinished work sprint over sprint because they are delayed waiting on decisions for direction, funding, or getting expenses approved for equipment. Let’s assume a cross-functional team (salaries and working costs) cost $50,000 per sprint. Every time a team has an unfinished sprint goal it costs the business another sprint ($50k) for them to finish the work in the next sprint. If they miss two sprints within a release, that is an accumulated cost of $100,000 in delays. This does not show on any expense report, but it should. Every missed sprint because of a delay in making a decision costs the business more than the hard cost to build. It’s the opportunity cost of delivering to the market late.
Cost of multi-tasking — a lot of organizations obsess on people (aka resource) utilization. They believe they are maximizing their investment in headcount by spreading people over multiple projects to ensure they are utilized 100%. Whenever you allocate a critical contributor across multiple projects, all you are doing is increasing the risk that multiple projects will fail. As in the previous example, I see numerous product development teams carry unfinished work sprint over sprint because critical team members they were counting on were not available when needed to complete the work. Using the same figures, each missed sprint goal costs the business an additional $50,000 for another sprint to make up for the missed work.
Cost of meetings — in most organizations, it takes 1 or more signatures for any expense of $500 or more. However, anyone in the business can send meeting invites to multiple people costing the company thousands of dollars without a single approval! Multiply this by endless meetings in calendars. How many meetings have no clear goal? How many meetings run over time? How many follow up meetings? Imagine the money pouring out annually in large enterprises of thousands of high-salaried professionals. Worst of all, no approvals needed to send outlook invites. No audit to measure the meeting effectiveness. The outlook meeting invite is a signed blank cheque that we allow anyone in the organization to send.
When we have bad financial quarters, we need to learn and collaborate more to change things around. Reducing spending in training and travel greatly hampers the ability to learn and communicate in order to rebound.
I would like to leave you with 3 things:
- Calculate the burn rate for your product development team per sprint. Begin tracking every time a story does not complete in a sprint because the product development team was waiting on a decision or approval. Also, begin to track every time a story does not complete because a shared team member was not available. Show this accumulated cost every sprint during the sprint review. Money talks. Showing these costs can help influence quicker decisions or push decisions down to the teams to reduce this cost. Allocating team members to only one team will optimize for effectiveness over utilization.
- Start monitoring the number of meetings, number of participants in a meeting, hours spent in meetings, and effectiveness of meetings. If you want to control costs that matter — only allow each employee to schedule no more than 60 minutes of meetings per week. This is real expense control!
- Reduce the temptation of cutting back on the tangible, easy to cut things like learning and travel budgets that can help you reverse the direction of a bad financial reporting period. Investing in learning and collaboration is going to enable problem solving and innovation.
Every keystroke is precious so I will end here.
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