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Use Risk Management to Make Solid
Commitments
08 OCT, 2008
Commentary on The Art of Agile Development'sRisk
Managementpractice.
Making and meeting commitments. Over and over, when I ask executives
what they want from their teams, I've found this to be one of the top
priorities.
That's why the Risk Management practice in The Art of Agile
Developmentis one of my favorites. It's all about being able to make and
meet commitments, and we have three great tools in there: risk multipliers,
risk-adjusted burn-up charts, and project-specific risks. Today, I'll show you
how to use the first two to make solid commitments to your executives.
Risk Multipliers
Risk multipliers account for common risks, such as turnover, changing
requirements, work disruption, and so forth. These risk multipliers allow you
to set a date, estimate how many story points of work you'll get done, and
be right. It's a simpler version of the risk curves you'll see in good books on
estimating and project management.

RISK MULTIPLIER
CHANCE RIGOROUS PROCESS RISKY PROCESS DESCRIPTION
10% 1 1 Ignore--almost impossible
50% 1.4 2 Stretch goal--50/50 chance
90% 1.8 4 Commitment--virtually certain
(As we explain in the book, these multipliers are estimates gleaned from DeMarco &
Lister's RISKOLOGY simulator and Todd Little's detailed analysis of hundreds of
projects. I'm guessing somewhat at how accurately they apply to XP. The most
accurate approach is to calculate your own risk multipliers from past project
history, but most companies don't track that data.)
The way this works is that you take your iteration velocity and extrapolate
out to your delivery date. That's the best estimate of how many story points
you'll finish under ideal circumstances. So if your velocity is 14 and you have
ten iterations left, you predict that you'll finish 140 more story points before
you release.
Then you apply the risk multipliers according to the type of process you're
using. If you have a solid velocity and get everything "done done" every
iteration, you get to use the "rigorous" column. Otherwise, you use the
"risky" column.
To continue the example, let's say your team has a rigorous approach. To
make a commitment, you apply the multipliers, like this:
CHANCE STORY POINTS FINISHED DESCRIPTION
10% 140 (140 1) Ignore--almost impossible
50% 100 (140 1.4) Stretch goal--50/50 chance
90% 78 (140 1.8) Commitment--virtually certain
This allows you to make commitments to stakeholders and executives. "We
are virtually certain to finish 78 more points by our release date, so
we're committing to delivering features A, B, and C. We have a50-50
chance of completing 100 points, so we're planning on features X, Y, and Z
as a stretch goal."
The Risk-Adjusted Burn-Up Chart
The risk-adjusted burn-up chart allows you to track your commitments
alongside your progress. It's based on Phil Goodwin's burn-up chart, which is
a variant of Scrum's burn-down chart. Here's how it works.

Start by drawing a chart with iterations on the bottom and story points on
the left. Mark the release date with a dashed line, as shown.
At the start of every iteration (typically, every week), plot two points on the
chart. At the bottom of the chart, plot the number of story points that are
"done done". At the top of the chart, plot the total story points--"done done"
plus the number remaining in the plan. This gives you a standard burn-up
chart.
Now add the risk numbers. Calculate your probability of completing various
numbers of story points using the risk multiplier approach described in the
previous section, and then plot those numbers on a vertical line. You can
either draw the vertical line on the release date and change it every week
(as shown in the figure above), or you can draw it on the current iteration
(as I'll show in a moment).
The result is an information-rich chart that shows you three trends:
1. Completion progress;
2. Changes to the plan; and
3. What you can commit to.
Example
Here's an extended example of these ideas in practice. Imagine a team of
six programmers. They've been working together for a while now and have a
solid velocity of 12. They start a new project that's due in six weeks. After
playing the planning game, they have a prioritized list of minimum
marketable features that looks like this:
FEATURE COST TOTAL
A 34 34
B 7 41
C 13 54
D 2 56
E 6 62
F 26 88
Based on their past velocity of 12 and their history of getting iterations
"done done," the team calculates the following estimates:
10%: 72 (12 velocity 6 iterations 1 risk)
50%: 51 (12 velocity 6 iterations 1.4 risk)
90%: 40 (12 velocity 6 iterations 1.8 risk)
They report this to their stakeholders by saying, "We commit to delivering
features A and B, and we'll work on feature C as a stretch goal. Features D
and E are unlikely to make it, and we almost certainly won't have time to do
feature F."

(Sorry about the image quality. Also, the 10% and 90% should be reversed.)
Iteration 1
The team signs up for 12 points and the iteration goes smoothly. They
deliver 12 points. The customers leave the plan unchanged in hopes that the
team's predictions are wrong. The team recalculates their risk-based
projections:
10%: 72 (12 finished + 12 velocity 5 iterations 1 risk)
50%: 55 (12 finished + 12 velocity 5 iterations 1.4 risk)
90%: 45 (12 finished + 12 velocity 5 iterations 1.8 risk)

(The 10% and 90% should be reversed in this picture.)
Iteration 2
It's a national holiday and most of the team is out for a few days this week.
The team uses all of theirslack but is unable to get everything done. They
deliver 7 points, but they keep their projected velocity at 12, knowing that
the holiday was an unusual event.
10%: 67 (19 finished + 12 velocity 4 iterations 1 risk)
50%: 53 (19 finished + 12 velocity 4 iterations 1.4 risk)
90%: 46 (19 finished + 12 velocity 4 iterations 1.8 risk)
They report the news: "We are still committed to delivering features A and
B, and feature C remains a reasonable stretch goal. Features E and F will
definitely not be done and we're removing them from the plan."

(The 10% and 90% are correct in this picture and all the remaining ones.)
Iteration 3 & 4
Iterations three and four proceed without incident and the team delivers all
12 points each time.
10%: 67 (43 finished + 12 velocity 2 iterations 1 risk)
50%: 60 (43 finished + 12 velocity 2 iterations 1.4 risk)
90%: 56 (43 finished + 12 velocity 2 iterations 1.8 risk)
The team reports, "Great news! The work's been proceeding smoothly and
we've finished features A and B. We're now working on features C and D,
and we're adding feature E back in as a further stretch goal."

Iteration 5
Disaster strikes! A critical database crashes and everyone is pulled to work
on it. The team only delivers 6 points this iteration.
10%: 61 (49 finished + 12 velocity 1 iteration 1 risk)
50%: 56 (49 finished + 12 velocity 1 iteration 1.4 risk)
90%: 55 (49 finished + 12 velocity 1 iteration 1.8 risk)
The team's report: "Due to the unexpected problems this week, we're not
going to get to feature E after all, and any problems on the scale of this
week's will mean canceling feature D, too. However, we're committed to
delivering feature C and we're going to do our best to get feature D done for
you."

Iteration 6
No problems arise and the team gets all 12 points done, for a grand total of
61 points completed. They finish features C and D and spend the extra
points adding polish to existing features and documenting their work. Rather
than being upset that the team didn't get the whole plan done, stakeholders
are happy that their expectations were exceeded. Everyone gets a big raise
and they all live happily ever after.

The end.
PS: One of the cool things about this technique is that it automatically
accounts for Steve McConnell's famous cone of uncertainty. Look at the
risk bars over time and you'll see how they become smaller and more certain
as time progresses, just as McConnell predicts.
Further Reading
Estimate Inflation: A Cautionary Tale. A follow-up example that shows
what not to do.
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risks, rock the boat, and change their environment to maximize their
productivity, throughput, and value. If that's youparticularly if you're in a
product-focused, entrepreneurial environmentI want to hear from you.
We can do great things together.