Reward by Value

If we reward people based on how high their velocity is, we’re in fact rewarding people who work hard. Or who game the the system. Assuming we trust the developers to be honest with their estimates (and there are plenty of forces helping them stay honest), what’s wrong with rewarding people who work hard?

Well, working hard is not The Goal of our team. Our goal is to create value for the people who pay for our hard work. If we want to optimize our system, we should be very clear about our goal and keep it firmly in mind.

Fortunately, value is pretty easy to measure and track IF each story has a value estimate by the customer. Just like we can measure the effort we put into the release by counting the story points of accepted stories, we can count the business value points of the accepted stories. And that’s exactly what we track on the burn up/down chart. As this chart is displayed where everyone can see it, we’re always reminded of our goal. Our goal is to:

  1. Create the highest possible business value in each release…
  2. …for the lowest possible cost per release

Therefore, we should be rewarded on the amount of value we release. As long as it isn’t released and used, the software’s value is zero.

Hey, that’s not fair! We’re being rewarded based on value estimates made by the customer? What if the customers don’t know the value? What if they’re wrong? What if they game the system to lower the value? What if…?” Well… you do trust your customer to do a good job, to be honest, to be competent and to make an honest mistake from time to time, don’t you? If not, stop reading this blog and do something about it!

Like story point estimates, business value estimates should be consistent. Developers are allowed and encouraged to ask for the reasoning behind the value estimate. This nicely balances with the way the customer asks for the reasoning behind the story points estimates of the developers. But it’s ultimately the customer’s reponsibility to get the value right.

Customers and developers work together to maximize story value, like they do to minimize story cost. Before and during the planning game they should look critically at all the stories. Can we do this in a simpler way? Is there a way to get more value out of this story or to get the value sooner?


In this diagram we see that increasing velocity no longer makes you look good. Instead, producing more business value makes you look good. One of the ways to produce more business value is to genuinely increase the team’s velocity. Inflating story costs will not bring more value.

As in the previous diagram, if the team can deliver on time, their velocity will be a bit higher than planned. This means they will take on a little more work, commensurate with their increased velocity. But this reduces the odds that they will deliver on time next time, unless they find creative ways to increase their velocity.

We’ll see more about velocity in the next entry.


Gaming the points system

The previous entry described how to estimate using points and velocity. Can’t this system be mis-used by developers?

Yes…. Developers could assign artificially high estimates to stories, thereby making it seem as if they improved their velocity. Well, developers always could do this if they made estimates. There are some forces countering this:

  • Are you going to give all your stories 5 points? You aren’t allowed to assign more points: if 5 is not enough you have to break down the story into smaller stories. Don’t you think the customer is going to ask questions if each story costs 5 points?
  • A customer is allowed (and expected) to question the estimates: if stories A and B seem to have the same difficulty to the customer, but the developers assign a higher cost to B, the developers had better have a good explanation. If the explanation is based on the difficulty of the feature itself, the customer can only accept it. If the explanation is based on the technicalities of implementing the stories, this might be a “smell” that the design of the code is in need of refactoring. If the developers can’t explain the difference, they should re-estimate. Stories should be estimated consistently. A customer can verify this consistency.
  • Story estimates are made by the team. The whole team would have to agree to “gaming the system”. Or at least, all of the most prominent and vocal members of the team. That’s quite difficult to keep up in the open, communication-rich environment of an agile team.


This system diagram shows how we can game the system to get a higher velocity, by working faster and more sloppily or by inflating our cost estimates. Sloppy work is kept in check by the acceptance tests the customer performs. Remember: only accepted stories count when calculating velocity.

Inflation can be kept under control by:

  • The customer asking for the reasoning behind the estimates
  • The customer and developers looking for lower-cost ways to get the same result
  • The development team as a whole is accountable for the estimates
  • Cost estimates are capped at 5

However, we still see a pernicious loop (in purple): if we inflate our estimates, we increase our velocity. If our velocity increases, the team has to commit to doing more work, which makes it unlikely to easily meet the deadline. Unless the estimates are inflated again…

We’ll see in the next entry how to break this loop.