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Today's topic is Evidence-Based Management is an approach that complements the Agile techniques and provides us with tools to measure the delivered values and optimize them. This approach enables organizations to make rational, fact-based decisions, bringing conversations from the level of individual preferences and opinions to the level of empirical evidence, logic, and insights.
In today’s Experts Zone #5 episode - Evidence-Based Management: How to Define Goals and Measure Them:
- 00:00 - Intro
- 00:50 - What is Evidence-Based Management
- 01:12 - Key Value Areas
- 01:39 - Current Value
- 03:34 - Time-to-Market
- 05:03 - Ability to Innovate
- 06:21 - Unrealized Value
- 07:18 - Outro
Have a nice watch!
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In my adventure as a project manager, I have encountered many organizations and different approaches in setting and achieving the goals. The biggest problem has always been defining goals and how to measure them. Today's topic, Evidence-Based Management, is an approach that complements the agile approach and provides us with tools to measure and deliver value. And of course, optimize them. If you want to find more about it, don't hesitate to reach me on frontendhouse.com.
What is Evidence-Based Management
This approach enables organizations to make rational, fact-based decisions, bringing conversation from the level of individual preferences and opinions to the level of empirical evidence, logic, and insights.
Evidence-Based Management is derived from medical science, it has also found its use in forensics, where evidence-based medicine gives great results.
The main assumption is to make decisions aimed at improving processes and bringing business value. Delivering value, satisfying stakeholders, and satisfying employees at present value are important. But the organization also needs to demonstrate that it can respond to market demand. It can be shown by delivering on time and being able to keep the level of continuing investment in product development. It is justified based on measuring what so far (Unused Value) could have been achieved if the product had the appropriate capacity.
There are four main key value areas in Evidence-Based Management. There is a Current Value, Time-to-Market, Ability to Innovate, and Unrealized Value. Let's discuss this evidence-based decision-making process that can support organizational success - so helpful for the leaders and managers.
The main topics that Current Value is aiming for are: identifying, naming, and valuing. The value currently being delivered is critical to improving the process. We pay attention only to the aspects that are currently provided to our clients. For this purpose, we look from the perspective of the recipients of our service/product. The customer, stakeholder or employee perspective will allow us to gain knowledge on how to develop and improve in our organization.
Key-value measurements for the Current Value and what to track, and how to define it, is Employee Satisfaction - a form of mood analysis that helps to gauge unemployment, commitment, energy, and enthusiasm. We can measure it using the results of retrospective, lesson learned, or PMO documents. For starters, we can use a simple employee satisfaction survey that is carried out on a regular basis.
Revenue per Employee
The second one is Revenue per Employee. A complementary indicator for employee satisfaction is Revenue per Employee. This ratio, which comes from the gross income/number of employees, is a key competitive indicator in the whole industry.
Customer Usage Index
Another one we should look into is a Customer Usage Index, which is a measurement of the use of a given functionality, which helps to determine to what extent customers perceive the product as useful and whether the current way of using the product meets expectations regarding how long users should use the given functionality. There are marketing metrics that allow us to calculate it, as well as marketing tools, measuring customer satisfaction, for example, the heat maps, conversion, using the new functionality, etc.
And last but not least, is our Customer Satisfaction. There's a simple form of customer mood analysis: how we are currently perceived by our customers, how committed they are, or how satisfied with the project. There is a lot of stuff that we can use to form this volume.
Another key value area that we should focus on is the Time-to-Market. Various things could shorten the Time-to-Market: all activities, starting from the elimination of communication bottlenecks in the organization, through improving the automatization of the publishing process to improvements in the area of application, maintenance, and removal of technological depth. Anything that reduces the time spent waiting or time spent getting the job done.
Build and Integration Frequency
The key indicator that we need to focus on the Time-to-Market value is Build and Integration Frequency. This is the number of running iterations launched over a certain period of time. For example, one sprint lasting two weeks. Story points or time estimates are helpful in determining, they allow us to investigate how many actual functionalities we have released in a given time.
Another one we should look into is release frequency. It's a similar indicator to the previous one, used when releases are in continuous mode. They allow us to determine whether the time we spent on new functionality is not too long or too fast.
Mean Time to Repair
Mean Time to Repair is the average time the development team takes to fix a bug from the moment it is detected. The finishing line is the moment we erase it from the production. This measure helps determine the organization's effectiveness in fixing errors.
And the last one, the Lead Time is the time from the presenting an idea of formulating a hypothesis to the moment when the client can use the idea. This measure can vary depending on customer and product and has a significant impact on customer satisfaction.
Ability to Innovate
The third key value we should look into is the Ability to Innovate. Determine the ability to adapt the client's needs by the response to his changing needs, maximizing the introduction of innovative solutions. In addition, anything that prevents users and customers from reaping the benefits of innovation, such as software that is difficult to install or the inability to justify installing it will reduce the value of Ability to Innovate.
Key questions we should ask are Technical Debt, Defect Trends and Time Spent Context Switching.
Technical Debt is a development concept that reflects the extra development work and additional tests that must be performed when the fast-paced solutions require subsequent corrections. This has a negative impact on the value delivery process and leads to an avoidable increase of losses and risks.
Defect Trends is a measure that shows the change in the number of defects since the last measurement. Anything that reduces the value of the products in the eyes of the customer, user or the organization itself is a defect. In general, defects are things that don't work as intended.
Time Spent Context Switching
Finally, Time Spent Context Switching is probably one of my favorite ones. It is the number of meetings per person in the team on a daily basis and the number of times team members are taking off work daily to help other people in the organization outside of the team. It can provide simple insights into the magnitude of the problem.
Unrealized Value is the focus point for us to detect what we can do more and what potential we are currently losing. Considering both, the CV and the UV, which means considering both the Current Value and the Unused Value, gives the organization the opportunity to balance current and possible future benefits.
For example, a product may have a low-cost Current Value because it is an early version used for marketing testing only but may have a very high Unused Value indicating a high potential of the marketing question. Investing in this product to boost its Current Value is probably warranted given that potential return of investment, even if the product does not have a high Current Value at the moment. Market Share The Market Share is the main value for the Unused Value. The relative percentage of the market controlled by the product - it's a pretty simple statistic. It can be easily calculated by dividing the value of our business, by the total value of the market and multiplying the results by one hundred.
This is the intro to Evidence-Based Management. I hope I catch your attention. The topic of Evidence-Based Management is a great model to research, so I hope at least that I encourage you to explore this knowledge and try to introduce it in your organization.
If you have any questions in regards to how to use this evidence-based approach in your organization or how to use it in your product, you can always catch our experts on our website. This management practice is all about better decisions, quality, and improvement.
If you have any questions, don't be afraid to ask me. Bye!