The document discusses how organizations can better measure their performance and focus on outcomes rather than metrics alone. It advocates for a holistic, multi-dimensional approach to evaluation that considers factors like business value, quality, and adaptability over time. Specifically, it recommends that organizations: 1) Measure outcomes like business benefits rather than just metrics like time and budget. 2) View performance evaluation holistically instead of focusing on a few narrow metrics. 3) Focus on both performance and organizational "health" to be most successful. 4) Continually learn and evolve to stay relevant through adaptive leadership.

1. Measurement in a Continuous World:
How the modern organization takes it's
own pulse
Jim Highsmith
Executive Consultant

2. 0
10
20
30
40
50
60
70
80
90
100
1 2 3 4 5
Iterations
Stories
Planned
Revised
Completed
Velocity is Killing Agility!
2

3. A Measure of Success
Cutter Sr. Consultant Helen Pukszta
“I recently asked a colleague [CIO] whether he would
prefer to deliver a project somewhat late and over-budget
but rich with business benefits or one that is on-time and
under-budget but of scant value to the business. He
thought it was a tough call, and then went for the on-time
scenario. Delivering on-time and within budget is part of his
IT department’s performance metrics. Chasing after the
elusive business value, over which he thought he had little
control anyway, is not.”

4. Mixed Messages
Be Flexible
Conform to
Plan

5. Dysfunctional Measurement Systems
Step 1: Measurement system installed.
Step 2: Performance tends to improve while people figure out the system.
Step 3: People, under pressure, focus on measurement goals rather than outcomes. (Always a
disconnect between the desired outcome and the measurement. Example: (1) productivity; lines
of code. (2) productivity; velocity
Step 4:
Time
Metric
Desired Outcome
Performance measurement
Source: Rob Austin, Measuring and Managing Performance in Organizations

6. Facing the Future
“Perhaps the most important question facing leaders
today is this: How do you build an organization that
performs flawlessly and evolves rapidly, one that
delivers sterling results today and changes fast enough to
be relevant tomorrow?”
Beyond Performance: How Great Organizations Build Ultimate
Competitive Advantage, Scott Keller & Colin Price (McKinsey
& Co.)

7. Battleground of the Future
Enterprise
(Adaptive
Leadership)
TalentCustomers
Shareholders/
Financial
Markets
Purpose
Do Agile Be Agile

8. How Important is Health (Being)?
¨ “Organizations that focused on performance AND
health simultaneously
¨ were nearly twice as successful as those that focused
on health alone,
¨ and nearly three times as successful as those that
focused on performance alone.”

9. Extensive Beyond Performance Research
¨ Surveys: 600,000 respondents, 500 companies
¨ 6,800 CEO’s & senior executives
¨ Reviews: 900 books & academic journals
¨ Personal interviews: 30 CEO’s
¨ Data from: >100 McKinsey clients

10. Multi-dimensional and Holistic
“Performance evaluation is a holistic
assessment of delivery and behaviour.”
TW Live Presentation, Bjarte Bogsnes, Vice President,
Performance Management Development, Statoil;
Chairman, Beyond Budgeting Round Table Europe

11. Multi-dimensional and Holistic
“You get a lot of negative behavior when you have
narrow metrics that really don’t represent the
complexity of the business. Instead we ask our
associates to view performance holistically, versus
focusing on a few specific variables.”
--CEO of Gore, in What Matters Now, Gary Hamel

13. Creating a Value Focused Culture
¨ Inspire around a value-based vision
¨ Make Value Visible
¤ Define a common currency and language
¤ $ @ portfolio, value points @ feature level
¨ Craft a Value Framework
¤ Value drivers
¤ Portfolio, Projects, Release, Feature, Iteration
¨ Make Value Actionable
¤ Everyone accountable for value outcomes
¤ Assemble a lightweight toolkit

14. The Agile Triangle
Value
(Releasable Product)
Quality
(Reliable, Adaptable Product)
Constraints
(cost, schedule, scope)

15. Enterprise Value Contributions
EVCs
Purpose
Ultimate
Reason
Social
Action
Learning &
Adapting
Profitability
Faster to
Market
Reduce
WIP
Be
Continuous
Increased
Revenue
Open New
Markets
Facebook Purpose:
“To make the
world more open and
connected.”

16. Value Dials
¨ Purpose
¤ Reduction in specific target diseases (health care organization)
¤ % profit spent on social responsibility
¨ Financials
¤ Headcount Reduction (# of H/C reduced or avoided) x (Average burden rate for
region & job type)
¤ Headcount Turnover
¤ Risk Avoidance (Value of risk) x (Probability of occurrence)
¤ Time-To-Market (Value of increased market segment share) x (# weeks accelerated
to market)
¨ Learning and Adapting
¤ New practices initiated this quarter
¤ …

17. Value Calculation Framework
Value Cost
Portfolio Financial Business Case (NPV/IRR) Portfolio T-Shirt Sizing
Project Same as above
Inception - Revised Cost Estimate
Iterative Development - Monthly Forecast
Capability Decision Making Sweet Spot
Where we want to start/continue to make better informed
Value Engineering Decisions
ROI = Value/CostFeature
Story
MoSCoW or other prioritization
method
Story Points (3,5,8)
Value Cost
Portfolio Financial Business Case (NPV/IRR) Portfolio T-Shirt Sizing
Project Same as above
Inception - Revised Cost Estimate
Iterative Development - Monthly Forecast
Capability Decision Making Sweet Spot
Where we want to start/continue to make better informed
Value Engineering Decisions
ROI = Value/CostFeature
Story
MoSCoW or other prioritization
method
Story Points (3,5,8)
Top Down –
Allocation of
Value
Bottoms Up –
Calculation of
Cost
We need to understand both Value and Cost at the Capability/Feature level.
Source: Pat Reed

18. Value Point Assignment and Allocation
NPV = $5 million
“Sales Increase”
5,000 Value Points
…allocation of Value Points
across Capabilities and Features…
Feature
A
(35%)
NPV = $---K
“Customer Experience”
250 Value Points
Feature
B
(30%)
Feature
C
(15%)
Feature
D
(20%)
Feature
A
(25%)
Feature
B
(50%)
Feature
C
(25%)
Feature
A
(10%)
Feature
B
(25%)
Feature
C
(40%)
Feature
D
(5%)
Feature
E
(20%)
Feature
A
(35%)
Feature
B
(45%)
Feature
C
(20%)
Feature
A
(60%)
Feature
B
(20%)
Feature
C
(20%)
NPV = $---K
“Other”
150 Value Points
Project A:
NPV = $5 million
Value Points get allocated across all Capabilities and Features based upon their relationship
to individual Business Value Dials
Capability A
(25%)
Capability B
(40%)
Capability C
(35%)
Capability D
(100%)
Capability D
(100%)
Source: Pat Reed

19. Features with Value Points
As a sales associate,
the ability to calculate
the total amount of
the sale.
C-5
As a sales executive, the
ability to view all sales by
product type, geographic
region, and sales
associate.
C-8
As a sales supervisor, the
ability to Verify the
adequacy of the
Customer’s Credit Rating.
C-3V-13
V-11
V-2
Feature Points are a calculation of cost.
Value Points are an allocation of revenue.

20. Reporting Differently (Report courtesy Jeff DeLuca)
Physical
Design
(33)
Apr 2001
JM
Hubbing
(20)
Apr 2001
JM
Satisfy
Transport
Item
(16)
Feb 2001
JM
Route through
Bearer System
(25)
Feb 2001
JM
Protected
Route
(8)
Apr 2001
JM
Retest Trail
Diversity
(18)
Apr 2001
CA
Save
Trail Design
(10)
Apr 2001
PS
A-Z
One Hop
(14)
Dec 2000
PS
A-Z
2 Hops
(21)
Dec 2000
PS
A-Z
Multiple Hops
(22)
Dec 2000
PS
Establish
Pathing
(19)
Dec 2000
PS
Comply with
Diversity
Constraints
(13)
Mar 2001
PS
Establish
Cost
(7)
Dec 2000
PS
Select Bearer
System
(7)
Dec 2000
PS
Logical Bearer
Systems
(13)
Apr 2001
PS
Establish
Products and
Models
(9)
Oct 2000
JM
Explode
Design
Model
(19)
Feb 2001
JM
Establish
Diversity
Levels
(19)
Oct 2000
PS
Generate
Constraints
(20)
Dec 2000
LT
Check
Constraints for
A Pathing Point
(13)
Jan 2001
LT
Capture
Details
(17)
Dec 2000
PS
Generate and
Track
Site Events
(16)
Apr 2001
JM
Generate and
Resolve
Order Activities
(13)
Mar 2001
JM
Run
Autodesign
(24)
Apr 2001
JM
Establish
Product
(12)
Oct 2000
PS
Establish
Product
Attributes
(15)
Nov 2000
PS
Establish
Product
Attribute Groups
(12)
Nov 2000
PS
Establish
Templates
(7)
Dec 2000
PS
Establish
Autodesign
Mapping
(6)
Dec 2000
PS
Protection
(4)
Mar 2001
PS
Autodesign
Transport
Shortfall
(14)
Apr 2001
JM
Establish
Site
(11)
Oct 2000
LT
Establish
Node
(14)
Oct 2000
LT
Establish
Network
Element
(9)
Oct 2000
LT
Establish
Equipment
(15)
Dec 2000
LT
Establish
Design Items
For Models
(26)
Oct 2000
JM
KEY: Work In Progress Attention Full Completion Progress Bar
Establish Product Catalog (PC) Establish Network Arrangement (NW)
Establish Order (OM)Establish Diversity (DV)Establish Design Product (DP)
Inter-System Pathing (XP)
Intra-System Pathing (SP)
System Selection (SS)
Establish Trails (TR)
Establish User
(11)
Nov 2000
JM
Users (UM)
Establish CIX
Trail Design
(15)
Dec 2000
CA
Lookup CI
Trail Design
(23)
Apr 2001
LT
100% 100%
100% 100% 100% 100%
100%42%
100%
100%
100% 100% 100%
100%
100%
100% 100%
100%
100%
100%89%
89% 1%
100% 100%
1%
0% 0%

21. Is Quality
really
important?

22. Quality Issues (technical)
¨ Code quality
¨ Design quality
¨ Automated testing
¨ Technical debt reduction
¨ Blah, blah, blah is what your business partners hear!

23. Historical Dilemma
Features Quality
23
Business
Outcome
Technical
Outcome

24. What if?
24
Features ?
Business
Outcome
Business
Outcome

25. What if?
25
Features Cycle Time
Business
Outcome
Business
Outcome

26. The Consequences of Waterfall
MaintainPlan, Develop, Build, Test, Release
12+/- months
Hundreds of features
Serial Development
Weeks
Few Features
Serial Development
Feedback from poor quality is long term
Consequences of low quality difficult to determine

27. Agile & Continuous Delivery
Milestone 1
R1 R2 R3 …
Feedback is immediate, a matter of weeks.
Consequences of low technical quality are
easier to determine.
Goal Not Features, but
Continuous Stream of Value!
3-6 mths
Weekly Releases
Milestone 2
R1 R2 R3 …
3-6 mths
Milestone 3
R1 R2 R3 …
3-6 mths

28. Summary
28
¨ A single release instance (waterfall) encourages
trading off quality for features.
¨ Aggregate releases over time encourage a business
trade off of features or cycle time
¨ Aggregate releases show that high quality increases
feature delivery and reduces cycle time

29. Cycle Times
¨ Feature/Story—release from backlog to deploy
¨ Release Frequency—how often features are
deployed

31. 31
Principle/
Practice
Management team embraced?
Not so
hot
Barely
started
Making
progress
Extremely
well
Adapting to
Changes
Exploring, not
planning
Engaging &
inspiring staff
Riding paradoxes
Do You Evaluate Yourself?

32. Do you do Management Retrospectives?
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33. Sample 360 Profile (Agility Consulting)

34. Intangibles
Year Intangible % Tangible %
1982 38 62
1992 62 38
2000 85 15
Impact of Intangibles on Market ValueHow Leaders Build
Value,
Ulrich & Smallwood
Intangibles assets are not reflected on
Balance Sheets.
Intangibles are reflected in Market
Capitalization.
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35. “The competitive advantage of the twenty-first
century is increasingly derived from hard-to-copy
intangible assets such as company culture and
leadership effectiveness.”
–Keller & Price

36. More Information
¨ White paper: “Adaptive Leadership: Accelerating Enterprise
Agility,” Jim Highsmith, Available on www.thoughtWorks.com.
¨ My blog: www.jimhighsmith.com.
¨ Twitter: @jimhighsmith
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