Each SAFe® portfolio provides a set of business solutions to run a business smoothly. There should be a confined operating budget to execute each portfolio, as the cost of operating each technical solution is a primary factor in every business. However, many traditional companies make out that, doing business using Lean-Agile development gives rise to an intrinsic conflict with the budgeting and project cost accounting methods. The result is worst and unproductive.
To cope with this, SAFe® provides strategies called Lean-Agile budgets. Lean-Agile budgets can directly solve this conflict of traditional project funding. With the Lean Budgets model, fiduciaries can keep control on the expenditures required for the project. Also, the model is empowered with the programs like rapid-decision making and flexible value delivery. This model can be productive for the enterprises in two ways:
- Enterprises can yield the best development processes which form the foundation of all the marketing aspects.
- Can manage the technology expenditures professionally.
According to Scaled Agile Institute, Lean-Agile Budgets can be defined as-
“A set of practices that minimizes overhead by funding and empowering Value Streams rather than projects, while maintaining financial and fitness-for-use governance.”
According to the law by a fiduciary government for the development and delivery of IT, hardware and software, ‘every SAFe® portfolio operates within a familiar and sanctioned investment expenditure’. This principle is applied to the products, services and any kind of solutions within a SAFe® portfolio. The following figure illustrates how the traditional strategic planning process allows all portfolios to operate within a budget in an enterprise.
Though this is the traditional method, it helps in regulating the spent investment for a SAFe® portfolio.
Moreover, SAFe® introduced a unique approach to budgeting. This new budgeting technique results in-
- Reducing the overhead
- Decreasing costs related to traditional cost accounting
- Enables decentralized decision-making
With this latest approach of working, portfolio-level employees (managers) neither have to schedule the work for other team members nor they need to keep track of the work during the project.
Lean-Agile Budgets has come up with a new standard for maintaining budgets over the project-level:
Lean Budgeting- beyond project cost accounting:
This standard provides fiduciary control over all the investments, with fewer overheads, friction, and much effective outcome. The following figure shows the governance with Lean-Agile budgeting.
Lean-Agile budgets include the five major steps for empowerment and governance of project cost, as follows:
1) Fund value streams, not projects-
This step in Lean budgets focuses on forwarding the associated expense decisions to the employees involved in the project, thereby increasing empowerment and lessening overhead. This is done by assigning Lean budgets to each value stream, as shown in figure:
2) Empower value stream content authority-
Though step 1 is a huge jump towards the budgets, the enterprise wants the assurance that the value stream is building the right things. SAFe® offers this through the empowerment and responsibilities of Solution and Product Management and provides visibility to everyone by conducting and prioritizing the Solution and Program Backlogs, as shown in the figure below.
3) Provide continuous objective evidence of fitness for purpose-
In this step, SAFe® furnishes cadence-based opportunities to evaluate progress with the help of Solution Demo. Progress can also be determined every two weeks, if necessary, via System Demo. Customer, Key Stakeholders, Lean Portfolio Management, Business Owners, team and any Fiduciary can participate to inspect whether the build is meeting the customer’s business needs.
4) Approve epic-level initiatives-
Epics are large, so they require additional approval. Generally, initiatives impact multiple value streams and ARTs which cost many millions of dollars. To resolve this, it requires vetting through the system, to check which level (Portfolio level, Large Solution level, Program Level) they belong to, as shown in the figure.
5) Exercise fiscal governance with dynamic budgeting-
In the final step, Lean Portfolio Management (LPM) adjusts the value stream budgets within the portfolio. Though Value Streams are highly self-organizing, they can’t fund themselves. Funding varies based on the business dynamics, as figure illustrates.
Typically, these budgets are adjustable twice annually. If this happens less frequently, the spending is fixed for an inordinately long period, which limits agility. When this is happening more frequently, the enterprise may be apparently very Agile. But in reality, the process is not so secured. This leads to a long-term uncertainty and eventually gives rise to an environment of non-commitment.