A Separation of Concerns

Out at Agile Eastern Europe in Kiev last month, I was privileged to see Bjarte Bogsnes and his talk on “Beyond Budgeting”.

One of the elements that struck me most profoundly was when he separated the concerns inherent in budgeting. He noted that it was used for three things:

  • creating targets
  • forecasting
  • allocation of resources.

The combination of all three, he noted, led to a lot of gaming and anti-patterns. By separating these concerns and addressing them individually, Statoil was able to adopt dynamic, transparent leadership and processes that have allowed them to be innovative at very high levels.

I (and others) see the same problems happening with estimation, which is often used for:

  • predicting, and hence gaining the trust of stakeholders
  • analysis and understanding of requirements
  • prioritization

There are of course different ways to predict (I like probabilistic predictions from past data, as long as it’s in a predictable domain) and to gain the trust of stakeholders (deliver something!). Talking through examples of how a system might work is a great way to understand requirements, and particularly to uncover risk in those requirements. Prioritization is much easier when the risk is uncovered (and the easier it is to estimate, the less likely it is to contain all the discoveries that derail projects!) So estimation is not the only way, and may not be the best way, to do these three things.

Increasingly, I’m coming to see a similar conflation with BDD, which is used for:

  • exploring what the system should do
  • determining whether the system does what it should do (which is different to whether it’s actually useful)
  • reducing the burden on the testers

But increasingly I’m seeing people using BDD as the only way to explore what the system should do, whether the system is correct (let alone useful), and help the testers out.

It’s OK to do traditional testing. It’s OK to knock up a small widget which goes and gets that information from those 3 different places so that the testers don’t have to go searching for it every time (and widgets like this might end up helping with automation too). And it’s OK to talk through what the system should do in whatever language suits you. BDD is just pretty good at those three things, but it isn’t the only way.

These are also three different things that seem to get mixed up together and confused:

  • analysis
  • testing
  • monitoring

And I’m seeing people struggle because BDD isn’t particularly good for things which require monitoring, and any capability which applies to the whole system generally requires monitoring rather than, or at least as well as, testing (code quality and maintainability, security, performance, etc.)

If you’re finding that a process isn’t working for you – be it BDD or anything else – then maybe have a look at what values you’re getting from it; what values others are getting from it; and what other options exist to fill in those gaps.

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13 Responses to A Separation of Concerns

  1. I find myself conflating things all the time – this is a great piece of advice. I wrote about estimation myself in the month’s Overload: http://accu.org/var/uploads/journals/Overload117.pdf

  2. galleman says:

    How would the BB author address the funding needs that are recorded on the balance sheet? Budgeting has many mechanical issues, but the root cause of those issues may not best be solved by “not budgeting.”

    • Liz says:

      Funding is done in smaller increments. Bjarte had a lovely diagram of a traditional budget. Below the line is “not ok” and above is “ok”; he points out that while lots of people will go over into the “not ok”, hardly anyone says, “Well, we didn’t need all the money so here’s some of it back.” He also compared traditional budgeting processes to a bank that’s only open in October, which is of course ridiculous.

      So instead, Statoil approve small increments repeatedly. The “ok” goes to whatever is most valuable for the business, until it’s no longer the most valuable thing, and they manage it all year through.

      I’m going to get hold of the book, but I recommend catching one of his keynotes if you find one online. Awesome stuff.

      • galleman says:

        Liz, If I’m sitting in the CFO’s office, how will I get a handled on how much “money” to commit to for a project. In our domain (defense) funding is real money (dead presidents as we say). Budget is what the project uses to measure cost. Developers get paid out of funding, but they don’t actually handle he money. That’s a finance and accounting role.

        So when you say “small increments” I’d read that as “small budget allocations to the project.” Incremental budget releases = small authorizations to continue. But somewhere in the firm, accounts payable and payroll need to write checks. Those checks are carried in the General Ledger as “obligations” to pay. What process would the CFO (or equivalent) do to “know” how much “cash on hand” is needed for the project prior to the need. This is usually a quarterly forecast of “spend plan.” That comes from a budgeting process that defined the funding need, which is then turned into “budget” for a charge number of some sort that connects the Budget to the Funds when the checks are cashed.

        I’m assuming that the domain here is one in which “budgeting” does take place – no matter how dysfunctional. So that would assume there is a finance and accounting organization of some sort, that has a connection to the firms leadership that in turn is accountable to shareholder or some “owner” of the equity.

        In the BB world and now it seems the #NoEstimates connection, these topics don’t seem to arise.

      • Liz says:

        I’m not a Beyond Budgeting expert and won’t pretend to be.

        However, I do notice that word, “commit”. As you might know, I’m into Real Options.

        What if you didn’t have to commit? What if you could make decisions as and when information arrives, and target budgets for information arrival instead? (
        Coincidentally, information discovery is also something David Anderson’s been blogging about lately in the Kanban space.)

        Note: I think Bjarte Bogsnes has his CFO on board with this, so if what you’re asking is “How do I persuade my CFO” then it’s a different conversation.

        Also note: the article you link to in your next comment talks about improving budgeting systems rather than abandoning them. I don’t think that Bjarte or Statoil have abandoned budgets at all; they’ve just improved the focus and ability to change them based on new information.

      • galleman says:

        At the end of the day, cash has to flow somewhere, even in RO. I work with SatOil on the platform program management side out of Stavanger. The budgeting processes are different depending on the business unit. Softer projects – IT, business and marketing have more flexibility. Bending metal and pouring concrete have other guidance.
        But in the end someone has to pay the invoices and those that pay would like to know how much they need in the bank.
        The options in RO are not exercised, so there is never a “cash call.” It works of tangibles that never have an invoice attached.

      • Liz says:

        What you’re talking about looks like forecasting, but as I said, I’m not an expert.

        I don’t want this to spin off into a discussion on the merits of Beyond Budgeting. I don’t know enough about it to have that discussion. If it does take place with some more knowledgeable people, please do let me know. I can’t currently see anything in what you’re saying, or in the article you linked, that argues in favour of conflating the three ideas of forecasting, targetting and resource allocation, regardless of whether it’s done incrementally or otherwise. That conflation of concerns is common to more than just budgeting, and it’s what I want to talk about in this post.

        WRT Real Options, I follow the Chris Matts / Olav Maassen school, in which options most certainly do get exercised. There’s a fake blog post of mine in their book, “Commitment”, which is based on a real story in which I offer options to someone contractually (they took me up on the option offered, too!)

      • galleman says:

        Real options are generally distinguished from conventional financial options in that they are not typically traded as securities, and do not usually involve decisions on an underlying asset that is traded as a financial security. This means actual “cash” is not exchanged.

        Critical to the discussion is whether the issues are a matter of principle or a matter of practice. Are you suggesting the principle is flawed or the practice?

      • Liz says:

        Glen, I don’t want to get into a discussion about the nature of Real Options either – it’s also outside the scope of this post. There’s a group here if you’d like to talk more about it: http://groups.yahoo.com/neo/groups/real_options_discussion/info . I will note that Chris and Olav’s school is a bit different from traditional RO and the things you find on the Wikipedia page. Here’s the book on it if you’d like to read more: http://commitment-thebook.com/

      • galleman says:

        I practice RO on a monthly basis. You mentioned it as a method you are interested in. That’s all. What do you like to discuss through this channel.

      • Liz says:

        Hi Glen, I try not to have lengthy discussions on the comments as they’re not threaded, hard to track, impossible when I’m on the move, etc.. If they’re off of the topic of the blog post others may not be interested either, and can’t filter them.

        My email is liz at lunivore.com if you’d like to email there. But I’m also on the RO group, and then other people (who may be more experienced than me) can join in too.

        I like getting quick feedback over the comments – the early ones you posted were useful – and links to related material, for sure.

      • galleman says:

        Liz, here’s some background on BB in the public sector that may be applicable to private http://goo.gl/n8HrSk

  3. galleman says:

    BTW, Bogsnes is on the HR/Business Ops side at the “home office.” There is another organization that is on the product – oil from platforms – side. Much more flexibility on the non-product side for how budgets are made, assigned, and measured. StatOil’s revenues on the product side are connected to “sunk cost” accounting and the forecast of cash flow against future earnings.
    SW orgs don’t always work that way I know. But when they do – FASB 86 rules here in the states for internal IT and product development costs (engineering sunk costs) against revenue need to know the “commitments” for payment usually on a quarterly basis.

    There is a famous US baseball player, Yogi Berra – “In principle there is no difference between principle and practice. In practice there is.” This might be ones of those times when there is a difference between principle and practice.

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