Requires the following solution to be installed:
- Budgeting by Custom Period
- Product Enablement (1b2923c7-d707-4bed-b0d1-275b6f70e341)
- Value Stream Enablement (63299979-14d1-4004-a4f1-1d5337caf8ca)
- Capacity allocation by value type: Business, Enabler, Technical Debt (7a04e80e-2a17-41a9-ad03-7d787fa70edd)
- Work Allocation Forecasted Cost based on Estimate and Cost per Point (67513dcf-56fc-4e21-b602-252e9f18908e)
Can be extended by the following solution:
- Lean Budgeting: Portfolio Epic MVP Cost (03b2ead1-4496-4c10-bb88-4dfbd1d4c627)
Lean Budget Guardrails describe the policies and practices for budgeting, spending, and governance for a specific Portfolio.
SAFe provides Lean Budgeting strategies that eliminate traditional project-based funding and cost accounting overhead. In this model, LPM maintains appropriate levels of oversight through allocating Value Stream budgets and applying Lean Budget Guardrails. This way, enterprises can have the best of both worlds: a development process far more responsive to market needs and professional and accountable spending management.
Every SAFe Portfolio operates within an approved budget for developing and deploying systems and Solutions that the Enterprise needs to meet its strategic objectives. The Portfolio’s total budget is allocated to individual Value Streams by Lean Portfolio Management (LPM) and Portfolio Stakeholders. The Value Stream’s budget funds the people and resources to help achieve the current Portfolio Vision and Roadmap. Establishing guardrails helps ensure that the mix of investments addresses both near-term opportunities and long-term strategy, that investments in technology, infrastructure, and maintenance aren’t routinely ignored, and that significant investments are approved appropriately.
There are four Lean Budget guardrails:
- Guiding investments by horizon
- Applying capacity allocation
- Approving significant initiatives
- Continuous Business Owner engagement
The solution supports the first three of them, because the last one is process-related and is mainly qualitative.
Guardrail 1: Guiding Investments by Horizon
Portfolio investments are organized by investment horizons that reflect four-time horizons. The amount of budget a given Value Stream allocates to Solutions in these horizons determines the near- and long-term health of both the Value Streams and Portfolio.
You can set the Horizon Targets for each Portfolio on the Budget Guardrails tab on a Portfolio view:
Those Targets will be visible on Value Stream, Solution Train and ART views as the template Targets. When you update those values for Portfolio, they'll be propagated to this Portfolio Value Streams, Solution Trains and Agile Release Trains (ARTs).
The Target values will also be propagated to Portfolio, Value Stream and ART Period Budgets. If during the next Period you decided to refocus from one Horizon to another, you can update Target values for this Period. They will be propagated down the hierarchy – from Portfolio to Value Stream to Solution Train and to Agile Release Train from any level you updated the values. For example, if you decided to focus on solutions from a different Horizon just for only Solution Train, then you update the Target values for this Solution Train Period Budget and they will be propagated to the Solution Train ARTs.
For each Period Budget we'll calculate Actuals for each Horizon. The Actuals are calculated based on the Initial Estimate of Features planned for a Period (in the corresponding Planning Intervals) based on the State of a Product which Features are connected to.
For example, if we have 2 Features with Initial Estimate 50points related to a Product in Evaluating state and 2 of the same size to a Product in Emerging state, and nothing planned from the Products in the other states, then 50% will be allocated to Horizon 3 (Evaluating) and 50% to Horizon 2 (Emerging).
When Target and Actual values differ for more than 5%, the Actual values will be highlighted in red, so that you can re-plan Planning Intervals to focus on the right Horizons.
Note: Please make sure the Features are connected to Products to make the solution working.
Guardrail 2: Apply Capacity Allocation
Lean Budgeting enables decentralized decision-making and more efficient execution. However, every train is challenged with balancing the backlog of new business Features with investment in the Architectural Runway continuously—for example, maintaining current systems, avoiding velocity reduction, and the need for wholesale replacement of components or solutions due to obsolete technology.
Balancing business features and enablers complicates prioritizing work since different forces can pull the teams in different directions. One solution to this challenge is that value streams (and ARTs) apply capacity allocation as a quantitative guardrail to determine how much of the total effort can be allocated for each type of activity for an upcoming PI. Each value stream should adapt the capacity allocation categories.
Similar to the Horizon Targets, you can set the Capacity Targets for each Portfolio on the Budget Guardrails tab on a Portfolio view:
The Targets propagation works the same way as for Horizon Guardrail, however the Actuals will be calculated in a different way. Here we'll use the Feature Type – Business, Enabler or Technical Debt – to see how much of Effort is allocated to each type in PI.
For example, if you have 300 points of Business Features, 150 points of Enabler and 50 of Technical Debt allocated for PIs in a Period, then we'll have Business Actuals = 300/(300+150+50)*100= 60%, Enabler Actual = 30% and Technical Debt Actual = 10%.
Guardrail 3: Approving Significant Initiatives
While each value stream is funded to promote empowerment and local decision-making authority, it is reasonable to ensure that significant investments are governed responsibly.
Portfolio Epics go through a decision filter to determine whether or not it exceeds the portfolio epic threshold, which LPM establishes.
Below threshold: If the Portfolio Epic estimate is below the Portfolio Epic threshold, approval is managed through the Program or Solution Train Kanban systems.
Above threshold: If the Portfolio Epic estimate exceeds the Portfolio Epic threshold, it requires review and approval through the Portfolio Kanban system, regardless of which level the initiative originates. LPM defines the Portfolio Epic threshold to determine which Portfolio Epics are a portfolio concern. Thresholds include Portfolio Epic's:
- Forecasted Cost
- Forecasted number of PIs to implement
- Strategic Importance
Portfolio Owners sets the Guardrails on a Portfolio view:
Portfolio Epic Owners define these parameters for each Portfolio Epic:
- Forecasted (Total Allocated) Cost and Estimated Duration are calculated by Work Allocation Forecasted Cost based on Estimate and Cost per Point solution.
- Strategic Importance is set manually
If either Total Allocated Cost or Estimated Duration of a Portfolio Epic is higher than the defined Guardrails, or of Strategic Importance is the same or higher, the Above Threshold check box will be set to True, meaning that this Portfolio Epic requires LPM approval.
You can also see MVP Cost next to Total Allocated Cost. It can be enabled by Lean Budgeting: Portfolio Epic MVP Cost solution. This information can be useful when you make a decision about Portfolio Epic.
On a Portfolio view you'll see Portfolio Epics Above Threshold and Below Threshold on the Budget Guardrails tab:
On ART, Solution Train and Value Stream views you'll see the same section, however only Portfolio Epics assigned to ART, Solution Train or/and Value Stream respectively will be shown there.
You can also see the details of Budget Guardrails across different Portfolios and Periods on Lean Budget Guardrails dashboard.
Set Product States
For solution to work correctly, you have to update the Product workflow to have the following states:
To do that:
- Go to Settings -> Workflows
- Select Product in the Workflow for list
- Update the states
Calculate Guardrail Estimates
The solution doesn't calculate total estimates for Horizon and Capacity Guardrails to decrease the load on the system. So you need to trigger calculation by pressing Recalculate Horizon Totals button to get them calculated for a specific Period. To do that:
- Open any Period Budget connected to the Period you need to do recalculation for
- Press Recalculate Guardrail Actuals check box in the Guardrails Estimate, pt section in the right panel.
Note: the system will take some time (a minute or so) to recalculate the data, so give it some time.
Adjust Target vs Actual difference coloring (Optional)
As described above Horizon Actual fields are colored in red if they differ from Targets more than 5%. If in you case this number is different you can adjust it.
Adjust in custom unit mashups
- Go to Settings -> Mashups
- Open CU for Period Budget Highlight Target vs Actual Horizons mashup
- Change the value in the first line from 5 to the needed value (e.g 10)
Adjust on layouts
- Go to Settings -> Detailed View
- Choose PeriodBudget entity
- Click anywhere within the code block.
- Press Ctrl+F to call Find field
- Type > 5 or < -5 to search for all places where the value needs to be modified.
- Change the value from 5 to the desired value (e.g 10)
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