December 30, 2015 Focus area: Scaling Agile

The ABC of reporting for agile organizations (part 1)

Part 1: Does management reporting conflict with a transition to agile? 

Part 2: The power of reporting for agile organizations! (Jan-2016)

In agile-adopting organizations, I am often consulted on the value of management reporting. Is it agile to have teams frequently reporting on performance indicators such as productivity and budget utilization? Should we, as an agile team, put our energy into this kind of non-value adding activities? These questions typically arise in traditionally minded organizations transitioning towards an agile mindset. All kinds of reporting structures have grown over the years and now suddenly people start to question them. If people ask for my opinion, most of the time I reply with the standard answer: it depends.

In this blog, I will provide the basis for a healthy discussion. I start with an explanation of two types of reporting (Type-A and Type-B). Distinguishing both, and migrating from Type-A to Type-B is of great importance in a successful transition towards agility. In a follow-up blog I will discuss a third type of reporting (Type-C). This type of reporting is essential for being a true agile organization. By the way, with management reporting, I mean all kinds of structured, frequent reporting to management. This information is often presented with KPI’s, shared in Excel-sheets, advanced BI-tooling or management dashboards.

reporting-in-agile-companies-and-organisations-andres-jansen

In my opinion, there are two traditional types of reporting: Type-A and Type-B. The first, most common, focusses on reporting for accountability purposes. The goal is basically to deliver an objective document that proves that we are ‘in control’. I call this type of reporting Type-A, referring to the focus on:

Accountability

Type-A reporting is mostly about looking back at end-results, often financial oriented. Due to the accountability-nature of it, these reports should first of all be 100% complete and correct. These management reports are shared often with an audience that is larger than the directly involved managers, making use of formalised processes and planning.

Type-B reporting on the contrary, is forward looking and more focussed on drivers of (financial) end-results. Reports of this type contain accessible and actionable information that stimulates pro-active steering. I call this type of reporting Type-B, referring to the habit:

Be proactive

(The Seven Habits of Highly Effective People, S. Covey, 1989). In line with its actionable nature, these reports are frequently updated and underlying information is available on demand. The presented information does not have to be fully complete and correct. A certain level of structural error is accepted, in favour of speed and frequency.  As long as the information helps to anticipate, to take the right action at the right time. The users of Type-B reports are most of time involved managers and team leads that understand the reported numbers in their context and translate this information into action.

Having described the two traditional ways of reporting, I can now start to answer to the following question: Does management reporting conflict with a transition to agile?

Being agile is a mindset in which individuals and teams welcome feedback. Fast feedback loops are therefore essential. They stimulate improvement on all levels, from processes to solutions. This information must be constructive and focussed on delivering more value to end-users or target groups.

A structured and formalized management reporting system can provide a healthy source of feedback for your team. Even when the information is quantitative. So, management reporting, or the level of formalization of process and planning, are in itself not conflicting with a transition to agile. The type of reporting is what makes the difference. The trick is that Type-B reporting is focusing on taking action, and because of that provides a stronger source of feedback because it will generate more interaction and collaboration (one of the key principles to agility). It’s the nature of reporting, and the behavior that comes along, that determines if management reporting is helpful in our transition to agile ore not. Let me give an example of reporting productivity for both types of reports. 

In Type-A, most of the time, we find measures or KPI’s that show the level of productivity expressed in units like velocity, story points and man-days. In more traditional-minded organizations you might look at units of work finished or percentage of work completed. Type-A reporting looks back. We report results from the past, compare them with targets we've set up in the past and we show that we are (not) in control. Productivity could than be reported as: "Measured productivity last month": 8 story points; target is 7 --> we are in control.

Type-B reporting looks at the current state and nearby future, it stimulates intervention even before things actually go wrong. However, we would probably still be reporting the level of productivity to the MT. But the foundation for this indicator is different. The basis for instance could lay in the level of productivity, as perceived by team members themselves. That makes all the difference, measuring the ‘raw’ productivity there where the rubber meets the road. Productivity could then for instance be reported as: "Perceived trend in productivity, compared to previous month": lower --> we need to take action. Or even: "The working environment helps me to be proud of my level of productivity"; yes-85% no-15% --> there is potential for improvement!

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The operationalization of measurements for Type-B reporting is often easy. For instance, every increment, you can ask a randomized-sub-group to (dis)agree with a survey question “I am proud of my level of quantity and quality (Y/N)”. So, implementing Type-B measurements for Type-B reporting might also be easy. It takes however a lot of courage to do so! Imagine being a manager of a team. What will you do if your Type-B report shows that 33% of the employees are not proud of their productivity? And what if the trend stays negative? Sharing this with your MT will kind of force you to learn, to explain and to take action. Such a strong message cannot be ignored. Type-B reporting painfully activates us to take action during our transition. That’s what agility is about!

There is a natural tendency to show that we are in control, no one likes to share bad numbers. Type-A reporting is therefore often more convenient. If there are bad numbers to share, Type-A reporting might help you out. For instance, in many organizations we see a year-over-year inflation of story points (giving more points to the same amount of work as time goes by). This inflation might create a horizontal trend-line for productivity, when it’s actually going down. And because we are looking back, it is often also quite easy to find explaining reasons in the history as well. Understanding why it went wrong in the past provides a feeling of being in control.

Fortunately, this is not always the case for Type-A. There can be much value in Type-A reporting, especially for specific stakeholders. The core message is, that it is harder to learn and improve, based on Type-A reporting. It is difficult to translate results into action because I) the focus of the report is on ‘control’, not on encouraging improvement, and II) the link between reported numbers and the reality is often so weak that it is hard to define improvement initiatives. Let me give another example. If there was an extremely productive team, that is reported as an outlier in our management report. We would first challenge these numbers, because positive outliers might indicate that we are not in control. The behavior that comes along with Type-A reporting is to start a discussion, or to let it rest: we are in control, right? Type-A reporting does not really help us to improve the way we work. And it can be counterproductive in our journey towards agility.

Then: is management reporting conflicting with a transition towards agile? It really depends on the type of reporting and the behavior that comes along with it. Being in transition, my advice would be to change any kind of Type-A reporting into Type-B. That would help, bridging the gap between old and new ways of working. This is a first, but major step. It will take a lot of energy to follow through but the positive impact on people will be huge.

Once the organization has created an agile mindset, the nature of reporting should change again. There will be less reporting to management in the old-fashioned way, and more internal reporting for teams that work autonomously. I call this next level of reporting, Type-C reporting. With the ‘C’ referring to:

Creation

Type-C reporting goes beyond Accounting (Type-A) and Being proactive (Type-B). This type is really about creating value. It will for instance help to create leading principles, to create the right working environment and to achieve trust.

I will further go into Type-C reporting in my next post, Part 2. However, as many organizations are currently transitioning, you might concentrate on Type-B reporting first.