ROI for Scrum Training

May 4, 2013

Does Scrum Training give a good ROI?

Well, of course, that depends. Mainly, whether the Team (the full Team) takes an aggressive attitude toward improvement. So, as you could guess, we train the attendees that a key job is to get continuously better. We set the expectation of doubling velocity in the first year.

Let’s look at the following calculation.

Start with the a Team that, fully loaded, costs about $1 million per year.

Their current Business Value delivered after 1 year’s work….taking the NPV (net present value) of all future cash flows, is currently $3 million. Now, maybe you can follow most of the rest below.

Financial Benefits Estimate

Cost of Team	$1,000,000

Business Value Delivered by Team	$3,000,000
Note: This is NPV from work delivered in one year

Improvement Factor	2
Note: Reasonable improvement factor in 12 months.
Note: Jeff Sutherland is looking for a factor of 5x-10x longer term.
Note: This is usually measured as an improvement in velocity.

BV Run rate after improvement	$6,000,000	per year’s work

Gross BV Improvement	$3,000,000	per year’s work
Note: Per year!
Note: Thus, this is a LOW (conservative) estimate

Investment required to obtain improvement	$500,000
Note: This includes many things, mainly accumulated cost of impediment removals
Note: This is a HIGH (conservative) estimate
Note: At some point, if you lowered the investment too much, it would lower the improvement factor.

Net Net BV Improvement	$2,500,000

Return on Investment	500%

Let’s talk about the investment of $500,000

So, this includes the cost of training (very minor).
This includes the cost of travel to the training (very minor).
This includes the time lost while training (very minor).
This includes the cost of removing impediments for the Team (this is by far the biggest cost).
Removing impediments may require servers, software, training on automated testing, etc, etc.

To be honest, we think $500,000 is a gross over-estimate of the cost of getting a 100% improvement in velocity. It will cost MUCH less. Maybe $100,000 or $200,000 or possibly $300,000 — depending on your situation. If the cost is ‘only’ $300,000, then the ROI after one year becomes 900%. Or 9x. That is huge.

Where would I invest first?

1. Train the whole Team, and people immediately around the Team (eg, a Scrum Team of 7 plus 3 others) .
2. Get an Agile Coach (I won’t debate here how much coach time should be dedicated to the Team. But a coach for one Team.)
3. Improve the Product Owner, or the flow of information from ‘the business’ about requirements
4. Get the Team to work as a Real Team
5. Improve the continuous integration, or start to
6. Improve automated testing
7. Improve integration and regression testing, so that they are much more robust

Almost always, these are among the top areas.

Each Team also has its own specific things, unique to that Team.

Some Teams are fundamentally dysfunctional. Some Teams need people skills or facilitation on decision-making. Or training in specific skill sets. Lots of other possibilities exist.

The key thing is that you see that starting Scrum is the key to releasing all these benefits. It will not be Scrum alone that releases the benefits. Getting all the benefits will require hard work and further investment. But it starts with Scrum.

Scrum, if played professionally, has a huge ROI. Huge.

Note: Here is a link to a spreadsheet, so that you can do your own calculations. Use different assumptions, and see what you get as an ROI on Scrum training.