Wednesday, April 27, 2016

How to calculate WSJF

Understanding Cost of Delay (Part 3): Calculating WSJF

In part one of this series of blogs on Understanding Cost of Delay and its Use in Kanban, we considered the meaning and difference between Delay Cost and Urgency (or Cost of Delay). In part two we looked at different Delay Cost and Urgency Profiles and the archetypes defined in Kanban for classifying work items by these profiles. Now we look at the prioritisation/ordering technique know as Weighted Shortest Job First (WSJF): the formula, the assumptions behind it and how the formula arises. WSJF brings the primacy of time into decision making about which item to implement and when.

Consider a product development team. They have many ideas for what to add or change in the product, and for improving the way they work. The question is, which of these many useful things should be done first. It turns out the that the total business value of a proposal is not the the deciding factor in maximising the business value a team can deliver in a given period; nor is it urgency of the proposal (the Delay Cost per unit of time). The deciding factor is the urgency divided by duration of implementation, a term sometimes referred to as the WSJF (or "wisjif") of the item.

To see why let's consider 2 work items with a total cumulative value of V, a duration of D, and an urgency of U. Suffices will indicate which of the 2 work items is being referred to. Assuming the WiP limit in our team is 1 (so the team does only 1 feature at a time), and assuming the urgency, U, is a constant over the period of interest, the estimated value realized by the 2 features will be:
Total value arising from implementing Item 1 followed by Item 2
For more information see Essential Kanban Condensed
This is the net present value of the two items less each item's delay cost. In the case of the first item, the delay is just its own duration, but in the case of the second item, it must wait for the first item as well. If we want to know whether it is better to do item 1 first or item 2, we need to know which has the higher urgency (Delay Cost per time period). We can visualise the delay cost like this... it is the total area in these graphs.
Feature 1 then Feature 2

Feature 2 then Feature 1

Switching the terms over in the formula above, and subtracting, gives us the difference in value realised by changing the order. Most of the terms cancel out, but we are left with the following, for the addition benefit (cost if negative) of doing item 1 before item 2.
This gives us the basis of WSJF. To maximise business value delivered by the team, we should prioritise the items which have a highest value for urgency divided by duration. The "wisjif" term may thus be expressed as:

WSJF = U / D

In the next article in this series we will look at whether the duration used in this formula should be Customer Lead Time, System Lead Time or something else. we will also consider the assumptions behind the WSJF formula. This will lead us to suggest how the formulae can be used in practice, in conjunction with delay cost profiles for different categories of items.

Read part 4 now: WSJF - Should you divide by Lead Time or by Size?

Back to part 1: Understanding Cost of Delay and its Use in Kanban

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