Am I spending too much on my dev team?
Software is built by teams, not by individuals but how do you calculate the business value that team delivers?
An equation for calculating value in product delivery
For me, there are 4 key components when it comes to evaluating value through product delivery:
Efficiency (or “Is the team able to deliver with minimal overhead”)
Impact (or “Is the team working on the right things to move the needle”)
Cost (or “What is the burn rate of the team”)
Business appetite (or “How valuable are the team’s goals to the business”)
The equation that then needs balancing is:
Each of these can be optimised independently, let’s see how:
Efficiency
Scale: 0 (no time spent on product delivery) - 1 (an almost zen-like state of “flow”)
Efficiency can be measured with process or productivity metrics. Frameworks like DORA, SPACE and DevEx (also in audio format) are all regularly talked about in the context of optimising the team's throughput and offer thoughts on measures (from quantitative in DORA, to qualitative in DevEx, to self-defined in SPACE). For me, this is most useful in identifying where things are getting in the way of the team delivering value. Laura Tacho and DX produce excellent content on this topic.
Impact
Scale: 0 (no measurable difference from features delivered) - 1 (step change improvements with measurable outcomes)
This can be broadly encompassed as delivery towards product outcomes. The topic of product vs. business outcomes really is a fascinating one. The key thing for our purposes here is whether the team are focussed on the highest impact work that will move the needle for the business. The levers that can be pulled are to (a) identify a different product outcome that will have a more direct impact on the desired business outcome(s) or (b) to pivot the team to focus on a different area that's more valuable to the business. John Cutler and Teresa Torres are both excellent people to follow in this space.
Cost
Scale: Cash value of fixed and variable costs spent towards the goal
This is the most objective measure of the lot. You can consider adjustments like hiring in lower cost of living areas or the seniority of roles within the team required to achieve their goals.
Business appetite
Scale: Cash value attributed to attaining the target product outcomes
How valuable are the targeted product outcomes to the business? When combined with the product outcomes from other teams, are they collectively exhaustive? Especially with high-growth businesses there is always an element of perceived value that's difficult to model / quantify (risk, likelihood of success, confidence in assumptions, market conditions. Some product outcomes (such as conversion rate, revenue per user, etc.) are inherently easier to attribute a cash value to whereas others (like customer satisfaction or launching into a new market) may have more long-term/strategic value to the business.
How to apply this in practice
The above is a pretty reductionist view on a highly complex topic so I would encourage you to use the ideas presented as a starting point for conversation and alignment. Healthy questions to be asking might be:
Are our product teams working on the most valuable outcomes for the business?
Is there a discrepancy between the product outcomes and business appetite to achieve them?
Are there things impacting the efficiency of our team(s) that we could pay money to fix?
Does our hiring strategy align with our business appetite and how we expect our appetite to evolve over time?