§ 107
Cost of Delay
Work gets ordered by size, by gut feel or by whoever asks loudest, while what each item loses every week it waits goes uncounted, so the most valuable work often waits behind the merely visible.
Keep in mind
Ask what a week of waiting costs before asking what it costs to build
What to do
For the items at the top of the backlog, estimate what each one loses per week of waiting, in money, and write the assumptions next to the number. Divide by the expected duration and schedule in that order. A rough range is enough: the point is to expose how far apart people's guesses are, not to be precise. Keep a fixed share of capacity outside the ranking for work whose value is long-term.
Why it happens
Most work loses value while it waits: revenue not yet earned, a market window closing, a penalty date coming closer. A backlog ordered by effort or by an undefined "priority" says nothing about that loss, and people's private guesses about it are far apart. Reinertsen, who argued for putting a number on it, puts the spread this way: "The intuition of members of the same team typically differs by 50 to 1, so the real estimate surprises most team members." Once the cost of delay is a number, dividing it by the expected duration (CD3) puts first the items that release the most value per week of scarce capacity, which a ranking by value alone or by size alone does not.
In practice
Maersk Line put a dollar cost of delay on each requirement for its Global Customer Service System and scheduled them by CD3. Looking at the spread, the authors found the most valuable and urgent 25% of requirements were worth three orders of magnitude more than the bottom 25%: "Not ten times, or one hundred times, but a thousand times more valuable."
Read the accountWhen it stops applying
Reserved Engineering Time: instead of making engineering work win its place item by item, fix its share of capacity by rule; Google caps operational work for SREs at 50% of their time and says "Their remaining time should be spent using their coding skills on project work."; the SRE book does not discuss cost of delay, but by this entry's reading a fixed share protects work such as paying down debt, whose loss in any one week looks small and so rarely tops a ranking.
Source
Don Reinertsen interviewed in Lean Magazine (2012), on his book The Principles of Product Development Flow (Celeritas, 2009) — "A cost-of-delay calculation establishes the value of time on the critical path of the project.", the 50-to-1 spread in intuition, and sequencing work "with the highest cost of delay per unit of scarce resource consumed."; Ben Linders' InfoQ interview with Joshua Arnold (2015), which quotes Reinertsen: "If you only quantify one thing, quantify the Cost of Delay"; Black Swan Farming (Joshua J. Arnold's site), Cost of Delay Divided by Duration — CD3 as "a prioritisation/scheduling method that maximises the value delivered in a given time period when you have limited capacity." The counter-force is from Benjamin Treynor Sloss, "Introduction", in Beyer, Jones, Petoff & Murphy (eds.), Site Reliability Engineering (O'Reilly, 2016), and its "Ensuring a Durable Focus on Engineering" section — the 50% cap on operational work; applying it to the ranking is this entry's reading. Joshua J. Arnold and Özlem Yüce, "Black Swan Farming using Cost of Delay" (2013, an IEEE-format paper republished on Arnold's site, Black Swan Farming) — the Maersk Line example.
Read the sourceCite this
Hammurabi, § 107, “Cost of Delay.” https://kanywst.github.io/hammurabi/laws/cost-of-delay/
BibTeX
@misc{hammurabi-cost-of-delay,
title = {Cost of Delay},
author = {{Hammurabi contributors}},
note = {Hammurabi, § 107},
url = {https://kanywst.github.io/hammurabi/laws/cost-of-delay/}
}Read in a column
- Deciding what to build Next in the column: The Last Responsible Moment
- Why estimates slip
Related laws
- 37Little's LawIn a stable system, the average number of items inside equals arrival rate times average time spent.
- 61Theory of ConstraintsA system's throughput is set by its single tightest bottleneck.
- 20Pareto PrincipleMost of the effect comes from a small share of the causes, such as bugs in a few modules.
- 89Fixed Time, Variable ScopeWhen scope is fixed and time is not, the date slips and the scope stays; fixing the time instead forces a choice about what matters.
- 108The Last Responsible MomentCommit too early and a guess hardens into the design; wait too long and an option quietly expires, so the decision gets made by default without anyone making it.
- 111Most Ideas FailIn online controlled experiments at large web companies, most ideas that survived the team's own pruning do nothing or make things worse once they are measured, and experts tend to be poor at telling in advance which ones.