• Karen Foster, Abigail Wilson and Zerqam Salman
  • Published: 26 April 2021

With traditional funding and planning methods, organizations often spend a considerable amount of time and resources tracking against plans based on historical information and business casing. This ultimately diverts focus away from achieving business outcomes. Adopting capacity-based funding and planning allows organizations to redirect their attention to delivering value and driving results.

Capacity-based funding distributes available funding across persistent, self-organizing teams. Funding is allocated based on the team's delivery capacity and the resources required to deliver the solution or product, rather than projects. 

Capacity-based planning is performed at the team level, where teams prioritize work within the sprint and estimate hours available to commit to a specified set of activities. This method focuses on understanding the scope of products and future conditions to develop more accurate release schedules. It is recommended that teams continuously re-estimate to ensure delivery predictability.

Implementing Capacity-Based Funding and Planning

Organizations should begin with a strategic planning exercise to build a high-level roadmap which contains the business outcomes and products they wish to deliver. They will need to further ensure that their capacity-based funding model is aligned with their modern delivery model. This means allocating funds to teams that are specifically built around business outcomes and products on the strategic roadmap, instead of organizing teams around the projects to be completed. Once the teams receive funds to deliver the strategic roadmap, detailed capacity-based planning should be performed at the team level. The team is autonomous to prioritize the work, estimate the delivery timeframe, and decide how to perform it, with certainty that they are delivering the next most valuable feature.   

When implementing capacity-based funding and planning, organizations should consider how a team’s financial and progress reporting, as well as success metrics, will alter. A traditional PMO may attribute the lack of heavy governance as a loss of control over how value is derived from allocated funds. Hence, a successful implementation requires a deep cultural change within the organization where stakeholders are comfortable with experimentation and the possibility of failure. To minimize difficulties during implementation, organizations should consider piloting capacity-based funding and planning to select teams, before incrementally introducing the methods to the rest of the organization. 

Instead of time spent supporting the governance and review of the business case process, an organization can simplify their annual planning to focus on executing the strategic roadmap. This results in greater organizational agility as it is scalable across various team sizes and can provide more accurate estimations of release schedules with strong deliverable predictability and transparency that only improves as teams matures. 

Traditional planning often includes rigid change request processes that can shift a team’s focus from business outcomes to reporting and business casing. Capacity-based funding allocates funds based on business outcome or product value streams versus projects while planning allows for constant re-estimation throughout sprints. Together, these methods allow for real-time pivoting of initiatives as teams are enabled to transfer funds or resources to reprioritized tasks for continued alignment to the strategic roadmap. This matches funding with agile delivery methods, without the time spent justifying changes.

Capacity-based techniques are forward-focused and help ensure consistent quality of work, due to teams initially providing a more accurate view of what can be accomplished within designated timeframes and the real-time pivoting of initiatives. Under other models, teams may become overstretched due to ambitious deadlines that overcommit during the sprint, which can lead to employee burnout and a high chance of compromised quality due to rushed timelines. 

Measuring Success

Organizations should leverage a framework for modernizing funding governance, and reliable metrics for measuring execution and business value through initiative-specific objectives and key results (OKRs). The evaluation would be based on value, execution, agile maturity, and team health metrics.

  • Value metrics measure the business value delivered by the team. The value generated is the most significant expression of customer satisfaction and team success.
  • Execution metrics measure the team's efficiency to deliver the solution. Standard metrics are planned vs. actual work completed, the value focus backlog mix, lead time and cycle time, percentage of automated testing, release frequency, and production incidents, as applicable.
  • Agile maturity metrics measure the team's ability for adaptation. Some of the metrics are the execution of agile practices (principles and values) and its internal dynamic score.
  • Health metrics measure team engagement and satisfaction. Key metrics are the team turnover rate, team size, and pace.

Depending on the size and speed of work there should be monthly or quarterly reviews of the team's performance at the portfolio level to re-evaluate the scope, challenges, and dependencies.

How Capco can help

Adopting modern delivery solutions to traditional project funding and planning will help financial services organizations enable dynamic strategies that evolve in response to market conditions. With a focus on business value, the Capco approach to planning and prioritization shifts the dialogue from project-based to capacity-based funding to allow for real-time pivoting of initiatives to meet evolving business needs.


Karen Foster, Managing Principal