Wage Cost and Project Labor Cost

I’ve been working with teams who want to move to agile. Some people on their teams are in another location, where the salaries are cheaper.

It’s difficult to get agile started with a geographically distributed team. If everyone’s distributed, it’s easier than if just some people–especially if they are all one function, such as developers or testers–are. Or, if the people on the team know what it’s like to work in a highly collaborative environment, it’s ok, but not as good as when everyone is all together in one location.

The problem is that many managers have confused wage cost with project labor cost. Wage cost is a part of run rate, what it costs to keep the project alive for a week at at time. Yes, cheaper salaries will reduce the project run rate.

The problem is: what happens if the geographically distributed project takes longer to deliver the project? My experience says that all the geographically distributed projects I’ve met take longer to complete. The lack of being all in one place made a particular team take longer to deliver running, tested features. Here’s an annotated value stream map that represents this organization’s delays:

Wage cost is certainly lower in some parts of the world. But the only measure of productivity is running, tested features. If your project team takes longer to complete features, then you have a larger project cost.

Before everyone gets so excited about bits and pieces of remote team members, ask yourself, “Are we building in delays that will cause us to take longer to complete running, tested features? What will those delays cost us?” Now you can start to look at wage and project cost and make decisions that will make sense for your team–whether that means moving to agile or not.

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