This document discusses using concepts from contract theory and information asymmetry to improve agile interactions in contractual relationships. It introduces the concept of a Backlog Asymmetry Measure (BAM) to quantify differences in how a product owner and development team value work. It then proposes some Agile Contract Principles (ACP) focused on aligning value, risk, and end conditions between parties. Future work includes further research, improving the BAM, and case studies applying the ACP and measuring its impact on metrics like lead time and deployment frequency.

1. Solving The Agile
Contract Puzzle
What can we learn from
the science of Information
Asymmetry
Phillipe Cantin
Lean-Agile Coach
November 2020

2. © 2020 CGI Inc.
Phillipe who?
Phillipe Cantin / LeanAgile Coach
• Author of Rally-Point Backlog
• Inventor of CrumbScale effort estimation method
• phillipe.cantin@cgi.com
• @pcantin (twitter)
• https://www.linkedin.com/in/phillipecantin/

3. © 2020 CGI Inc.
Could it be that simple?
Align the perception of value and risk
Common understanding of when development will stop

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Steve’s team and agile contracts
• No agreement on priorities
• Different decision process
• New and unclear
• Anchoring effect (bias)
Is there…
…a link?

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Why would I take the easy path?
Down the rabbit hole

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Line of inquiry
What can science teach us?
The [initial] question:
• Can a contract-based relationship
prevent Agile interactions?
If so, can we
• Understand the cause
• Measure it
• Be proactive

7. © 2020 CGI Inc.
Background research
Contract theory
Opposing interests
Moral hazard & adverse selection
Information asymmetry
BINGO!

8. © 2020 CGI Inc.
All you can eat
Moral hazard
(hidden actions)
• I could eat more than I normally do
• I could try this and not finish it
• I bet I can eat this whole pizza
Adverse selection
(hidden information)
• Same client but new behavior
• New clients attracted to buffet food

9. © 2020 CGI Inc.
All you can code
Moral hazard
(hidden actions)
• I can avoid all risks
• I can give conservative estimates
• I can control the priorities
Adverse selection
(hidden information)
• I don’t attract the developers I need
• Estimates don’t match the market

10. © 2020 CGI Inc.
Information Asymmetry
Moral hazard
(hidden actions)
• I can impact the result with
my actions
Adverse selection
(hidden information)
• I misjudged how they would behave
Agent Principal

11. © 2020 CGI Inc.
We know how to fix this… …right?
Different interests
Symptoms:
• Different priorities
• Variability in needed effort
• …in and around the backlog
Clarify the objectives
Priorities set by the PO
Daily Meeting
Backlog Maintenance

12. © 2020 CGI Inc.
Simple fix. Be Agile! …Yeah right
People are already
contractually forced to
“do agile”
but this do not ensure
that they will
“be Agile”
Agility is hard. It`s a cultural change.

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Clearly, I never learn.
Down the (second) rabbit hole

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Getting Agile results without telling people that they are being Agile
Can we tweak the existing conditions?

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Agile hacking points (generic)
Information Asymmetry
• List of remaining work can differ
• The distribution of value can differ
• The distribution of risk can differ
• Prioritization can then differ
Align Value Align RiskAlign Risk

16. © 2020 CGI Inc.
Information Asymmetry
• Level of flexibility and adaptability of the end conditions can differ
…or even prevent Agility
Align End conditions
Agile hacking points (Agile)

17. © 2020 CGI Inc.
Measuring the asymmetry
Relative size
for same item
=
2X
10X
Item Value Factor
Value
difference for
an item
0%
1%
20%
Item Value Swing
Value
difference for
the backlog
15%
40%
200%
Backlog Value Swing

18. © 2020 CGI Inc.
Backlog asymmetry measure (BAM)

19. © 2020 CGI Inc.
Agile contract principles (ACP) 1/3
Aligning Value and Risk
1. All the known work in the same backlog
2. Describe risk as value $$$ (common economic language)
3. Distribute the agent`s payouts(value) according to the principal’s payouts

20. © 2020 CGI Inc.
Agile contract principles (ACP) 2/3
Aligning End Conditions
The principal and agent should agree on the following
• Partnership (queue of work from the principal)
• Fixed capacity (predictability from the agent)

21. © 2020 CGI Inc.
Agile contract principles (ACP) 3/3
Backlog asymmetry measure (BAM)
• Backlog value swing < 15-20%
• Item value swing < 15-20%
• Item value factor < 2-3x

22. © 2020 CGI Inc.
Current applications
FaaS Train Solution
• Remote SAFe Train
Self-Managed Pods
• Remote Dev Team
Train Icon made by Freepik from www.flaticon.com

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Future work
Continue background research (systematic approach)
Robust Backlog Measurements (using simulated backlogs)
You can help me while I help you!
• Experimental Sudy / Theory-testing: In a contract context with
existing symptoms, compare BAM measurements before and after
implementing ACP. Also measure the effects on backlog maintenance,
LeadTime, Cycle Time and deployment frequency.
• Case Study: Implementation of the ACP and BAM
• Correlation Study: Collect BAM data and other project data
phillipe.cantin@cgi.com

24. © 2020 CGI Inc.
Thank you!
phillipe.cantin@cgi.com
@pcantin (twitter)
https://www.linkedin.com/in/phillipecantin/