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The definition of velocity is “Just like a speedometer that measures how fast you’re hurtling through space, Tracker’s velocity is a measurement of how fast your team completes stories. Instead of miles or kilometers per hour, Tracker expresses velocity as the number of points completed per iteration.” (source: pivtoal blog)

What should be the ideal growth rate of team's velocity from one sprint to another? For example, if team is delivering 100 points in current sprint, what should be the expectation from the next sprint i.e. 102 points for 2% growth?

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It depends vastly on several different factors, perhaps most importantly on which stage the Team is in in the 'Forming, Storming, Norming, Performing' process.

If the Team is in the Performing stage (that is, they're already performing at their 'optimal efficiency'), then I would expect velocity to be more or less static... when ignoring fluctuations caused by external factors. At the very least, on average, it should stay more or less the same over time.

During the first three stages, however, I would expect velocity to be highly variable (it would not be too unexpected to go from 100 to 90 to 125 to 70 to 130, etc.), with a general, long-term trend towards increasing (as the Team gets closer to the Performing stage).

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In reality most teams go slower over time. This because the bigger the product becomes the higher the complexity becomes. This as more and more parts are depended on each other.

To keep a high velocity you need to also practise good engineering practises, combined with refactoring to keep your code (c)lean and mean. Something project management tools do not really offer insights in. Pushing for velocity on the short-term probably leads to short-cuts, hindering the velocity growth on the long-term.

Expect more from your teams, but do not sacrifice quality. If you want to keep your speed high watch the first (free) episode of Clean Code it gives great insights on why teams slow-down and how-to go fast.

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