The cobra effect describes the worsening of an initial situation by the attempt to improve the situation.
Origin and history of the Cobra Effect
This effect takes its name from the time of British colonial rule in India. At that time there was a terrible plague of snakes in the country, whereupon a bounty on every cobra killed seemed to be advisable as a countermeasure.
However, it is much more lucrative to breed the cobras and then behead them rather than hunt them. This trick did not remain undetected for long and so the bounty was abolished. So the breeders released all cobras. So there was a new, this time worse snake plague.
Agile cobra effect
All metrics and reward triggers, the MBO approach, budget figures and other KPIs are susceptible to the Cobra effect. It is always important to be careful whether a chosen variable does not cause unwanted and sometimes hidden effects:
In some companies it is still common practice to use the velocity of a team as a measure. Simply put, velocity is the number of Story Points delivered per sprint. It is assumed by management that more is better, i.e. a higher number of Story Points also means better performance of a team. Since a higher velocity gives the development team an incentive to be better in front of management, the development team may inflate its estimates during the planning process so that it looks like it is doing more work than it actually is. And it may also be that teams change their estimation base without increasing the speed of delivery.
A customer IT manager once said to the assembled teams during a PI planning session: "You can be braver and pull more this time! What he meant: Pull more features into your next iterations so more can be completed. Again, the cobra effect is working, because too many features also mean too much work in progress for the teams. This in turn leads to a slowdown, which in turn leads to higher transaction costs.