Observing the long-term affects of awarding partial credit has convinced me the Product Owner and Scrum Master should not award credit for work that does not meet its acceptance criteria. One possible exception: the team came to the Product Owner well before the review meeting to renegotiate. In that case, then the outcome should be reduced scope (fewer features) rather than reduced quality (fewer tests).
The times it’s hardest to do this are the times you have the most to gain from doing this. Awarding credit for work not done to the agreement robs the team of growth opportunities and dilutes the credit when it really was earned. The team can get into a habit of not taking the agreements seriously enough to do the last few millimeters of work that often turn out to be the hardest. Some people, including Ken Schwaber, say the Scrum Master shouldn’t even allow the team to demonstrate work which doesn’t meet the definition of done.
We’ve all observed the danger of a team creating an artificially high velocity by getting into “technical debt.” Doing that for too long will lead to a “design dead” (unmaintainable) product. Teams should allow time every Sprint for refactoring to ensure the code quality remains high.
Calling something “done” when it’s insufficiently tested also leads to nasty surprises, as the FBI found out.