Story Points or Hourly Estimates have been debated and discussed related to Agile delivery for quite some time, especially for Agile teams looking to improve their Predictability without losing their flexibility. Both methods are intended to aid in Planning and Forecasting; however, each method offers a different perspective on Work and how it should be measured and understood in a complex environment. Your choice of methodology or understanding when to use each could greatly impact your Delivery Success, Team Morale and Stakeholder Confidence.
To determine which type of Agile methodology is more effective (either Story Points or Hourly Estimates), your evaluation must move beyond what you like or dislike, and focus on how each methodology deals with Uncertainly, Variability and Real-World Delivery Constraints.
Why Estimation Continues to Be a Challenge in Agile
Agile Estimation is usually perceived as an accuracy method. However, it does act as a means for maintaining a mutual understanding among stakeholders, facilitating better project management, and assisting with decision-making as part of the whole Agile process. There is much ambiguity associated with developing software and delivering products due to the constant state of change within both these sectors. Therefore, creating accurate estimation methods is not always feasible because of these and many other factors.
Inaccurate estimation leads to many problems for the team including missed deadlines, increased rework, and frustration levels within the team members. The selection of whether to estimate using Story Points or Hours to measure work is a process decision, however, it is also an indication of how those participating in the Agile process view their work.
Understanding Story Points in Agile Estimation
Teams use the relative estimation tool of story points to assess two or more pieces of work in relation to their effort, complexity and risk, without regard to or reference to time. By viewing work as a relative measure compared against other pieces of work (i.e., one type of story point compared to another), teams assign points by using an internally defined, consistent scale. The use of an internal consistent scale allows for the establishment of an accurate and stable reference system that will help define how the team delivers work.
Story points are designed not to indicate an exact time commitment, but rather they support and enable teams to build a better understanding of how the work they perform last week (or last few months) may differ from each other and what might be reasonable to expect in the future with the same volume of work. When more work is complete, the velocity patterns become historical and assist in predicting future work.
Advantages of Story Points
Emphasize relative effort
Instead of estimating in hours, story points require teams to think relative to one another when it comes to effort, thus mitigating pressure to estimate with “accuracy” in hours and allowing for the recognition that uncertainty exists.
Encourage team collaboration
During estimation sessions using story points, team members collaborate, discuss and develop a common understanding of the work.
Become more accurate over time
The more work teams do, the more stable their historical velocity in story points will be; therefore, as a result, the more reliable your planning and forecasting will be.
Eliminate time-based pressure
Story points provide clarity to the common fallacy that you can predict the time it takes to develop something down to the minute, which is typically not true in complex environments.
Common Challenges with Story Points
Story points can be misinterpreted or used incorrectly, despite their usefulness to organizations. Individuals who are not familiar with Agile methodologies may have difficulty understanding the value of story points, and how they can be confused by using story points as fixed timeframes.
Story points are also generally representative of the team. When comparing velocities between teams, this comparison can lead to an inaccurate picture of what a team is capable of doing. That is why velocity should be viewed as a planning tool and not as a performance metric for the team. Misusing velocity as a performance metric can lead to undesirable behaviours and a lack of trust among the teams.
Estimating in Hours: A Familiar Approach
A time-based estimate measures the effort required to complete a task in hours. A time- based approach is natural for organisations that are transitioning from traditional project management models, as time-based estimates of task completion complement budgeting and employee staffing and employee reporting structures.
Time-based estimates may be accurate for simple repetitive operational work environments; however, such estimates often lead organisations to set unreasonable expectations regarding their ability to deliver more complex and changing work products in an efficient and timely manner.
Advantages of Estimating in Hours
Communication with Stakeholders is Simpler
Since hours are a tangible and straightforward measurement, it is simpler for Business Units and Executive Teams to understand when estimating timeframes for business projects.
Effective for Short and Repetitive Tasks
In the case of operational or routine tasks, it is reasonable to expect hour-based estimation to be fairly accurate.
Aligns with Traditional Planning Models
Working organisations transitioning from the traditional Project Management structure tend to favour the hour-based method of estimating and budgeting, as this format is very similar to their internal Finance and Accounting processes.
Limitations of Hour-Based Estimation in Agile
In estimating hours, this creates an expectation of predictability that Agile environments typically do not have. Factors such as interruptions, rework and differing individual working styles create different levels of variability that the use of a time-based estimation does not factor into calculations.
Using a time-based approach to estimating hours may also create a tendency to rely on false assumptions about accuracy. If teams start to see themselves committed to a specific timeframe, when deviating from the estimated timeframe, it will typically be viewed as a failure. This perception of failure can lead to micromanagement, diminished autonomy, and becoming risk averse Long Range Development Plans (LRDP) which create longer approvals processes and impede speed to market.
Story Points vs Hours: How They Handle Uncertainty
The main distinction between story points and hours is the way that they account for uncertainty during the estimation process. Rather than attempting to limit or ignore uncertainty, story points explicitly acknowledge it as part of the estimation process. In an environment characterised by complexity, acknowledging the presence of uncertainty enables more accurate planning to be done, therefore providing better results. Because of this reason, many established Agile teams will use story points for all or most of their planning activities, sprint planning and use hours primarily for documenting capacity and tracking work in operational processes.
The Role of Baseliner.ai in Modern Agile Forecasting
Baseliner.ai greatly enhances the value Agile teams receive, by allowing teams to develop forecasts using their actual delivery data and not be mired in endless debate about story points and/or hours. Baseliner does this by examining historical performance data to create its probability-based forecasting method, rather than relying only upon the team’s estimated delivery dates.
Using Baseliner’s ability to visualise the uncertainty of a team’s delivery date, as well as the associated confidence level of those delivery dates, Baseliner assists Agile teams:
Set reasoned expectations for sprints/release dates.
More clearly communicate their release expectations and timelines to all their stakeholders.
Reduce the debates over each person’s subjective estimates.
Be able to see that the uncertainty surrounding a team’s delivery date is visible, and therefore manageable.
So rather than wasting time choosing between estimation techniques, Agile teams now have the ability to focus on being as predictable as possible by basing their decisions on data-driven insights provided to them by using Baseliner.
Conclusion
The primary conclusion drawn from comparing Story Points to Hours is that uncertainty will be part of the Agile process regardless of estimation; the important factor in determining value in Agile is how well teams will be able to communicate and manage uncertainty as an element of the project environment. Both methods have merits; Story Points have a greater degree of potential use for rapidly changing, complex projects because they promote flexibility and promote collaboration while Hours has continuing use for projects that have well-defined scope and effort.
By utilizing Baseliner.ai to combine estimation methodology with forecasting based upon actual historical delivery data, Agile team planning moves from simply optimistic predictions about how a team will perform on an Agile project to planning decisions that are made based upon factual evidence regarding past performance. As a result, uncertainty becomes an identifiable and controllable component of a team member's Agile processes and therefore, an advantage for all project stakeholders including the team members.
