Story points in Agile may sound like a reward you get after reading a good story. But they are not! Instead, they are a unit of measurement that estimates the overall effort required to complete a piece of work. 

Are you getting confused? Let’s start from the beginning. 

In Agile development, product owners are responsible for creating the product backlog- a key document containing an ordered list of requirements that briefly describes all the desired features or fixes of a product. While product owners should keep updating this document according to the project needs, a good estimation will give them insight into how much work and effort each item requires. Unfortunately, estimating can be a tedious process. 

The good news is that story points make Agile planning flexible and help the entire development team understand the scope of the work. 

Hold On! What’s Wrong With Using Time as an Estimation Technique?

Traditional software development teams use time as an estimation technique for measuring teamwork. The estimation typically happens in days, weeks, or even months. While it is a widespread practice, it has some noteworthy drawbacks: 

• It does not measure the complexity of the work
• Teams tend to underestimate or overestimate deadlines
• Won’t detect the risks and uncertainty associated with the tasks

On the other hand, Story points eliminate most of these drawbacks and provide a clearer picture to the entire development team of how much work they can achieve during each sprint. They take into account the following: 

• The expected effort needed to complete the work
• The complexities, risks, and uncertainties associated with the completion of the tasks
• Overheads, including meetings, daily stand-ups, brainstorming sessions, quality assurance, and administrative work.

In a nutshell, story points consider multiple factors. But time estimation focuses only on the duration. After comparing both methods, you may notice that the former is relative and promotes team collaboration and cross-communication.    

What Are the Top Benefits of Using Story Points?

Before we move on to how to estimate story points, it is crucial to understand the why. From the above discussion, we know that time as a unit of measurement in Agile is not feasible. It is an outdated concept that focuses on individual contribution more than teamwork. But one may wonder what the benefits of using story points are and why it is one of the most popular estimation methods in Agile. Let’s discuss this below in-depth: 

Makes the Work Team-Centric

Agile is an iterative process that encourages continuous feedback. Since story points involve product owners, developers, designers, and the entire team, it is more collaborative than any other traditional estimation method. It makes Agile planning a cohesive process that takes into account varied perspectives. With every stakeholder involved, the team also gets a better grasp on what’s required of them, making it easier to implement a solid strategy. 

Reduces Overestimation or Underestimation

Often, traditional estimation methods consider the best-case scenario while estimating the hours needed to complete an item. But inevitable impediments can easily tinker with the deadlines, leading to chaos. With story points, you measure the complexities involved and the team’s expertise in handling these uncertainties. By considering the perceptions of different stakeholders, you can plan better for these unavoidable circumstances and forecast the product’s long-term delivery. 

They are Relative

In simple terms, story points estimates units of work, also known as user stories, based on the difficulty in completing them. It sizes each user story with the other. For instance, suppose an ‘X’ user story is a size 1. The ‘Z’ user story will be size 2, as it is twice as hard to complete. It may sound counter-productive, but such relative estimates are helpful and push the team to make smarter decisions. It is also a much faster process as you can assign points quickly after discussing them with the team. 

How to Go About Estimating Story Points?

People often misunderstand that story points are of little value as they are abstract. But in reality, they are valuable if you know how to use the correct estimation approach. Let’s review the top three approaches to estimating story points to help you get clarity!

1. The Fibonacci Sequence

Want to keep things simple and clean? Then you should opt for this method.

The most common way to estimate story points is by assigning Fibonacci numbers to the user stories. This sequence is a series of numbers where a number is the addition of the last two numbers. 

The Fibonacci numbers look something like this: 0, 1, 2, 3, 5, 8, 13, 21

The more complex tasks, the higher the numbers assigned will be. Similarly, the smaller and more achievable tasks get a lower number.  

2. Planning Poker

Who doesn’t love a game of good old poker? But for Agile teams, this concept is much different. 

Planning poker is a consensus-based estimate that Agile teams do to assign story points to each user story. The rationale of this technique is to keep everyone accountable and involved during the estimation process. 

What happens here is that the product owner holds a meeting and discusses with the team the requirements of the user stories, the context, and how they can add value to the business. And a quick FAQ discussion happens.

After the explanation, each estimator is given a set of cards having a series of Fibonacci numbers. The product owner then asks them to assign a number to each user story based on their understanding of how difficult it will be to implement the user stories. Everyone then privately assigns a number to the user story, keeping a poker face. 

If the scores match, then a value is assigned. And if the score differs, then another quick discussion happens where everyone shares their perspective and reasoning behind the estimates, and finally, a decision is made. 

3. The Three-Point Estimation Method

Have you ever asked yourself- What’s the worst that could happen?

Well, this technique considers something similar. It tells you to factor in the three most important factors by analyzing the current information. 

So how does it work? You decide on a scale. And assign value by factoring in: 

• The best-case scenario
• The worst-case scenario
• The most-likely scenario

Once you have got these three values, you figure out the Beta average by using the below formula to get the most-likely case value: 

Estimate = (O+P+4M)/6

Get Smarter with Agile Planning!

In a market that obsesses around crafting great customer experiences, the complexity of work has also increased. Thankfully, there are multiple ways to make Agile planning more fruitful, and story points are one of them. Hopefully, this guide has helped you understand the concept in more detail. 
Looking for more tips and in-depth training around Agile development? We offer instructor-led SAFe, PMP, and Scrum Alliance training to help you supercharge your career. If you’d like, we can schedule a quick call to discuss more on this. Feel free to reach out.