“Everything You Need to Know about Agile Capacity Planning” on SmartSheet, November 7, 2020.
How Do You Calculate Capacity Using Story Points?
Alan Zucker, Founding Principal at Project Management Essentials, LLC, sets the context on why Agile teams use capacity planning: “Traditional projects estimate task durations in days or hours. The project schedule is developed by aggregating the amount of time it will take to complete the work. But both experience and data show that these traditional estimating methods are not effective. Only about one-third of projects are completed on time, under budget, and with the intended scope. The average project is about 75 percent over budget.
“Agile takes a different approach,” Zucker continues. “Teams deliver new functionality in fixed duration iterations or sprints that are frequently two weeks long. Teams estimate their capacity (how much work they can complete during the sprint), the effort required to complete the user stories. At the beginning of the iteration, there is a short planning meeting in which the team matches the work that it can accomplish with its capacity. It is like filling a bucket: Teams take work from the backlog and pour it into the bucket until it is filled.”
Rather than estimating capacity and work in hours, Zucker recommends that teams use story points based on the Fibonacci sequence. “We have found that people can quickly estimate the relative size of different bodies of work. In other words, ‘This story is two, three, or five times bigger or more complex than that one.”
Zucker advises against comparing story points across teams because doing so only promotes a type of grade inflation. “Story points are unique to a team. Every team will develop its internal process of estimating size. The best way to estimate a team’s capacity is based on its historical performance. In other words, how many story points they completed in the last several iterations. Capacity estimates for an upcoming iteration should be adjusted for known events, such as holidays, team vacations, or an upcoming training. For example, if our Agile team has 10 members, the sprint duration is 10 days. The number of story points the team completed each sprint is 100. If the sprint included a one-day holiday, the team would reduce its capacity by 10 points for that sprint. If team members were taking additional days off, the capacity would be adjusted accordingly.”
Tips for Capacity-Based Sprint Planning
In this section, Agile experts provide their tips for capacity-based sprint planning. These tips will help you plan for your next sprint, from keeping planning activities simple to preparing for unplanned interruptions.
When estimating team capacity to deliver new features, it is essential to consider the impact of the other things that consume a team’s time. “The team’s capacity should be adjusted for unplanned work,” suggests Zucker. “Unplanned work is everything that comes up other than the work on the product backlog. Unplanned work can be all-hands meetings, fire drills from the boss, or supporting production issues — in other words, all of the normal stuff that takes away from our productive hours. Our hypothetical may have 100 points of capacity without disruptions, but they plan for disruptions and set their capacity at 90 points.”
Zucker also emphasizes that capacity and story points are unique to a single team. “Do not compare capacity or story points across teams. Comparing team results is grade inflation and weaponizing the process. For example, consider that Team A’s capacity is 100 points, and Team B’s capacity is 200. If we tell Team A they are only half as good as Team B, they can double or triple their estimates. To avoid grade inflation, impose the rule that the team can not expect to deliver more capacity in the coming sprint than it has delivered in a recent sprint.”