Story points give more accurate estimates, they drastically reduce planning time, they more accurately predict release dates, and they help teams improve performance. Hours give worse estimates, introduce large amounts of waste into the system, handicap the Product Owner's release planning, and confuse the team about what process improvements really worked.
Interesting new research has become available. The Standish Group has updated their findings on project success rates based on analysis of the last decade of data with tens of thousands of data points. In addition, Microsoft has new research findings showing that agile estimation is astoundingly more accurate than traditional project estimation. See:
Scrum + Engineering Practices: Experiences of Three Microsoft Teams
Laurie Williams, Gabe Brown, Adam Meltzer, Nachiappan Nagappan
IEEE Best Industry Paper award winner
Many people who have managed projects with hours have a hard time understanding why story points are better. They have failed to understand some fundamental data that has been published for over 60 years in the industry literature as well as the latest research.
First, let's look at the latest data on project failures. Failure rates are increasing for IT projects during the current disruption of the global financial system. The latest Standish group analysis shows that agile projects have three times the success rate of traditional projects. Jim Johnson now recommends agile practice be used universally on all projects.
In fact the latest Forrester Group research shows that:
Common Project Management Metrics Doom IT Departments to Failure
The venture capitalists I work with say they have never seen a correct GANTT chart in a board meeting. When they dig down into the problem they say none of their management teams knew the velocity of their teams before they implemented Scrum. Not knowing the velocity of production of the teams is the root cause of 100% failure of release plans to be accurate in their board meetings.
The stability of a user story is critical for planning. A three point story today is three points next year and is a measurable part of the product release for a Product Owner. The hours to do a story depend on who is doing it and what day that person is doing it. This changes every day. The GANTT chart assumes a fixed number of hours for some fictitious person (who often is not the person to implement) and assumes fixed dependencies (which are always changing). A study of 80 multimillion dollar projects at GSI Commerce (now owned by eBay) showed that the best experts in the company were totally incapable of estimating how much time a project would take by the people who actually implemented it.
You would think these data would cause people to change their behavior but many companies seem to prefer to continue to fail and be acquired or go bankrupt rather than improve their project management techniques.
Rand Corporation research in the 1940's showed clearly that humans are not good at estimating hours and practical experience repeatedly confirms the research. The recommended the Delphi approach to estimation which was adopted in software development as the Wide Band Delphi technique. The same technique is now embedded in the practice called Planning Poker for agile teams.
The management metric for project delivery needs to be a unit of production. Production is the precondition to revenue and companies say they are in business to grow revenue and margins (even though in project planning they often do the opposite). At least a venture capital group is clear that it is all about the money and money comes from velocity of production combined with quality of the product. Hours are expense and should be reduced or eliminated whenever possible.
The best data on individual developer performance comes from Yale University and has been reported previously on this blog. The best developer on a project takes one hour to complete a task while the worst developer takes 10 hours (within a project) or 25 hours (across projects). For teams the difference is an order of magnitude greater. Larry Putnam's published data show that an hour for the most productive team turns into 2000 hours for the least productive team.
Hours completed tell the Product Owner nothing about how many features he can ship and when he can ship them.
The important metric is the number of story points the team can deliver per unit of calendar time. The points per sprint is the velocity. Therefore we estimate everything in points for the Product Owner so that he create a release roadmap based on team velocity and adjust the plan if velocity changes.
The way we do story point estimation gives better estimates than hourly estimates as they are more accurate and have less variation. A CMMI Level 5 company determined that story point estimation cuts estimation time by 80% allowing teams to do more estimation and tracking than a typical waterfall team. A telecom company noticed that estimated story points with planning poker was 48 times faster than waterfall estimation practices in the company and gave as good or better estimates.
Story points are therefore faster, better, and cheaper than hours and the highest performing teams completely abandon any hourly estimation as they view it as waste that just slows them down.
For a complete break down on the points vs. hours debate see Scrum Inc.'s webinar on the topic.