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Team Cost Estimation: Can You Use Planning Poker to Estimate Costs?

Cost estimates are a key aspect of every agile project for deciding whether the project is feasible. Here’s how Planning Poker can help improve your estimates.
November 12 · 5 min read
Planning Poker can help improve your cost estimates.

Estimation is challenging, as product managers, project managers, and software developers all agree. Indeed, many software developers consider it to be one of the most difficult aspects of their jobs.

With this in mind, higher management and executive leadership frequently put a lot of pressure on product development teams to ensure that estimations are as accurate as possible.

In this regard, Planning Poker, also known as Scrum Poker, is a consensus-based estimate technique increasingly used for estimation. Typically, Planning Poker is used to estimate the product backlog. Planning Poker, however, can also be used to estimate costs.

The Planning Poker Estimation Technique

James Grenning came up with the idea for planning poker after a particularly long and tedious meeting. Mike Cohn of Mountain Goat Software helped to popularize the game. In his book "Agile Estimating and Planning," Cohn updated the planning poker game to use a modified sequence of numbers that get optimized for reporting.

Planning poker is a task or project estimation approach in which teams estimate the size or scope of various projects and tasks using a deck of poker cards. On the other hand, Cost Estimation is a frequently underutilized yet very successful use of Planning Poker. Basically, instead of referring to efforts, the base unit now relates to costs.

Planning poker integrates three estimation methods:

  • Expert Opinion: An expert gets asked how long something will take or how much it will cost in an expert opinion-based estimating technique. The expert bases their estimate on personal experience, intuition, or gut feeling. Expert Opinion Estimation takes less time and is more accurate than some of the other analytical procedures.
  • Analogy: User stories get compared in analog estimation. Because the assessment is based on established data, the user story underestimation is compared to previous user stories, yielding accurate findings.
  • Disaggregation: This term refers to splitting a user story into smaller, easier-to-estimate user stories. It takes to design the user stories included in a sprint is usually between two and five days. As a result, user stories that may take longer to complete must get divided into smaller use-cases. This method also ensures that there will be a large number of similar stories.

As you will see later, the game is not difficult to grasp.

The Planning Poker Process

You will observe how a typical Planning Poker session gets conducted at this point on. The primary difference between using Planning Poker to estimate costs instead of efforts involves what you use as a base unit for the cards. When using Planning Poker for cost estimations, set a base unit in a set dollar amount based on how large the overall project is.

Step 1: Distribution of the Cards

Each team member, known as the estimator, is given a set of planning poker sequence order cards at the start of the session. Each card is assigned a numerical value. Mike Cohn of Mountain Goat Software has proposed a planning poker sequence list of 0, 1, 2, 5, 8, 13, 20, 40, and 100. This sequence often gets employed in most Planning Poker sessions.

Step 2: Reading of the Story

The product owner or client then reads an agile user story aloud to the team or the estimators or describes a feature. Then, for the cost estimation, you will provide a summary of the user story.

Step 3: Discussion of the Story

The team's estimators discuss the characteristics to gain a complete grasp of all areas of the story. The estimators must talk about the assumptions and risks and ask questions to clarify them. Furthermore, the team's Moderator gets suggested to record a summary of the discussion for record-keeping.

Step 4: Cost Estimation and Sharing of Cost Estimates

Following the discussion, each estimator will select one Poker Sequence card in secret based on their estimate. To determine the value of each card, simply multiply the card’s value by the agreed-upon base unit. The members must then all reveal their cards at the same time. If all of the people choose the same values, then that figure is the required cost estimate.

Step 5: Reaching Consensus

If the values don’t get chosen simultaneously, all members describe the reasons for their estimates in further depth. The estimator should share the basis, which determines the greatest value and selects the lowest value. Following this additional conversation, each estimator re-selects a card, and the cards get shown simultaneously once more.

This approach gets repeated until all of the estimators agree. The process is complete when each estimator holds up the same number, which is the required estimate.

According to poker sequence rules, the larger number gets chosen when two consecutive numbers in the voting are tied, such as 13 and 20. It is done in this manner because it saves time. It also protects the team from the possibility of running out of time if a cost’s scale gets underestimated.

Advantages and Disadvantages of Planning Poker

There are advantages and disadvantages to Planning Poker compared to other estimation techniques.

Advantages

  • Planning Poker is a concept that stresses collaboration and teamwork. It offers each member an equal opportunity to improve their morale.
  • Rather than the traditional practice of one person dictating cost estimates, it gives a platform for estimators to present their views and proposals to the team.
  • The team's discussion on the length and cost estimates is also an excellent method to learn something new about the user story under consideration.

Disadvantages

  • The approach has a key flaw in that it makes "convergence to consensus estimate" a requirement rather than a natural outcome of the discussion.
  • In a planning poker sequence, reaching a consensus may offer the impression of assurance, but significant points may still need to get considered.
  • If sufficient attention does not get provided, any dominating team member can alter a person's estimations. Consensus would be reached in this instance, but only through sheer force of will.

With such benefits and drawbacks in mind, you might wonder if Planning Poker works. In a nutshell, the answer is yes. Teams that estimate with Planning Poker routinely claim that their estimates are more accurate than any other method they have tried. The following are the reasons behind such success:

First, the fact that Planning Poker brings together multiple expert viewpoints is one of the reasons it leads to improved estimations. These professionals are better suited to estimating work than anybody else because they form a cross-functional team from all disciplines on a software project.

Second, there is a spirited discussion during poker planning, and estimators get challenged by their peers to justify their estimates. Researchers have discovered that such an approach enhances estimate accuracy, particularly on items with a high degree of uncertainty, such as most software projects.

Third, studies show that asking people to defend their estimates leads to estimates that better compensate for missing data. On an agile project, this is critical because the user stories getting estimated are frequently purposely ambiguous.

Furthermore, studies have demonstrated that individual averaging estimates during agile estimating and planning and group discussions of assessments produce superior results.

Conclusion

Beyond product backlog or task estimate, the agile estimation technique can also get used for estimating costs. If you have the correct tools and methods in your toolkit, the cost estimation process can be a pleasant and collaborative exercise for remote and distributed teams.

Ultimately, using Planning Poker for cost estimations offers the same benefits for all task and product estimations.

In this regard, check out how Asynch Poker can help you today!

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