Why Story Points Are Not Equal to USD

During my coaching interactions and engagements with teams, I have seen multiple Agile teams maintain an exchange rate for converting Story Points (SP) into hours. 

The exchange rate between SP and hours usually varies between teams, but the most common conversion is 8 hours per 1 SP. Some teams prefer 6 hours per 1 SP.

What Is the Correct Exchange Rate? 

SP is not a Currency Unit akin to USD, so it does not require an exchange rate. 

Converting SP to hours is an inefficient process. It defies the very nature of agility. Skip SP altogether – just provide your estimates in hours. Nothing in Agile forces teams to use SP.

SP is better served in making estimates predictable. Consider my favorite example, "Buying a Shoe."

"Buying a Shoe"

When you buy a shoe, do you tell the shopkeeper that you're looking for a shoe that's nine inches long, five inches wide, and provides two inches of toe room? Or is there a simpler way of shopping for a shoe that fits your foot?

Shopkeepers use a measuring scale known as "Brannock's Device" to measure shoe size on a standardized scale. This scale dictates the general size and shape of shoes across all brands. This prevents the confusion that would be caused by shoe manufacturers labeling shoes according to each individual measurement (length, width, toe space, etc.). 

This same methodology should be applied to SP when estimating. Instead of saying 1 SP = X hours, evaluate and rank stories by the following key dimensions:

1. Effort
2. Complexity
3. Uncertainty (Risk)

One of our product teams used this approach for their previous two releases. They found a greater predictability and created a "Story Point Calculator" using the above criteria that has since enhanced their entire workflow. 

Section 1 – Dimension Reference Chart 

Shown below are the Low, Medium, and High values for all three dimensions (Effort, Complexity, and Uncertainty/Risk) within our calculator. These can be configured based on any other needs and scenarios.

Section 2 – Story Point Calculator 

This tool automatically computes Story Points using an internal logic based on the selections of its user. When teams continuously use this, it will become the "Brannock Device" of their product. 

A more defined value set will improve work predictability and translate the true value of Story Points to their most useful conversion. The team will be able to more easily estimate the approximate length of time needed for the work.

The product team that piloted this program has since designed their own version, showing how your team can one day do the same. 

A final note: every Product team needs to design its own Story Points reference chart. Personalization offers the greatest value of Story Points in an Agile workspace.