Three point estimates are a best practice in project management because they produce accurate estimates and stronger team member commitment. They also provide us with risk data on the probability of more or less work, and duration, on tasks than we had planned. See a PM do three point estimating the right way in the video.
The improved estimating accuracy in three point estimates comes from the fact that we are considering the risk inherent in any task. We identify with the team member the risk factors that can make a task take more or less time than the best guess estimate. Then we give the team member the opportunity to estimate the work load if adverse risks occur. We also ask the team member to estimate the work if positive risks occur that affect the task. From those three estimates; best guess, worst case (pessimistic) and best case (optimistic), we can calculate the probability of various task durations. That allows us to talk with the project sponsor about the level of certainty the sponsor wants on the project duration.
Example of Three Point Estimates
As an example, we might discuss a task that has a best guess estimate of three weeks duration. The probability of completing the task within that best guess estimate is 50%. We can also offer the sponsor probabilities of 60, 70 and 80% certainty. As always, there is a cost to increasing our certainty and that often comes in the form of increased labor costs. Having this data allows us to give the project sponsor the opportunity to pay for more certainty.
The improved team member commitment in three point estimates comes from the fact that we engage our team members in estimating the work and duration of their tasks. When team members are given the opportunity to participate in the estimating process, the final estimates they have more confidence in the numbers. That is in sharp contrast to the PM simply telling the team when they must be done . Having this discussion with the team about the risks on the task also gives us another big benefit. If we identify the risks that could cause the task to take longer than the best guess estimates, we try to mitigate those risks very early in the project lifecycle. Early risk identification and mitigation is always preferable to firefighting when we’re halfway through the task.
As you watch the video on Three Point Estimates, observe how the project manager teaches her team to come up with the three estimates. Then you’ll see the project manager use the estimates with the project sponsor to give him choices and also fend off arbitrary cuts to the project’s duration. Finally you will watch private interviews with the team members so you can see their reaction to the three-point estimating process.