Agile Velocity vs Capacity Planning: A PM’s Handbook for Optimizing Developer Throughput

What’s the point of agile velocity vs capacity planning for software development teams? 

While the two project management KPIs may sound similar, they have entirely different meanings and uses for an agile team.

For a SCRUM master, it’s important not only to know the difference but also to understand how to reconcile these two elements to perform an accurate measurement of developer throughput.

Follow along as we break down these two components of sprint planning for SCRUM teams, while also helping you develop a better understanding of your team’s long-term and project-specific performance.

Agile Velocity vs Capacity Planning: What’s the Difference?

Velocity refers to the average number of story points completed by your agile team within a single sprint.

It’s a clear indication of how quickly your team can clear its existing backlog and is usually represented using a burndown chart.

Capacity, on the other hand, is a measure of how much time your team can dedicate to a project within a single sprint. 

It’s measured in the number of hours, offering a window into your team’s future ability to take on and work through story points. 

In the world of agile SCRUM, these two metrics together assist in making better forecasts about future projects based on past data. So, instead of being a situation of “either-or”, the relationship between velocity and capacity is a complementary one. 

When you have access to historical data on your team’s velocity, you can combine it with information from your time-tracking app to create an accurate forecast of your team’s capacity.

However, it’s also worth noting that both velocity and capacity are relative estimation metrics that review your team’s past performance and future throughput based on comparative data instead of offering any direct absolutes.

That makes sense because in the agile methodology, planning and estimation are always handled iteratively and incrementally.

How to Measure Agile Velocity?

Sprint velocity offers direct insight into team performance, making it a very effective tool for project estimation and future forecasting.

But how do you measure velocity? It all comes down to a simple formula:

Velocity = Total Number of Story Points Completed Across Sprints/Number of Sprints

So, if you were to estimate your team’s average velocity across three consecutive sprints, the answer would be the total number of story points completed across 3 sprints divided by the actual number of sprints in the data set (3).

How to Forecast Agile Capacity?

Capacity planning is a multi-step process. 

You have to compute the total number of developmental hours your team can allocate across a given sprint. But this number is merely a future estimate, it does not guarantee the actual number of developmental hours but offers a forecast of the amount of engineering time that you might be able to allocate.

So, think of it as a sum of the total number of working hours across all your team members. Then, subtract an educated estimate that accounts for potential time-eaters like meetings and reviews, as well as emergency situations like illness. 

But again, this is merely an estimate. The thing about capacity planning is that your team’s availability can always change in the course of the project. As such, it’s better to err on the side of caution and have an acceptable amount of buffer time so you don’t have to push deadlines.

Reconcile Average Velocity with Available Capacity for Better Project Estimation

Velocity is measured in user stories. Capacity, on the other hand, is usually calculated by working hours. However, connecting the dots between these two concepts is the key to unlocking more accurate project estimates.

That’s why you need time-tracking data.

By logging the number of development hours spent by your team members across story points, you’ll have a much better idea of how to correlate velocity data with capacity planning.

However, it’s important to keep in mind that time tracking by itself shouldn’t be used as a tool for evaluating team performance. Rather than measuring progress from individual metrics, your team should always be incentivized to focus on core work.

Instead, use time tracking data as a means to set better deadlines and create estimates for stakeholders that match developer throughput. 

At 7pace, we have created our own proprietary concept called “pace”. Pace helps you visualize the speed at which your team is burning through your backlog from project to project and sprint to sprint. The historical data you collect also helps you create pace estimates for future projects.

Want to know more about this concept? Check out our dedicated guide to calculating pace for DevOps teams.

How to Use 7pace for Crafting Better Project Estimates and Evaluating Software Development Throughput

What is 7pace? You might say that it’s a powerful time-tracking tool for SCRUM teams and DevOps professionals.

But that’s oversimplifying things because 7pace does a lot more than track time.

Instead, you gain access to an end-to-end performance analytics software extension that works directly within your development environment. 

Right now, 7pace supports two popular development platforms: Azure DevOps and GitHub. It integrates seamlessly with your development environment and provides you with detailed analytics on team members and project iterations without missing a beat. 

It also features downloadable clients for multiple platforms, along with the ability to integrate with other reporting platforms using a powerful API.

Want to learn more about how 7pace can help improve your project estimates with a better evaluation of developer throughput? Sign up today!