In Part 3, you had some knowledge of the team's velocity. This is the option of when you do not have knowledge of the team's velocity, because this team has not worked together before, or has not worked on a project like this before. You are all coming in blind.
Your Zeroth Best Bet: Wait to Estimate Until You Know How the Team Works
If you have not worked on a project like this with this team, you have other problems. It's not worth estimating the entire backlog at the beginning of the project, because the team members have no idea what relative estimation means to anyone else on the team. The team needs to work together. So, ask them to start together as quickly as possible. Yes, even before they estimate anything. They can work on anything—fixing defects, developing the stories for this product, anything at all. You all need data.
Since you have a ranked backlog, the easiest approach might be to start with a kanban board so you can visualize any bottlenecks. If necessary, use kanban inside an iteration, so you have the rhythm of the iteration surrounding the visualization of the kanban.
If you keep the iteration to one or two weeks, you will see if you have any bottlenecks. The shorter the iteration, the more often you will get feedback, the more valuable your data.
Once the team has successfully integrated several features, now, you can start estimating together and your estimates will mean something. Use the confidence level and re-estimate until the team's confidence reaches 90%. How long will that take? I don't know. That's why you have a kanban board and you're using iterations. I have seen new-to-agile teams take 6-7 iterations before they have a velocity they can rely on at all.
Your First Best Bet: Make Your Stories and Chunks Small
If you cannot wait to estimate, because someone is breathing down your neck, demanding an estimate, look at your backlog. How small are the stories? Here's my rule of thumb: If you eyeball the story and say, “Hmm, if we put everyone on the team on this story, and we think we can attack this story together and get it done in a day,” then the story is the right size.
Now, you can add up those stories, which are about one team-day in size, give yourself a 50% confidence level, because you don't really know, and proceed with “Use Timeboxes, Better Your Estimate as You Proceed” in Part 3.
Now, if someone is breathing fire down your neck, chances are good that no one has taken the time to create a backlog of right-size stories. But, maybe you got lucky. Maybe you have a product owner who's been waiting for you, as a team, to be available to work on this project for the last six months, and has been lovingly hand-crafting those stories. And, maybe I won the lottery.
Your Second Best Bet: SWAG and Refine
Assume your manager has asked you for a date and you did not get empirical data from the team, but instead you decide to develop a SWAG, a Scientific, Wild Tush Guess.
- If you must develop a SWAG, develop it with the team. Remember, a SWAG is a guess. It's an educated guess, but it is a guess. You want to develop a SWAG the same way you estimate the stories, as a team.
- Develop a 3-point estimate: optimistic, likely, and pessimistic. Alternatively, develop a confidence level in the estimate.
- When you start with a SWAG, also start collecting data on the team's performance that the team—and only the team—can use for the team to use to better their estimation.
- Refine the SWAG: Explain to your management that your original date was a SWAG, and that you need to refine the date. I like the word “refine,” as opposed to “update.” Refine sounds like you are going to give them a better date as in sooner. You may not, but you will give them a better date as in a more accurate date.
- Do NOT SWAG alone. The team gets to SWAG. It's their estimate, not yours, as a project manager.
- Do NOT let your manager SWAG for you. Unless the manager is going to do all the work, the manager gets no say. Oh, the manager can decree a date, but then you go back to Part 3 and manage the project and re-estimate reasonably.
- Do NOT report a SWAG without a confidence percentage or a range attached.
- Estimating the Unknown: Projects or Budgets, Part 1
- Estimating the Unknown: Projects or Budgets, Part 2
- Estimating the Unknown: Projects or Budgets, Part 3
- Estimating the Unknown: Projects or Budgets, Part 4
- Estimating the Unknown: Projects or Budgets, Part 5
And, the book: Predicting the Unpredictable.