Earned Value Management for Your Project

First, we should start with taking a look at what earned value management is.

About Earned Value Management

Earned Value Management takes project reporting to the next level. It’s a way of measuring project performance. It shows whether you are under or over budget and ahead or behind your schedule at any given point. Because it plots your progress over the life of the project it can give you useful information about whether you are on track to complete on time and on budget (and if not, how much over you are likely to be based on your performance to date).

EVM is made up of two main measurements that are easy to track.

  1. Cost variance

This is the measure of what you planned to spend by a certain point and how much you have actually spent. For example, if you planned to spend $100 this month but in reality your project expenses only came in at $75, then you are behind your planned expenditure.

Alone, this measurement doesn’t tell you very much apart from that you are currently under budget.

  1. Schedule variance

This is the same analysis, but for your schedule. It is the difference between where you thought you’d be in terms of progress against how many of your tasks you have actually completed. For example, if your project schedule says you should be 30% of the way through the project and you’re actually reporting that you are 50% complete, then you are ahead of your plan.

Alone, this measurement doesn’t tell you much either, apart from that you are steaming ahead.

Together these figures tell a very different story about your project. You are under budget and ahead of plan! You are completing work more quickly and spending less on it that you had expected. While that’s good news it probably means your estimates were wrong in the first place – an important lesson for future projects.

There are other calculations that contribute to a full EVM analysis of your project but the important things to remember are:

  • EVM is just another way to measure performance
  • It combines measurements to give you a rounded view of your project.

The Benefits of EVM

Status reports alone can make it hard to work out why there are overruns on your project. Earned value can help identify where there are problems. If you had spent $150 in the example above you could then drill down to find out where that money had gone. EVM can give you a contextual view of project performance – or at least some clues about where to look for potential problems.

You can use it at a portfolio level. When you’ve got a bank of historical data for the performance of past projects you can take that and apply it to proposed projects. You’ve got lots of great, accurate data about project estimates and how projects are likely to proceed. If you are doing a similar project you’ll probably get similar performance results so you can predict what will happen based on your historical evidence and estimate more efficiently.

At the other end of the scale, you don’t have to use it on every aspect of your project. You could choose to only use EVM to manage the performance of a third party organization, for example. It can be tailored to fit the size of your initiative or even part of an initiative.

The in-depth analysis of your project’s progress gives you loads of data to use during your project retrospective or lessons learned meeting. It’s then a simple job to apply what you learned to future projects.

However, EVM isn’t all good news. There are some important disadvantages to take into consideration before you make the decision to use it on your projects.

Be Aware of the Disadvantages

As you’ve probably gathered, there is an admin overhead for pulling these reports together. Even if you use automated project management software that does the math for you, there is still extra work to do for the project team. You have to record progress in a way that works for your EVM calculations and make sure it is always up to date. Then you have to produce the reports. Finally (although this might not be a disadvantage) you actually have to do something with the reports – otherwise what’s the point?

EVM reports can be seen as just one more report for your project stakeholders to look at. If they feel they get adequate information for making project decisions already they might not see the benefit of adding another way of presenting the data. They might not be willing to put the time in to learn how to read a new report.

Another disadvantage is that it’s time consuming: even automated systems require management and data input. The payoff for small projects might not be there, especially as it takes a while to set up and bed in any new way of working.

EVM is often seen as not being suitable for agile environments because it relies on having a full project plan in place. If you don’t have a detailed project plan because you are evolving your requirements and planning iteratively in a highly changing environment then it might not suit how your team works.

One final point to watch out for that isn’t to do with the mechanics of getting EVM up and running: people bring baggage to EVM. They may have heard that it’s really difficult and that automatically biases them against using it. If any of your project managers hold the PMP® credential they will probably remember having to memorize the calculations for their exam – not a pleasant experience and one that might cloud their judgement when you say you want to use EVM!

EVM and Other Tools

If you do decide to use EVM it’s important to realize that your other forms of project tracking are not simply thrown away. You can still use real-time project dashboards. You can still get status updates from your team. EVM can sit alongside what you already do, or replace it, if you would prefer. As with any new process or report, it’s probably a good idea to try it for a while and establish how it fits with your other working practices, tweaking it as you see what works well.

It can even coexist with Agile ways of working, especially if you have been using it for a while. The historical data can help you predict where you will see overruns and that can help agile teams identify problems quickly.

Earned Value Management won’t be the right decision for every project, but it is one more tool for you to consider for your project. Even if you choose not to use it, you’ll know understand why you have made that decision – you’ve come to it through a position of consideration, not because you don’t know enough to make the call.

Good performance reporting at all levels, whether you use EVM or not, requires solid project budget and schedule information. ProjectManager.com can capture all that for you in real time and present it in easy to understand dashboards.

Reference: https://www.projectmanager.com/blog/evm-for-your-project

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