Earned Value Management – More than a “buzzword”

In my post titled “Earned Value Management – The next “buzzword” I belittled Earned Value Management (EVM)…and now its time to eat some crow, although some of my objections to EVM still stand.

After doing more reading I realized the EVM can be a very powerful tool to use to manage and measure the performance of value creation on a project. Using EVM, a project manager is able to understand the actual value that the project is bringing to the organization as well as whether the project is truly on schedule and within budget.

To properly use EVM, a project manager must have the following information:

  1. Planned Work – What work is scheduled to be completed?
  2. Cost Estimate for Planned Work – What is the cost estimate for the scheduled work?
  3. Actual Work – What work has been completed?
  4. Cost Estimate for Completed Work – What is the cost estimate for the work that has been completed?
  5. Actual Costs – What costs have actually been incurred?
  6. Variances – Cost difference, Schedule difference, Estimate Difference.

If a PM can accurately capture the actual costs at any given moment during the project, EVM can be used and can provide a tremendous amount of information to a PM. Using values such as the Cost Performance Index (CPI) and the Schedule Performance Index (SPI), project managers can measure that financial performance of a project.

The key to utilizing EVM is to ensure that details about the costs incurred during a project are measurable and accurate. This is the sticking point that most PM’s have with using EVM since it can be difficult to accurately measure costs, but if EVM processes and systems are put into place at the beginning of a project this difficulty can be be removed (or at least alleviated).

As mentioned previously, I do still have some objections to some of the recent comments about using EVM, most notably the use of this tool as a sole means for performance measurement. Like any other methodology and/or tool used in life there needs to be some common sense applied its usage.

For anyone interested in a great debate about utilizing EVM in projects, please check out Max Wideman’s “Earned Value Discussion sparks debate” article on his web page.

[tags] Earned Value, Project Management, EVM [/tags]

4 responses to “Earned Value Management – More than a “buzzword””

  1. Craig Brown Avatar

    Of course EVM presumes the work you have planned delivers value evenly over time. This would be a contentious point.

    For example, I would say planning time is worth more than doing time in an hour for hour comparison.

    Another tool in this space is the burn down chart, which I think makes more sense for IT and process improvement projects.

  2. Eric D. Brown Avatar
    Eric D. Brown

    Craig – Thanks for the comment.

    Burn down charts are an excellent tool for this type of work…I prefer them over more formal & involved tools.

  3. flipper_g1 Avatar

    Excellent! I found this site very useful in my Project Manegement course at DeVry University. THANKS!

  4. ericbrown Avatar

    Glad to be of service!