Project management systems – Earned value management – part 6

Earned value management – part 6

Intermediate implementations (focuses on both technical and schedule performance)

It is not only important to complete the tasks to the required quality.
For many projects the time element is also relevant.
For example, there may be an extra cost element in finishing quickly.

Projects generating new ideas and development may greatly benefit from rapid completion.
This would be especially the case in a very competitive market.

It is usual to use a more robust version of Earned Value Management for these more complex projects.

As in the simple project above the project manager must still define a comprehensive work breakdown structure.
Once this exists, the task dependencies are considered and the final schedule is prepared with appropriate timelines.
This schedule model can then be used to develop the Planned Value curve (green) as shown in Figure 1 in the Word file ‘earned value diagram.doc’ in the product package.

The figure also shows the schedule variance in both time and money.
This provides a simple graphical indication of performance.
Bare in mind that the outcome of this curve depends on the accuracy of the original schedule and the task dependencies.

The Earned Value Management schedule data may not be absolutely accurate it does provide some diagnostic information.

Other rules are often incorporated in more complex Earned Value Management applications.
For example, ‘fixed formulas’, estimates of the percent complete, apportioned effort, level of effort and others may replace the use of 0 / 100, 50 / 50 and 25 / 75.
Each one has its strengths and weaknesses.
Often more specialist software is required for their use.

Many of the rules do not use currency units, but it is more common to use dollars (or another currency) for the plotting of the Planned Values and the Earned Values.
It is usual to record labour hours in at the same time as currency.

Advanced implementations (focuses on cost, technical and schedule performance)

For large projects it is important to track cost performance at regular intervals.

To measure cost performance, Planned Value (or BCWS) and Earned Value (or BCWP) must be in units of currency.
That is, in the same units that actual costs are measured.

In large projects more elaborate processes for controlling baseline revisions will be required.
In addition, there will be greater integration with the Earned Value Management systems of other interested parties in the project.
Many of the project management systems will be more rigorously controlled.

See the section on ‘terminology’ [see Project management systems – part 9] for additional tracking terms.

Limitations of Earned Value Management

The higher the complexity of the Earned Value Management used the more cost will be involved.
It is important to tailor the level of Earned Value Management to the size of the project.

The benefits of any implementation should far outweigh its cost of implementation and maintenance.
Earned Value Management should prove beneficial in any project.

Project quality cannot be measured by Earned Value Management.
Earned Value Management is a tool to be used in project management.
The project may appear OK from the perspective of Earned Value Management but fail if the end product is below standard.

Earned Value Management measures objectively.
The stakeholders must buy in to the use of Earned Value Management or it may be less effective.

Earned Value Management uses a project plan.
This suggests that the project has a known goal and a route for getting there.
Some think that Earned Value Management is less useful for discovery projects and others that are hard to plan for outcomes.
Research projects tend to move with the various discoveries along route.

Others believe that all projects can be planned if the time intervals are small enough.

Typically, the projects where Earned Value Management works best have discrete tasks and not continuous ones.
Projects with mixed ‘discrete’ and a high level of ‘continuous’ tasks may give less than satisfactory results.

It is usually assumed that projects posses a satisfactory schedule and a method for accounting.
This is not always the case for smaller projects but they should still benefit from Earned Value Management.
There may also be problems with getting the correct cost data at the right time.

General implementation

As with many project management systems its implementation is subject to the motivation of people if it is going to succeed.
This will often require cultural changes and good communication of the benefits that may result.
[see, motivation is covered in more detail in 'The Complete Motivation package‘].

Initially, the personnel must understand what Earned Value Management means, how it fits in with the business model and how it relates to those people who will be responsible for implementing the project.

It is important during the initial use of Earned Value Management that a lot of feedback is given and personnel can see the results as the project progresses.
If personnel do not see the benefits regularly they will soon become disillusioned, as with any system.

More information can be found in the online encyclopaedia Wikipedia.

PRINCE2® 2009 describes project monitoring within the Progress theme.
The purpose of the Progress theme is to establish mechanisms to monitor and compare actual achievements against those planned; provide a forecast for the project objectives and the project’s continued viability; and control any unacceptable deviations.
Two of the principles of PRINCE2 [see ‘The Complete Project Management plus PRINCE2’] are managing by stages and continued business justification.
The Progress theme provides the mechanisms for monitoring and control, enabling the critical assessment of ongoing viability.
[see Progress - purpose]