Introduction to Earned Value Management
Why Organizations Need Earned Value
“9.9% of every dollar is wasted due to poor project performance—that’s $99 million for every $1 billion invested”.
(Source: 2018 Pulse of the Profession®)
“Scaled to encompass total global capital investment, around $1 million is wasted every 20 seconds—or $2 trillion every year”.
(Source: Brightline Initiative™)
1 – It all starts with a plan
EVM For Project Success
- EVM encourages detailed realistic plans to be used from the start of a project.
- EVM requires disciplined and integrated planning that will help achieve early detection of issues to course correct.
- Provides a common set of guidelines for measuring technical, schedule, and cost performance throughout the life of a project.
- EV provides objective indicators as to performance during the life of a project.
- EVM implementation can be tailored based on complexity of the project.
- EVM and project management aims to have an achievable program plan.
- EV provides an accurate forecast (EAC) of the total funds required for project completion.
- EVM provides metrics based on actual performance data.
- Provides a signal in time for the project manager to take corrective action.
Benefits of EVM
- All project sizes will benefit
- Measure accomplishments
- Accurately forecast project completion and final cost
- Early warning to delays or overruns
- Provide schedule and cost variances
- Minimize scope creep that can result in overruns
- Improve the control of project performance
- Provides a competitive advantage and delights customers
EVM is the Answer
Earned Value Management (EVM) is a project management methodology that combines schedule and cost performance to answer the question, What work was done for the money spent?
The Big 3 – Common for All Types of Projects
Scope – What is the product (Goods or Services)?
Schedule – When will the products be delivered?
Cost – How much will it cost to deliver the product?
EVM provides a structured process to manage all 3!
It all Starts with a GREAT Proposal
Steps for completing the proposal estimate:
- Understand the scope, scope comprehension is the key to accurate estimating
- Utilize the project template to clone or populate the project information, the past estimates, and the timelines for the tasks
- Establish a work breakdown structure (WBS)
- Estimate the resources needed to complete the work
- Understand the timing of needed resources
- Include all materials, services, and travel required
- Time phase the estimates
- Ensure that the right skill set is available when you need them
- Use To Be Determined (TBDs) if the name of the resource is not yet available
- Gain buy-in from the proposal team and the functional departments before submission to the customer
At contract award the proposal is the starting point for the project plans!
- Statement of Work (SOW) – description of what is to be delivered to the customer.
- Performance Work Statements (PWS) – summary of the work that needs to be done for a contract
- Integrated Master Plan – event driven plan that documents the accomplishments needed to complete the scope of work and relates each accomplishment to a project event.
Establish a Work Breakdown Structure (WBS)
A WBS is a hierarchical decomposition of the work to be accomplished on a project. It is typically outcome or product based and should make the management of scope, schedule, and cost much easier.
Organizational (Department) Breakdown Structure
Responsible Organizations - A functional organization is a common type of organizational structure in which the organization is divided into smaller groups based on specialized functional areas, such as Engineering, Quality, or Project Management.
Define Control Accounts
Responsibility Assignment Matrix (RAM) - a graphic representation that reflects the integration of project participants such as work teams, subcontractors, and internal organizations with individual project Work Breakdown Structure elements to form Control Accounts (CA).
Plan your tasks with start and stop dates
Plan and Manage Your Resources
Look for availability and skills to complete your project
- Skills library
- Enterprise availability
- Planning grid
- Visual notification
- Available to all stakeholders
Create a Cost Plan (Budget)
Characteristics of a good budget:
- All scope is included
- Meets the contract cost and schedule
- Includes all the resources needed
- Aligns with the WBS
- Basis for comparison to actuals and EV
Execute the Project
- Time charged to tasks
- Status % complete on each task
- Explain schedule and cost variances
- Update to go forecast
- Look at metrics for current issues and potential future issues
Are Your KPIs SMART?
Specific - Target a specific area for improvement
Measure - quantify or at least suggest an indicator of progress
Attainable - specify who will do it
Realistic - state the results that can be achieved realistically, given available resources.
Time-frame – when can the results be achieved?
Additional Tips for Picking the Right KPIs
- Very clear purpose (what matters most)
- Common business language
- Align with your current processes if possible
- Holistic approach (think through the unintended consequences)
- Drive the desired behavior (Encourage and reward)
- Define tolerances (red, yellow, green, blue)
- Have a mechanism to display the KPIs to all stakeholders (dashboards)
I – Important
P – Potential Improvement
A – Authority
Define the KPIs That Help Drive Your Strategy
EV Metrics – help manage current status and gives you a window into the future!
If you are ready to jump into the Earned Value Pond and take control of your projects please contact us at: Unanet.com