Wednesday, 27 May 2009 00:00

Avoiding Potholes on the Road to Earned Value

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You will be hard pressed to find a person that has taken some project management training who has not drunk the purple Kool Aid called Earned Value Management (EVM). You may have run into EVM "evangelists" at project management conferences or symposiums. You can recognize them by that glassy stare that comes from rolling up one too many work package cost calculations and you may have even learned to run for the hills when they have cornered some neophyte who expresses ignorance about the whole concept or (worse) challenges its practical applicability.

All joking aside, with the emphasis placed on EVM's benefits, you may be inclined (or coerced) to apply it to your next project. To help you avoid some of the more common beginner pitfalls with use of EVM practices, here are three tips:

  1. Consistent progress reporting on tasks or work packages is crucial. If you do not set expectations about standards for progress reporting across your project work packages (or even worse, in a portfolio/program situation, across the different projects that you are overseeing), rolled up value calculations will magnify these inconsistencies. Whether you want to be a purist and accept only 0 or 100% (good luck "selling" that in most organizations!) or see the world in a few limited shades of grey (0, 25, 75, 100%), ensure that there is consistent progress reporting to ensure that you can do an "apples to apples" comparison between project, sub-projects, or work packages.
  2. Be aware of non-critical paths. If you have team members that are neglecting critical path activities but have completed multiple high value non-critical path activities, you could end up with favorable schedule variance calculations even though you are behind on the critical path. I recall a project where team members spent a significant amount of time on non-critical path work packages and the project manager reported favorable schedule performance far past the point where the end date was in serious jeopardy. This is where you may want to consider doing a separate set of earned value calculations focused on critical path activities or at least do not use schedule variance as the sole metric for evaluating schedule performance.
  3. Be aware of cost imbalances between one-time costs (e.g. capital expenditures) and ongoing costs (e.g. labour or consulting fees). Similar to the previous point, if one time costs occur earlier or later than originally planned, cumulative cost data could negatively impact the accuracy of variance calculations. Variances in these one-time costs can also "mask" performance issues. If a computer server is much cheaper than was originally budgeted, the cost savings could hide poor labour productivity or performance on another work package. As much as possible, separate one time costs so that you can get a more accurate performance picture.

Earned Value Management IS a recognized best practice for objectively assessing project cost and schedule performance, but, as Ben Parker would say, "With great power comes great responsibility."

What do you think? You can reach me with feedback at kbondale@solutionq.com or visit our website (http://www.solutionq.com)

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Kiron Bondale

Kiron D. Bondale, PMP, PMI-RMP has worked for over thirteen years in the project management domain with a focus on technology and change management. He has setup and managed Project Management Offices (PMO) and has provided PPM consulting services to clients across multiple industries.

For more of Kiron’s views on project & change management, please visit his blog or contact him directly at kiron_bondale @ yahoo.ca.

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