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Project management systems – Earned value management – part 5

Earned value management – part 5

Scaling Earned Value Management from simple to advanced implementations

Earned Value Management does not depend on the size or complexity of the project.
As for most management systems its implementation can vary significantly depending on the circumstances.

This can mean setting a black and white threshold for the use of Earned Value Management.
If a project exceeds the threshold it is utilised, if below it is not.

Another approach might take into account the exact nature of the project and the skill level of the people.

Simple implementations (focuses on technical performance)

Various levels of implementation can be used which take into account the complexity required.

Small and simple projects exceed the larger and complex ones.
Typically only the latter benefit form Earned Value Management.
This may be because people feel that, for smaller projects, it would be too much trouble to implement or too costly.
If you have knowledge of spreadsheets Earned Value Management can be implemented simply.

Several steps are needed.

Step 1 – define the work

This is one of the basic steps of any project management.
What work is required to achieve the goal?
This is usually defined in the work breakdown structure.
It is a list of all the tasks needed.
The list should be as complete as possible.

In an ideal situation for Earned Value Management it is easier if each task stands alone, that is, with no overlap.
The lower parts of the work breakdown structure are known as Work Packages.
These are the tasks that can be managed readily without having to go down to additional trivial detail.

For the purposes of Earned Value Management they are also know as ‘terminal elements’.

Step 2 – assign a value

A value is provided for each of the terminal elements.
This is known as the Planned Value (PV).
For an individual task it is equivalent to its Budget At Completion (BAC).

This is usually in a currency unit, for example, dollar or pounds.
However, it could be in other units, for example, man-hours etc.
For a large project this is usually part of the project budget.

For small projects a simpler system of assigning a weighted number (not related to currency or work) may be used.
The use of a non currency method makes people reflect more on the tasks and can expose deficiencies in the scope of the project.
Any issues should be resolved as soon as possible.

As with all projects try to achieve results that are as accurate as possible.
Some tasks will be difficult to assign values to until more detail is known later in the project.

Step 3 – set out the rules.

Each terminal element ‘earns’ value according to a rule. This rule will assign somewhere between 0% and 100% of the full Planned Value of the task.

If 0% or 100% are the only options this would be called the 0 / 100 rule. 0% if the task is anything other than complete. When the task is complete it gains 100% of the Planned Value.

There is also a 50 / 50 rule. This is similar to the above, only 50% is assigned once the task has begun and the other 50% when complete.

In order to give more weight to the completion of work other rules have been used, namely, 25 / 75 and 20 / 80. These rules can focus the workforce in identifying when a task is under way. Simple rules are useful for tasks of small duration. This is one reason for identifying the work breakdown structure with tasks that are small in duration. It becomes easier to evaluate the Planned Values and apply any rules.

Step 4 – measure the project progress

This basically means beginning the project and assessing its progress. As each task (terminal element) is completed (or begun) the appropriate rule is applied to the Planned Value and the Earned Value is evaluated and recorded. This data is recorded at regular intervals, for example, weekly or monthly. It can be compiled in real time as tasks progress.

The more rapidly you can update the Earned Value data the more information is available to the project team. This can help motivation to see real time progress. In this manner Earned Value Management can benefit any project. It shouldn’t be classified as a once-a-month management tool.

With this simple approach it is possible to compare the performance of similar projects. The projects should be as identical as possible, with the same Planned Value data and applying the same Earned Value rules. Once the start dates are aligned the curves indicating progress can be compared. Make sure that you carefully consider the reasons for any discrepancies and don’t jump to conclusions.

This simple system just focuses on the list of tasks (terminal elements). No timescale has been identified. Have they started and have they completed? If a project has 50 tasks and 40 are complete it does not follow that the project is 80% complete in terms of its schedule. In practice, not all the tasks will take the same length of time and many will overlap and have dependencies that will affect the schedule. Thus, there is no feeling of how much time is left before the project is complete. Hence, there is no estimate of schedule performance.

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]

PRINCE2® is a Registered Trade Mark of the Office of Government Commerce in the United Kingdom and other countries.