When it comes to making project decisions, the more data available, the better.
But more important than the amount of data is the quality,relevance and timeliness of the available data. Different decisions require different data sets.
For program managers, earned value management (EVM) provides data beyond that provided by traditional project portfolio management (PPM) methodologies, allowing program managers to make more informed decisions.
That is why more and more companies are adopting EVM as part of their project management strategies. By incorporating EVM with traditional PPM practices, program managers are better able to control project constraints, make instantaneous decisions and meet delivery objectives.
Understanding Earned Value Management
The adoption of earned value management as a project management tool began in the 1960s, when the United States government adopted EVM principles in the Energy and Defense Departments. It has since become the most preferred project management method worldwide, project management expert Atul Gaur says.
To understand the evolution, it is important to understand the differences between PPM and EVM, as well as what commonalities they share.
What PPM Does Well
Project portfolio management is essential to aligning a company’s strategy to performance.
Projectmanager.com founder Jason Westland contends that PPM serves four main purposes:
- aligning a project with corporate strategy,
- ensuring each project supports the company’s direction,
- determining which resources to apply to which projects,
- and managing resources across all projects.
Project managers depend on PPM to help them deliver projects that are on time, on budget and on scope. Dustin Haughey, PMP, posits that PPM answers questions at both the project and portfolio level.
At the project level, this includes whether projects are impacting or dependent upon one another, how well projects perform, and how much each project contributes to the overall portfolio.
At the portfolio level, Haughey says, these questions include:
- Are we doing the right things the right way?
- Are we doing things well?
- Are we realizing the benefits?
Being able to track the progress of a project based on time and money is essential, which is why implementing proper project portfolio management is so important. It allows program managers to make adjustments based on deadlines and budgets to meet delivery goals.
There are, however, some crucial blind spots in the PPM framework — namely the inability to calculate relative to value earned in a project based on time and money invested at each phase, and the inability to forecast future performance.
How EVM Provides More Data-Driven Insights
The essence of EVM is that it provides quantitative data about projects that helps program managers make decisions.
As Greg Cimmarrusti, PMP notes, EVM systematically integrates measurement of cost, schedule and scope into a single system to help determine benchmark achievements, provide an early warning for performance troubles and forecast future performance.
Consultant James L. Haner says that EVM is useful in answering a different set of questions:
- How are we doing in terms of cost and schedule? Are we ahead or behind?
- How efficient are we being with time and resources?
- What is the forecast for the rest of the project in cost and schedule adherence?
EVM plays a key role in maintaining accountability and visibility across a project. This approach to project management uses various formulas to give additional insights than traditional PPM, allowing program managers to make more informed decisions and adjustments as needed based on real-time data.
Comparing the Two Methodologies
The foundation of both PPM and EVM is to provide data about the status of a project and make any necessary changes based on that data. Both provide insight into a project’s adherence to budget, schedule and scope at different points along the way of the project’s progression.
Traditional PPM answers questions such as how much time and money a job will require and, once started, how much money was spent at any time or in any phase of the project. But EVM goes further. EVM also addresses what work has been completed for the funds used, what it will take to complete the job and how long it will take to complete.
Integrate PPM and EVM for Better Project Control
One of the most pressing issues facing program managers is acquiring accurate data in a timely manner to make project decisions, explains Joe Kerins, our chief defense industry client strategist at Artemis. He notes that program managers need to understand cost, schedule, future work and future performance so that they can be proactive in making changes to help support meeting budget and schedule.
The key to making those proactive decisions is the data. PPM and EVM provide different data points, but each is essential to program managers in their decision-making process. By integrating PPM and EVM, program managers can gather the necessary data to understand project constraints based on past, present and predicted performance.
To assist program managers with these decisions, it is important that they have the proper software that allows them to evaluate PPM and EVM data from a single database that combines both cost and schedule information. Kerins stresses the importance of a tool that can provide data in near real time so program managers can react and make instantaneous decisions.
With the instantaneous, insightful data provided by EVM, comes the opportunity to control more variables in a project. Earned value management provides advantages that traditional PPM cannot.
1. It Gives Stakeholder an Easy Visualization of a Project’s Status
EVM gives stakeholders better visibility into the progress of a project. This creates the kind of transparency that gives stakeholders confidence in a project.
Case in point: Dayton, Ohio, engineering firm AMG uses earned value management to track its projects. The company’s EVM calculations produce two indices that customers and any other stakeholders can use to see how a project is coming along.
“There is no task more paramount for our project managers than to effectively communicate with our customers and give them objective measures of status against the cost and schedule goals of the project,” the team says. Earned value management provides for that higher level of visibility and reporting that keeps AMG’s customers involved in a project’s progress.
2. It Controls for Scope Creep
EVM also helps program managers get scope creep under control. As Bernie Roseke — a bridge engineer, project manager and president of Roseke Engineering in Canada — explains, EVM has two formulas for measuring scope creep: cost variance (CV) and schedule variance (SV).
CV is the monetary value that represents how far under or over budget the project is, and SV is the monetary value that represents how far ahead or behind in schedule the project is. CV and SV are excellent tools for providing early warnings when time or budgetary issues arise.
3. It Makes Risk Easier to Calculate
Finally, EVM’s formulaic nature is excellent for helping program managers manage risk. As risk management experts Val Jonas and Lauren Bone argue, EVM helps identify where to expect variance and therefore risk. Program managers can use variance data to proactively plan for any risks and take steps to preempt or mitigate those risks.
Kathleen Hass points out that the focus of program management has become all about the value of the programs. They are measured in terms of value to the customers and the bottom line. And the best way to provide that value is through EVM, which is why more program managers are incorporating this approach to manage their projects.