How many projects have you seen delivered on time, on a budget?
70% of projects fail due to a lack of proper people, processes and tools.
Let’s see how Earned Value Management (EVM) can help to deliver projects in time, and on budget.
Simply stated, Earned Value Management (EVM) processes, systems and software enable the continuous assessment of project performance and status — helping management effectively measure how projects are aligned with resources and goals.
- EVM helps project managers to measure project performance.
- It is a systematic project management process.
- Its main use is to find variances in projects based on the comparison of work performed and work planned.
- EVM is used for cost and schedule control and can be very useful in project forecasting.
- It is focused on cost and schedule efficiencies.
EVM is an excellent tool, but if it isn’t utilised, or is used irregularly, then it does not benefit the project. As the leader of the project, it is imperative that the Project Manager understands how the data is calculated, where the numbers come from, and what events lead to the current state of the project. That way, the information can be interpreted correctly, and actions can be taken to ensure project success.
Just using Earned Value to manage your project doesn’t automatically guarantee success. In fact, using it incorrectly can even be more harm than good if it is not fully understood well.
We are going to talk about the proper implementation of Earned value management as a tool for project success to ensure the project delivery on time, and on budget with simple ten steps as below.
Step 1 – The inputs:
Definitions and details. The first, and perhaps most important, criterion for successful EVM practices is clearly defining the project scope, including objectives and deliverables. If managers do not clearly define what constitutes 100% of the project, how can they accurately represent status down the road?
Step 2 – Resources:
Who’s doing what next? The EVM policy team should define who will perform the work, and identify any necessary resources from internal and outside the team. Understanding and carefully selecting internal and external resources mix is an essential element of project planning. Remember it is not the number of people but the right people at right time.
Step 3 – Plan and schedule:
Keys to execution. A project plan (what and how) backed up by a good schedule (who and when) system with integrated budgets and resources, EVM requires the creation of project schedules that describe the sequence of work and identify significant task interdependencies. A detailed project plan that accurately describes the project scope and planned value — then measures the resulting earned value — allows project managers to quickly identify project variances and take corrective action early on.
Step 4 – Budgeting:
Use rates you know. After clearly defining the project scope and schedule, project team must estimate the budgets for all tasks and resources. Project managers need to keep track of the various resources and their respective rate structures, then map them to defined cost-accounting processes. Managers should apply rates discretely — especially over long programs — to project both current and future costs, that means rates for budget, actual and forecast.
Step 5 – The starting gate:
Rely on a baseline project. Managers must define the time-phased budget baseline for total scope against which they will measure project progress, including both direct and indirect costs for each subproject. Stakeholders must agree on the starting point and midstream metrics, as well as ensure that outcomes and agreements are well-documented and communicated.
Step 6 – Evaluation:
Your definition of progress. Typically, organisations specify what physical products, outputs, metrics, milestones, and technical performance indicators they will use to measure the actual work accomplished against the scheduled plan. Whatever the metric is, the key to project success is the communication of, and agreement on, these objectives across the project team. Agree and communicate Rule of Credit (RoC).
Step 7 – Cost control:
Align actual costs to the project budget. Throughout a project, managers must remain informed about money spent to date and have a true understanding of remaining resources. The best way to keep costs in check is to establish a formal system that is controlled by a cost controller, where all direct costs are attributed to the specific project requiring the resource. All indirect costs are also captured accurately.
Step 8 – Monitor:
Monitor, monitor, monitor. Once a program is underway and baselines have been established, it is imperative to continuously monitor performance to determine any cost and schedule departures from the baseline plan.
Step 9 – Forecast:
Avoid surprises. EVM provides the ability to quickly and independently forecast the total funds required to complete a project. At several points along a project’s timeline, project managers should use the earned value data to forecast the final required costs and keep management apprised of the status.
Step 10 – Change:
You can count on it. Change is the only constant in life — and in projects. By defining change management processes upfront in EVM policies, management and project teams alike are better prepared to deal with the inevitable. Additionally, it is imperative to adjust project baselines when changes occur.
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