Making Earned Value More Valuable

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The most powerful — and most commonly misunderstood — measurement of project progress is earned value metrics, the way of measuring actual versus planned progress.

"Earned value" is so attractive because the term conjures positive visions, emotions and expectations on what earned value metrics will do. But in reality, if a project manager does not measure and then present the metrics properly to project sponsors, the numbers can produce unpleasant mood swings, premature celebrations and raging arguments.

I have found that project managers who successfully track project progress with earned value metric share a common practice: They allocate the same effort to the meaningful presentation of earned value and its implementation. Consider these basic tips for making earned value actually mean something: 

1. Qualify activities that earn value. One of the quickest roads to failure is to include all project activities in determining earned value. This can set up the false indication of true progress by incorporating administrative tasks like the kick-off meetings, project status meetings and other activities that are not central to actual progress. To avoid misleadingly optimistic earned value, include only core items when determining earned value — for example, high- effort and -risk activities, and external dependency milestones.  
 
2. Set standard earned value ranges. Another common trap in calculating earned value is allowing optimistic or downright untrue declarations of progress. You've all probably heard, "We are 99 percent complete, and all we have left to do is..." time and time again. 

To avoid this trap, set up conservative ranges of progress completion. For example, you may set a conservative percentage-complete tier of 75 percent if a deliverable is completed, and designate the remaining 25 percent to the approval process by the project sponsor.

3. Clearly communicate earned value to project sponsors. Speaking of project sponsors, one of my all-time favorite earned value moments occurred recently during the first progress status meeting. After several weeks of high expectations around earned value, the project manager stood up and said, "Our SPI is .92." Needless to say, this abbreviated report of the schedule performance index caused a long silence, puzzled looks and furrowed brows among project sponsors. Avoid such tense moments by communicating to project sponsors, in terms they understand, what earned value can and cannot do. Add relevance and context by combining earned value with other project readout content, and tailor your communications to sponsors through visualization techniques. For example, present a graph showing the schedule of planned value against the actual earned value of these deliverables for the project. 

Earned value can be one of the most powerful and revealing indications of true project progress — as long as it is properly determined and presented.

How do you measure earned value? What are your tips in presenting earned value to project sponsors?
Posted by Kevin Korterud on: May 15, 2013 02:39 PM | Permalink

Comments

Luis Berrios
Hi Kevin,' Great insights on determining Earn Value. More and more our PMO is being challenged with earn value as we move forward in the IT Shared Services Model. In many cases, the expectation is that we provide information on progress down to the $00.00001, which can be overwhelming. Thanks, Luis Berrios - PMP Alpharetta, GA

Kevin Korterud
Hi Luis...great point. I see that a lot these days as people think that increased reporting precision = increased project precision. While its great to have that Siz Sigma mindset I think it sometimes constrains projects from being successful.... This topic might just be a good idea for my next blog... :0 Nice to hear from someone near my old hometown of Peachtree Corners...

Abdulilah Angaa
Hi It is maybe deterrent from organisation to other, but, I think for construction field the best way for PM to use with the EV measurements and calculation is to use man/hr based EV stuff. Thank you for the nice article

Kevin Korterud
Hi Angaa...would most certainly agree that the construction field is very robust in their approach to EV; likley that is a function of the number of providers, cost differentials between components, etc that compels one to really leverage EV as a progress tracking method. In my IT field its been a bit of challenge to leverage EV...but with the increasing complexity of delivery projects Im starting to see it employed more often...not unlike the construction field...

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