The Fog of Earned Value

Vincent is a Senior Project Management Consultant and e-Learning Developer.

Many project managers stop thinking about earned value the day after their PMP exam, but that’s unfortunate because it can be helpful in understanding progress and refining estimates. Here is a fog-free explanation of earned value that might help you apply the technique on your next project.

Six people for six months is something all project managers can understand, but $600K — which is the total cost at $100/hr — has no intuitive meaning. By converting time and resources to dollars, vital information is lost. That’s, in essence, why so many project managers view Earned Value as something that is required for the PMP exam but really only applicable to large government projects. The method uses obscure cost graphs, and just reading some well-intended explanations can cause a headache. Thus, because EV is not ever fully understood, it is left out of the toolbox that many PMs use.

This is unfortunate because EV is in fact very useful and easy to use. To see this, we’ll look at a more common sense approach to EV, which I believe is easier to understand than the dollars-and-cents approach typically used.

Let’s look at a simple example. Assume we have a project with eight tasks, where each task is planned to take one week and there is one resource assigned to do all of the tasks. As planned, it should take eight weeks. Now suppose, at the end of the second week, our …

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