Categories: earned value
In his book, Business Leadership for IT Projects, Gary Lloyd goes into Earned Value in some depth – enough for business leaders to understand what it is and how it can be used to provide a reality check on project performance.
He warns against ‘earned value complacency’, which is where the exercise of pulling together the EV statistics and producing the graph lull you into the sense of security that you know all you need to know about the project’s performance and expenditure.
If you’ve used EV, you’ll know that the numbers only tell part of the story, so Lloyd recommends that you use it as a tool to enable further discussion about performance. So much of what EV tells you is down to how it is applied. If you’re a supplier organisation using EV on your client projects, you could be using it in a different way to how the sponsor is used to seeing it.
Not radically different, of course – the formulae are the formulae – but just different in terms of base assumptions or presentation. Even small changes in how the data is calculated or what’s included might change how someone interprets performance.
Lloyd recommends that these are the questions that project leaders should be asking of the people putting together their EV charts for projects, whether they are internal or external. As a supplier project manager, a canny customer could end up putting you on the spot if you don’t understand the exact calculations behind the data. Even if it is produced by your company’s Project Management Office, you still need enough of an understanding to be able to answer questions from your client with credibility and accuracy. It’s reasonable of them to be asking you and a good client should want to challenge and understand the numbers. Besides, that process of challenge is good for everyone so don’t take it as a personal affront. Leaders don’t take numbers at face value; it’s not what makes them good leaders.
9 Questions Project Leaders Should Ask About Earned Value
As a project sponsor, if you’re going to choose something in the EV reports to dig into, try to pick something that you have a reasonably good understanding of where the data points are significantly large so as to help the calculations be transparent. Trying to work out whether a particular task is half a day ahead of schedule or not isn’t going to help you understand the model.
Here are the questions to help you delve into what is really going on.
- Is the analysis based on the completion of individual deliverables/products or on the estimated proportion completed? If the latter, how is this estimated?
- Do your calculations include a true estimate to complete the deliverables and products, not simply the actual cost incurred to date taken off the original estimate? [Hmm, I’ve been guilty of this!]
- How often are you reforecasting?
- Do reforecasts take into account the actual productivity levels on the project? [I would add: and how are you measuring productivity?]
- Have any estimates to complete been reduced to mitigate overspend elsewhere?
- What is the cause of overspend?
- What is the cause of underspend?
- Why has more (or less) value been earned than predicted?
- How is contingency for unplanned work and any change budget shown in these numbers?
Could you answer these questions about your EV reports? If not, who are you going to get to explain them to you so that you can adequately explain them to someone else?
