Earned Value Management (EVM) is not enough

 

OK, I know this one is going to create a stir in the social atmosphere and that gives me a bit of a smirk on my face. Why? Because it’s time for project managers and PMO leaders to wake up and pay attention to what the business has to say.

What is EVM?

According to Wikipedia,

“Earned value management is a project management technique for measuring project performance and progress. It has the ability to combine measurements of the project management triangle:

* Scope

* Time

* Costs

In a single integrated system, Earned Value Management is able to provide accurate forecasts of project performance problems, which is an important contribution for project management.”

EVM is about measuring schedule and cost performance of a project. OK, that’s good, but it only measures the performance of the project, not the outcomes that the project was intended to create. That’s the problem. EVM alone cannot tell your business leaders if they are going to achieve high-impact business outcomes for the work that was done, only if that work will be done according to what you expect.

Now, before the methodology zealots start blasting me (which they tend to do before reading the whole article), let me clarify. EVM is a good tool. It’s a great resource for measuring project performance, and one that I encourage you to study and apply, but that’s not all we need to be measuring. We need to start measuring return on investment of our projects, and the likelihood of that return being achieved throughout the life-cycle of the project, if we want to actually prove our worth as project managers and PMO leaders. It’s about getting to strong outcomes, not just breaking even.

Let me put this into some real life scenarios …

Imagine we are talking about your retirement savings plan. You make investments and you expect those investments to grow through earnings so that the money you are putting away plus those earnings can help you afford to eventually retire.

OK, so let’s say you diligently put money into this plan through every paycheck and then your retirement plan manager comes to you and says, “Well, we spent all of your money and we need more money.” What? You spent all of my money? (At least that’s what I would be saying!) The manager keeps saying they will take care of your investments, you will get a big return in the future, and so you keep putting in more money. You can count on your fingers and toes the number of times you heard, “promise, this is the last time”.

That goes on and on over the years and you are now ready to retire (a.k.a. your project is now complete). It’s time to reap all of the rewards of your investments that were promised to you and it turns out there aren’t any. You can’t retire. The money was thrown into risky investments that were not well managed and you have no savings (a.k.a. the high risk project that completed without delivering any of the benefit outcomes expected {like a system that is built but no one ever uses it} – all loss, no gain). You’d be pretty upset, wouldn’t you? Ask the victims of the last financial crash how they felt when looking at their retirement plans, I’m sure they will tell you. It wasn’t pretty. That’s how your business leaders feel when they look at all of this money spent on poorly managed projects that never complete. Money down the drain.

What’s the EVM situation here? Well, that all depends. Did you put in the money you thought you would? If you put in a million dollars over your career and you expected to put in a million dollars over your career, then the project cost exactly what you said it would cost. Did you retire when you thought you would retire? Yep! Right on the planned retirement date. OK, so schedule performance is as expected and cost performance is as expected. The EVM numbers are all good and your retirement account is empty.

But, you are saying you would never have gone that long without checking on your investment to see how it is doing, right? You are also saying you would have pulled out long before retirement if it was doing nothing but losing money. Hmmm…OK, so that is exactly what your business leaders are doing when they ask you for status. They want to

know how their investment is being managed to get to the outcomes they want. Unfortunately, when they ask you for status, you answer them in EVM language – the money is being spent as expected, but what they really want to know is ROI projections – is the money I’m investing going to achieve the earnings we expect?

Let’s try another scenario…

Now what about the scenario of breaking even? What if you planned to put away one million dollars over the span of your career and your expected spend met your actual spend at retirement (a.k.a. your project completion date). According to EVM, you spent exactly what you expected to spend, you spent it in the time frame you expected to spend it, and the scope of your investments is exactly what you planned for. OK, EVM says we are rocking and rolling! Now, what happens if you spent years putting away a very well thought out and managed million dollars only to find out that you earned 0% on that money over the life of the investment? The money spent equals the money you earned. The money would have been better off in a basic checking account or money market earning 1% interest (the less risky project). Would that scenario be OK with you or would you be really upset with your retirement plan manager who promised great returns?

The “promise” of earnings was clear from the beginning and why you decided to invest your money in this way. Yet, here you are no better off than had you put the money under your mattress. The investment cost you exactly what you expected, and according to our EVM calculations, we are exactly on plan, yet the return on your investment was zero.

How about another scenario…

Now, what if you invest that retirement money and you see huge rewards? The earnings are phenomenal and you know you invested in the right places. That initial investment has grown well because you invested in the right funds, with the right manager watching over your investment, and you reaped huge benefits. You achieved a great return on your investment. Happy now, right?

Wouldn’t you want to do everything you could to ensure that all of your investments made repeated that same level of performance and focus? Would you want to ensure that your retirement plan manager was investing in the funds that were getting the

highest returns OR would you want him or her to just spread the love across all possible investment options and hope that there would be some return on some of them? Every investment fund should get a “fair chance” at your money, right? HAHA, no way, buddy! Not a chance. Put my money where the returns are the greatest – where we will have the greatest impact. Right? I’m pretty sure you would want them to focus their energy only on the ones that could give you the biggest bang for the buck. It’s the job of the investor to make sure that their money is being well spent on the investments that will yield the greatest return on the investment.

Enter your business leaders. That’s all they are trying to get you to help them do. Each project is an investment. An investment that we expect a return on. If that return is not there, then your company is better off putting the money under their mattress instead of doing all of that work.

Thanks for taking the time to read this article.

I welcome your feedback and insights. Please leave a comment below.

See you online!

Warmly,