Project Management

Might earned VALUE be an oxymoron for projects following a predictive life cycle?

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(As is often the case, one of the learners in a course I taught this week provided the inspiration for this article, so thanks Maca!).

The PMBOK® Guide, Sixth Edition defines Earned Value as "The measure of work performed expressed in terms of the budget authorized for that work." Notice that the word "value" does not show up anywhere in that definition.

On projects which are following an agile or adaptive life cycle, the expectation is that work items such as requirements or features will be completed end-to-end. This includes meeting the quality requirements of all key stakeholders so that we can be confident that we can ship the work items to a client. If a framework such as Scrum is followed, these work items are batched into Potentially Shippable Product Increments whereas on those projects which are following a continuous flow based delivery approach, we can hand them over as we go.

On these projects, while final business benefits might not have been realized yet by our customers as those will normally lag delivery by days or even months, we might claim that what we've earned is valuable.

However, when we consider projects which are following a waterfall or predictive life cycle, because of the batch, phased manner of those approaches, the time for the first customer handover of capabilities and the time between subsequent handovers is usually prolonged. As such, until we have delivered a project output which will directly enable our customers to realize business benefits from it, have we actually earned any value?

Writing a Business Requirements Document or creating a design might be necessary by-products of the delivery process but if a project is terminated with just those having been produced, its unlikely that a customer would consider they had received anything of real value.

Please don't misunderstand my point.

I believe that Earned Value Management is a valuable, objective tool for both determining a project's performance and for forecasting where we will end up when it is used appropriately. Appropriate usage includes such elements as using an objective, verifiable method for determining how much progress has been made for each work package and that prerequisites such as work package-level budgeting and financial actuals reporting are easily available.

I'm just questioning why we would use the word "value" when referring to what we have earned in the name. Perhaps, for waterfall projects, we should rename the measure to "Earned Delivery Value".

Posted on: December 15, 2019 06:59 AM | Permalink

Comments (10)

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Dear Kiron
Interesting your reflection
Thanks for sharing

For projects where the approach used is predictive, what is of customer value is delivered at the end of the project.

What is the purpose when using earned value management?

Thanks Luis -

The purpose of EVM is to provide a holistic understanding of project progress combining scope, schedule & cost. It can also be used (depending on the project context) to support forecasting.

As I mentioned in my article, I don't have concerns with the benefits which EVM can bring - my concern is about calling it "earned value" when our customers have received no "real" value.

Dear Kiron
Thanks for your comment

In this article you highlight the "benefits which EVM can bring"

What is measured is the product of an amount of work done at a given time at a given cost (value).
It is then compared to the budgeted cost and time used

I believe this concept and calculations for its determination were not created by PMI (Correct me if I am wrong)

You are correct, Luis, that EV is a measure of the amount of work done in terms of financial measures, but it is not value. Just because I've created some documents or dug some holes or acquired some equipment does not mean I have delivered value to my customer.

And yes, PMI did not invent the idea. I believe it originated within the US Department of Defense in the early 1960's.

Interesting question Kiron. Agreed that the terminology is bit confusing and may not be clearly understand for all kinds of projects. I would say better name will be "Estimated Delivery Value" since we may not able to verify the "value" or not? Thank you for your question.

Dear Kiron,

In practice could be, because we know for a fact that EVM is useful in project management to measure the progress of the overall project performance in terms of schedule and budget, if in each milestone something tangible is deliverable to the customer in this particular case it is easier to the customer verify the value produced by the project and already delivered. When it's not the case we must be prepared to find alternative ways to explain to the customer what value already was produced by the project.
Nevertheless as tool of work of project managers EVM will be always useful to track the progress performance of the project.

Absolutely, Alexandre - I am not refuting the value to us of EVM but rather the difficulty in convincing customers that anything other than outputs which help them achieve business outcomes are "valuable".

Thank you for sharing your point of view regarding the value earned.

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