Analysing Project Performance in Earned Value Management

 

I get it – if you don’t use earned value on your projects, you might be wondering what you can takeaway from The Practice Standard for Earned Value.

That was my view too, having never worked on a project where earned value was a necessary part of how we measured performance. However, there are lots of project tracking and performance management tips you can pick up from the standard. As with all things project management, tailoring is the answer. You can choose to apply some of the tools and techniques from the EV canon and ignore the ones that don’t work for you (like last month’s dive into creating the performance measurement baseline, which I can’t imagine doing unless the project/client demanded it).

The process we are looking at today is Analyse Project Performance. Unsurprisingly, as you can tell from the name, it’s the process of comparing what we said we would do to what has actually happened, with a view to understanding the current status and taking corrective action where appropriate.

You’ll need to do this regardless of whether you use EV on your project or not – admittedly, you won’t have a performance management baseline to use if you aren’t in an EV environment, but part of project management for any type and size of project is doing that comparison and making adjustments accordingly.

We do that so we can capitalise on opportunities, mitigate against variances, take action and keep the project on track, as well as predict where we are going to end up if things continue as they are.

Top tip: These analyses are best done by EVM software. These days, when tools are so advanced and the state of project management tech is so good, there’s no need to work out variances by hand. Reduce the likelihood of human error and draw on your IT systems to do all this analysis for you.

Inputs

There are just two inputs to this process:

The project management plan – in particular, the performance measurement baseline that was put together in the previous step. There will be other bits of the plan that are useful as well, like variance thresholds if they are documented (they should be)

Work performance information – because you use this to compare to the plan and see if you are where you thought you would be.

Work performance information in this process is more than simply asking people what they’ve done or taking a look at timesheets. This is where the maths part of EV kicks in: you’re looking at planned value, earned value, actual cost and budget at completion, those staple calculations of an EV management system.

I could write whole articles about those formula, so I won’t go into detail about those. For now, know that you’ll need to get project performance data from your software tools and know how to interpret the formula.

What to do

So what does it look like to work through this process and analyse project performance?

We can break it down a bit.

What you’re doing is looking at the variances and performance indices. Look at schedule and cost variance, and work out the schedule performance index, cost performance index and the to complete performance index.

When I say ‘work out’, I mean (hopefully) press a button in your software and get a report that does the maths for you, presenting you with an easy-to-read dashboard or data sheet that gives you the information. You can work it all out by hand, and it’s really helpful to know how to work out the formulas and what they are for, but over in the real world, let’s rely on software tools to speed things up.

The indices will tell you if you are ahead or behind schedule and budget.

That’s good to know, but alone, it’s not really very helpful. We also need to do some forecasting.

What that means is we use the EV data to forecast performance forward, giving us information about what things will look like when the project is complete. Again, that’s useful data to help stakeholders understand how the project is going and what actions might be necessary to address any variances.

Estimate to complete, estimate at completion, variance at completion and the to complete index are the useful formula here.

Finally, you can look at percentage comparisons and trend analysis to help you work out what might happen in the future given past performance. It’s all useful data, but the key thing that jumps out at me is that there is no narrative; no context. You’ll need to add the story to help people understand the ‘why’.

Outputs

The outputs from this process are:

Performance measurement methods

Funding forecasts and trends

Correct and preventive actions – what to do once you’ve deciphered the information and worked out what that means for you.

Typically, you’ll be looking at graphs and tables, and a lot of numbers. What’s really important is that whoever is looking at the numbers understands what they are looking at, what they represent and what they mean for the project. That might mean doing some team training about EV so that everyone starts from the same common language.

There is a ton of detail in The Practice Standard along with a worked example, so if some of these terms don’t mean much to you, or you want to see some ‘real’ graphs that explain what all this is about, I highly recommend checking out the standard for a more in-depth explanation of this process, because most of what we typically think of as EV is this step.

This is the time in the process where you compare planned performance (the performance measurement baseline) to current performance. Some variance is to be expected because life happens and changes are part of managing the work. However, the management skill is in balancing the work to address any variances and bring the project back within metrics to show it is in control.

Next time, I’ll be diving into the next process in the earned value management standard, which is maintaining the performance measurement baseline.

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