The Money Files

by
A blog that looks at all aspects of project and program finances from budgets and accounting to getting a pay rise and managing contracts.

About this Blog

RSS

Recent Posts

How To Deliver When Your Project Budget is Cut

5 Differences Between Project Accounting & Financial Accounting

How To Manage A Project Audit

Ask The Expert: Entrepreneurship at Work with Chris Cook

Book Review: Writing Proposals: A Handbook of What Makes Your Project Right for Funding

Moving to EVM: Getting Buy In

Categories: earned value

So you want to move to using earned value. As a way of communicating project status, the charts are visual, the picture becomes clear and it’s a great way of explaining progress. Once you understand what you are looking at then you can get a great deal of information from a single report.

However, you’re probably a bit daunted by the move because EVM has a reputation as being difficult to understand. You might have learned the theory as part of your PMP® exam preparation but you might not have looked at those formulae since.

If you’re convinced that EVM is the right move for you and your team, it’s the same as implementing any new way of working: get the buy in, define what you want to do, plan it, implement it, review.

Let’s focus on that first point, getting buy in, for a moment.

If your team aren’t behind you, actively supporting you, not just passively nodding in a meeting while at the same time dreading having to do it in real life, then you’re going to find it a lot harder to switch to a culture of using earned value.

This isn’t news: it’s simply change management. One of the biggest issues I think we as project managers have is doing change to ourselves. If we think of these initiatives as a project, with all the associated project management disciplines including change management, then we’re going to have much better success rates.

Getting buy in from the team

So how do you get buy in from the people doing the job?

First, identify who is going to be involved in using EVM or interpreting the results. These are your stakeholders.

Then start your programme of communication and change management. For example, identify their concerns. If it was me, I’d be worried about the maths and what I’d actually have to be doing each time I put together a report. I’d want clear guidance on what was required.

I’d also be worried about the accuracy of the reports, knowing that my current project’s scope and schedule aren’t yet solid enough to do any meaningful reporting from. How is that going to work? At what point in a project is EV going to kick in? And what if I never get my schedule baselined? (Because, you know, it’s one of those projects. Don’t judge, OK?)

Identifying and addressing concerns goes a huge way towards gaining the support of the team. If they feel like they can manage the change (whatever it is) and have confidence that it won’t be as awful as they are possibly expecting, then they’re going to feel better about the process of getting there.

A big chunk of change management is communication, and you can keep the team on side far more solidly if you keep them abreast of what’s happening. It’s not good to dangle the carrot of EVM and then provide no updates for three months. That just breeds uncertainly because when people don’t know the truth they have a habit of making stuff up to fill the gap. Not maliciously, but something heard on the grapevine becomes a “fact” once it’s been through half a dozen people at the water cooler. So keep the communication channels open. My book, Communicating Change, has a number of ways to do that if you need some suggestions.

Getting buy in from above

Everyone has different preferences when it comes to taking in information. In our office, a couple of teams have their personal preferences displayed on their desks following a team building event, so you know when approaching them to lead with facts, emotion, detail or something else.

As a result of personal preferences, the way you gain buy in from senior managers is going to be different depending on the person. The exec who likes facts is going to want to know that it’s going to deliver standardised project reporting, improve forecasting by X% and give us the data to better control project performance. (Or whatever, you get my drift.)

The exec who prefers to understand the human impact might be influenced by the story of a single project which, using EV, turned in better results because the project manager could more easily control the work and people on the team had better visibility of progress against cost.

Unfortunately that means that there isn’t a magic formula that I can give you for gaining buy in at senior levels, but in my experience all execs do have one thing in common: they like solutions that save time, save money and increase profitability. Standardisation and repeatability are also good selling points. In other words, initiatives that improve project management maturity aren’t particularly important, unless you dress them in the language that business leaders want to hear.

Then you have a powerful story.

What has been your experience of implementing EVM? Did you struggle to get buy in from people? I’d love to hear how it worked out for you.

Posted on: August 03, 2017 08:12 PM | Permalink | Comments (7)

5 Common Approaches for Performance Measurement

How do you track the performance of your project? Here are 5 ways that you can do it.

1. Fixed Formula

This is pretty easy. Assign a fixed percentage when the work starts. Then make it up to 100% by allocating the rest when the task finishes.

The Pareto principle is a good one to use if you don’t know how to split your task percentages. Assign 20% complete to the job when it starts, and the remaining 80% when your team member reports the work complete (because at that point it’s 100% complete).

It’s simple to work out but it’s not terribly accurate. It’s only good for small pieces of work and short tasks where it would be too difficult or not worth it to work out percent complete across a couple of days. It can also be used where the task is no longer than a week long. If you are updating your project plan once a week, and the task is no longer than a week long, the task is either started or finished so the 20/80 split (or 50/50 or whatever you think is appropriate) works out pretty well.

2. Weighted Milestones

When you’ve got plenty of milestones along the way, you can work out project performance by tracking how many you’ve hit.

In other words, you can pre-assign progress (percent complete) to certain milestones or parts of tasks. When you hit Milestone 1 you can say the project is 15% complete, at Milestone 2 it goes up to 20%, at Milestone 3 you’re 65% complete and so on. Until your final milestone at project completion where your project (or task) gets updated to be 100% complete.

This is also a way to split payments to vendors – many contracts have a schedule of payments linked to the achievement of key milestones. Your budget could be weighted in the same way as how you track performance.

3. Percentage Complete

We’ve talked about % complete already, but this version of it is just based on the project manager’s guess best professional judgement. They update the schedule or tracker weekly (or whenever it’s appropriate) with their take on project performance by assigning a percent complete.

This isn’t hugely accurate either – although it depends on the project manager. It takes experience to be able to pick a percentage out of the air and have it reflect reality. Generally, project management tools can help with this by playing back to you the % complete of your project schedule, so at least in that case you should have something underpinning the number you give.

4. Percentage Complete with Gates

This is similar to weighted milestones but instead of waiting to hit the ‘gate’ point, you can report any percentage complete up to the approved limit for that milestone.

For example, when you hit Milestone 1 you can say the project is 15% complete, as we saw above. With weighted milestones, until that point the project would be 0% complete. With gates, you can set a % complete every day if you like, working up to 15% at the point of hitting the gate (the target milestone date or achievement).

It’s like a blend of using your professional judgement but being constrained to not say you are too far ahead because you can only ever hit a certain percent complete through the nature of where you are on the project.

It sounds complicated to explain but this is my favourite approach for measuring project performance.

5. Level of Effort

Finally, you can track effort against the elapsed time. Alternatively, you can track against some other task or work package on the plan. For example, ‘Complete Testing Documentation’ might be linked to ‘Complete Testing’ and the two activities progress in parallel.

You’d track performance for ‘Complete Testing’ and then, as you know that testing documents are being updated as you go, apply the same % complete to ‘Complete Testing Documentation.’

Which one(s) of these do you use? And which do you avoid? Do you use these as standalone techniques or do they link to your Earned Value Management activities? Let us know in the comments below!

Posted on: April 23, 2017 11:59 PM | Permalink | Comments (5)

The Questions Your Sponsor Should Be Asking About Earned Value

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.

  1. Is the analysis based on the completion of individual deliverables/products or on the estimated proportion completed? If the latter, how is this estimated?
  2. 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!]
  3. How often are you reforecasting?
  4. Do reforecasts take into account the actual productivity levels on the project? [I would add: and how are you measuring productivity?]
  5. Have any estimates to complete been reduced to mitigate overspend elsewhere?
  6. What is the cause of overspend?
  7. What is the cause of underspend?
  8. Why has more (or less) value been earned than predicted?
  9. 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?

Posted on: November 27, 2016 11:59 PM | Permalink | Comments (3)

4 Key Terms for Earned Value

Categories: earned value

Whole books have been written about Earned Value, so I won’t be able to go into much detail here. However, it’s worth having a little refresher on the key terminology, and if you haven’t come across Earned Value before, hopefully this is a gentle introduction to some of the language you’ll hear often.

To recap, Earned Value is a way of assessing project progress and lets you compare performance across projects. It can help spot trends in performance. It combines scope, schedule and cost and looks at project progress holistically with all of those elements included.

Earned Value

Earned Value (EV) is the value of the work performed. It’s the word ‘value’ here that caught me out for a long time. However, once you understand the terminology, the rest of EV becomes much easier. Project Management for Dummies (yes, that’s on my shelf and I refer to it often!) defines EV like this:

The earned value of a piece of work is defined to be equal to the amount you planned to spend to perform it.

In other words, it’s the original budget for a task. I think the terminology avoids using the word ‘budget’ because this means something very specific in EV and ‘the amount you planned to spend’ could also include resource time that is not costed in the same way as buying a cement mixer or other resource.

Planned Value

Planned Value (PV) is the amount of budget that you’ve planned to use up at a particular point in the project.

The Dictionary of Project Management Terms (another of my go to reference books) explains it like this:

Sum of approved cost estimates (including any overhead allocation) for activities or portions of activities scheduled to be performed during a given period. Also called: budgeted cost of work scheduled.

Ah, ‘budgeted cost of work scheduled’. That makes a lot more sense, doesn’t it?

Actual Cost

Actual Cost (AC) is one of the easiest to get your head around: it’s the actual cost, expressed in terms of money, for the project to the specified date.

You might also see Actual Cost of Work Performed (ACWP) which relates to the total cost for doing a task or set of tasks during the time period you’re referring to. It includes direct and indirect costs, so it should be a complete and comprehensive cost for the activities.

Budget at Completion

Budget at Completion (BAC) is also quite straightforward to understand. It’s the amount you are forecasting to spend for the project at the point that the project will be finished: in other words, the total planned expenditure.

Think of it as what has been approved: it’s what your project sponsor says you can spend to get you to the end of the project, hopefully based on your realistic and practical estimates.

With these bits of information, and a few others, you will be set to start crunching the numbers and running the formulas to start producing your Earned Value information.

Posted on: January 25, 2016 11:59 PM | Permalink | Comments (12)

What is EVM? (video)

Categories: earned value, video

Posted on: May 27, 2014 09:52 AM | Permalink | Comments (0)
ADVERTISEMENTS

"If you can't convince them, confuse them."

- Harry S. Truman

ADVERTISEMENT

Sponsors