Earned Value Management (EVM) Primer

As mentioned in the previous post, I will give you just a “Readers Digest” version of Earned Value Management (EVM).  Earned Value Management is a series of metrics that can be applied against a project schedule to determine the overall project “health”.    There have been studies done by the U.S. Government Accountability Office (GAO) that state that if EVM is applied to a project , at the 16 – 18% mark of project completion, it can be forecasted if the project will come in on time and on budget.

 

In this Primer, I will focus on just two of the standard metrics of EVM: the Schedule Performance Index (SPI) and the Cost Performance Index (CPI).  There are other forecasting metrics that I will cover in a future blog entry.

 

What is Earned Value Management?  Earned Value Management (EVM) is a project management technique for measuring the project progress.   EVM combines the measurements of scope, schedule, and cost in a single integrated system.  EVM can provide an early warning of performance problems within the project.   EVM promises to improve the definition of project scope, prevent scope creep, communicate objective progress to stakeholders, and keep the project team focused on achieving progress.

 

What are the basic features of an EVM implementation?

  • Project Plan that identifies work to be accomplished
  • Valuation of planned work, called Planned Value (PV) or Budgeted Costs of Work Scheduled (BCWS)
  • Pre-defined “earning rules” to quantify the accomplishment of work, called Earned Value (EV) or Budgeted Costs of Worked Performed (BCWP)
  • Actual Costs (AC), also known as the Actual Cost of Worked Performed (ACWP), is used to record the actual worked performed to date

 

A project well suited to EVM has some or all of the following attributes:

  • A clearly defined objective
  • Work taking place over an extended period of time
  • A high labor content
  • Easily attained cost forecasts
  • A formalized management structure
  • Cost and time limitations
  • A timely and proper accrual accounting system

 

Basic Earned Value Formulas:

  • Components
    • Planned Value (PV) : The summation of planned expenditure over time 
    • Earned Value (EV): The actual percentage completed of planned expenditure over time
    • Actual Costs (AC): The summation of actual costs expended over time 
    • Budget at Completion (BAC): The original project budget
  • Variances:
    • Schedule Variance (SV) = (EV) – (PV)
    • Cost Variance (CV) = (EV) – (AC)
    • Variance at Completion (VAC) = (BAC) – (EAC)
  • Indices:
    • Schedule Performance Index (SPI) = (EV)/(PV)
    • Cost Performance Index (CPI) = (EV)/(AC)
    • To Complete Performance Index (TCPI) = (BAC-EV)/(BAC-AC)
  • Forecasts:
    • Time Estimate at Completion (EACt) = (BAC/SPI)/BAC/months)
    • Estimate at Completion (EAC) = (BAC)/(CPI)
    • Estimate to Complete (ETC) = (BAC –EV)/(CPI)

 

We will focus on just 2 of the formulas SPI & CPI.  It is based on these 2 formulas and the understanding of each that helps us build the rest.  We will discuss the others in a future article.

 

Now for a quick example:

 

Here is an simple example of a 4 task project over a period of 7 months.  The illustration shows the budget allocated per task each month.


This illustration shows how the Planned Value (PV) is calculated at the beginning of the project.

Now let us take a look as of April 30th :

This illustration shows what the Project looks like as of April 30th.  For task #2 in the month of April, we did not fully finish what we had planned, but we did incur 8 units of costs against our budget.  There are different methods of applying the effort, for the purposes of calculating Earned Value (EV), of a started task but not completed task: Fixed Formula, Weighted Milestone, Percent Complete (Duration-based), and Apportioned Effort (Physical Percent Complete).  For this example, we will state that the task shows 0% unless 100% complete for the period.

 

Planned Value (PV) is calculated to be 60 at the end of April

Earned Value (EV) is calculated to be 44 at the end of April

Actual Value (AV) is calculated to be 52 at the end of April

 

So now let’s apply the formulas:

Schedule Performance Index (SPI) = EV/PV  44/60 = 73.3

Cost Performance Index (CPI) = EV/AV  44/52 = 84.6

So what does this mean?  According to our metrics we are approximately 26.7% behind schedule and from a Cost perspective, for every $1.00 that we spend, we are getting $0.85 worth of productivity.   My suggestion is to use Physical Percent Complete to determine the effort.  Remember, in our example we took an “All or Nothing” approach to determine where we stood on our task.  If we had finished 8 of the 16 units of work and we recorded an additional 8 units in April, then our SPI would reflect  52/60 or 86.7 and we are only 13.3% behind schedule and our CPI would reflect 52/52 or 1.00 and we are getting full value for the effort extended.

In my next series of installments, I will further discuss the advanced features of EVM as well as how to implement such metrics into your project scheduling.

For further reference, please look at the following: (1) Practice Standard for Earned Value Management by the Project Management Institute and (2) Earned Value Management by Quentin W. Fleming.  This and future articles were/will be heavily influenced by these two excellent publications.

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Baseline the Project Plan – The Start of Project Metrics

It has been quite a while since I added posts to this Project Management Blog.  I felt it was time share some additional experiences within the community.  After all, the key to life is giving back and I felt it is due time to do so.  

I remember the fear of baselining a project.  It seemed so mystical.  As if there was a lock of all data once you did so.  My perception was there had to be so many steps in order to do so . . . not so.  In MS Project it is just a couple of steps.  But the real power of the baseline comes into the picture when you start applying Earned Value metrics to your plan, which of course, requires a baseline.  More on Earned Value in my next blog entry.

But having a baselined schedule allows so many other views to your Project plan.  A baselined schedule shows when and what was originally planned compared to where you are now.  I can create reports that will show late starts, based on the baseline start date and current start date of a task ( I usually will have a visual flag in a column to represent late starts).   The same is true with late finishes.  No project or project schedule runs perfectly, so it gives you insight into what really is going on with the work.  Interruptions, delays, failure to deliver on time, trying to keep your vendors honest on delivery times, all of these can play havoc to a project.  Lessons learned after the project can help future projects in planning tasks and the effort and/or duration for these tasks.  

The “Key” to working with baselines is to not rebaseline everytime there is a slight change to the schedule.  There are some industries that do not allow changes to a baseline schedule unless the scope, time, or budget drastically changes, then a rebaseline may be in order.  My recommendation is to have a Change Control Board (CCB) that monitors change requests and that it is their decision to do a rebaseline and at that I suggest only rebaselining those tasks and sub-tasks that change, otherwise you will end up “forgiving” potentially bad project management and team members that did not deliver as promised.

The Baselined Schedule can be one of the best tools in a  project manager’s toolbox.  Don’t be afraid, embrace it.  

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Meeting Agendas – Perception of Professionalism

 I remember the first project that I managed.  It was an ERP project for a client and the existing project manager was leaving to take a position with another company.  At about 9:00 in the morning the PM said “Since I am leaving, why don’t you run the status meeting today?”  The meeting was for 10:00 and I said “sure, no problem”.  Well, the managing V.P. from my firm was in attendance that day.

 We had the usual 30 person status meeting.  I was a little nervous, but I felt the meeting went well.  After the meeting, the VP wanted to meet to go over how the meeting went and for me to get his feedback.  Well, it was a meeting I would not soon forget.  He read me the riot act!  He let me know, in no uncertain terms, that I NEVER conduct a meeting without a meeting agenda.  The perception was that I, and the firm, where unprepared.  He stated that there was not the FLOW of a properly prepared meeting.

 I learned my lesson that day, and he turned out to be one of my best mentors.  He was right, of course.  The next meeting, I had the Agenda prepped days in advance and ran it by him just to make sure that it was appropriate.

  • What is an agenda?
    • It is a list is a list of the individual items that need to be discussed to achieve the meeting’s broad aims
    • Agendas may be drawn up and circulated to all participants before the meeting, or they may be agreed at the actual meeting.

 

  • Why is an agenda important?
    • Helps you prepare
    • Communicates expectations for the meeting
    • Provides a mechanism for order and control
      • Limits the tasks and participants
    • Helps measure success/failure of a meeting
    • Describes your objective(s) for the meeting and creates an outline of the steps to get to the goal
      • Assigns time buckets and set time limits
      • Schedules items in order of importance

 Here is the Mind Map template that I use for any meeting:

 

My Meeting Agenda Template

My Meeting Agenda Template

 All this will fill out a standard  Meeting Agenda template:

 

Meeting Agenda

Meeting Agenda

I know this may seem simplistic, but this will make your meetings more efficient and will give the attendees a feeling of confidence in the meeting organizer.  As a PM, you represent not only yourself, but also the organization.  The perception of professionalism is built at the start and it is up to you to maintain it.

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Preparing Project Charters

I come from a consulting background where you were paid proportionately to the volume of paperwork that you produced.  Half joking aside, I have produced Project Charters that were well over 30 pages in length.  This begs the question, who truly reads them and what value does it bring to the project, team members, project sponsor and the steering committee? 

When I was the PMO Director of a Fortune 500 company, I created a template for Project Charters that would produce a 2 page document (3 pages if there were a lot of signatures).  The concept was that the document truly had to mean something to all of the people involved.  It had to lay bare the scope of the project . . .

So here is the process:

After assembling the team (and preferably the project sponsor) I would attach my computer to the projector so that all could see.  I would start up my Mind Mapping software (more on that later).   

It came down to a filling out a 6 step process template in order to create the Project Charter:

  

Project Charter Template

Project Charter Template

 

  • Step 1: Project Name
    • Process
    • Code Name
  • Step 2: Overall Understanding of the project

Instead of one overall Charter and individual Charters per phase, put all into one.

  • Define Phases
  • Define stages within Phases
  • Sub-projects
    • Define
    • Assign Leaders
    • May need separate Charter
    • Time Targets
    • Org Changes
    • Process Changes
    • Software tool
      • Define all Systems
      • Define all Vendors
    • Project Admin
    • Communication
      • Marketing of Project
    • Metrics
    • Rollout
      • By System
      • By Geography
  • Step 3: Objectives
    • Answer the WHY?
      • Understand Why the Company is doing the Project
    • Metrics
      • Measure

Measurability is a characteristic of the Objectives

  • Delta may need to be determined
  • Standardization
    • Ease of Use
    • Speed
    • Cost Reduction
      • Overhead reduction
    • Process
      • Refine answers
      • Increase productivity of operations
  • Step 4: Scope
    • Answer the WHAT?
      • Deliverables

Tie Scope to Deliverables

  • Step 5: Assumptions, Concerns and Constraints
    • Assumptions
    • Concerns
    • Constraints
  • Step 6: Stakeholders
    • Include people for political purposes
    • Program vs Project (or sub-project)
    • Customers
      • BU Manager
      • Division Presidents
    • Sponsors
      • Director
      • IT Working Council
    • Project Manager

Program Leaders

  • Could be Project Leader

May not do the Admin part

  • Project Analysts

To do the Admin part

  • Team Members
    • Own the task

 The process at first may seem hard to follow for some of the team members, but after a while, they get it and they are enthusiastic to participate.  The mind mapping software that I use is Mindjet Mindmanager www.mindjet.com .  I will provide future articles of my use of mind mapping in project management.

I take the results of what is created and produce a 2 – 3 page document.  We all agree to the Charter, because we all had a hand in its creation.  The process takes between 1 – 3 hours depending on the participative mood of the team and the level of depth of the project scope.  Then while everyone is in the room, I get all the team members signature as well as that of the project sponsor.

I would like to add the Mindmanager file *.mmap file but WordPress does not recognize this as a file for upload.  If anyone knows how I can do so, please comment on this site.   Thank you, Greg Cimmarrusti, PMP

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The 3PM Twibe

First of all if you are into Project, Program or Portfolio Management (3PM) and are on twitter, then you need to join the 3PM twibe:  http://www.twibes.com/3pm .  This particular site captures all of the members tweets that have #3PM, #Project, or #PM in the text.  This way you can view in a captured mode all of the tweets for later review.

 

The site is dedicated to Project Management, Program Management and Portfolio Management. It includes tweet entries that are new issues or products in the PM world. It is intended to be informative to all project managers.

 

Definitions:

  • What is a Twibe?  A Twibe is a group of Twitter users interested in a common topic who would like to be able to communicate with each other.  On each twibe’s page, there is a list of twibe members.  There is also a tweet stream that lists tweets from Twibe members which contain key word tags. Tags are set by the Twibe founder and are listed just above the tweet stream.  You can browse through Twibes that have already been created by going to www.twi.bes.com/twitter-groups
  •  How do I join a Twibe?  Anyone who subsequently tweets http://twibes.com/3PM will also join the twibe.  Be sure that the full URL is included in the tweet. Please note, some desktop applications through which Twitter users tweet may filter the URL, and thus cause an error. 
  •  How can I communicate with my twibe members?  In order for you to tweet directly to your fellow twibe members, they must choose to follow you. There will soon be the option to “Follow All” in a twibe or follow members individually.  Also, using one or more of the search tags in your tweets, will allow your tweets to show up in the tweet stream on your twibe page where they can be viewed by your twibe.

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PM Tools: Freeform Databases – OneNote versus Evernote

When I first started managing projects, I knew the importance of keeping all of my project information in an organized tool.  Particularly email, notes to myself, copies of memos, status reports, team info, etc.  I first started with a product called Infotree from Nextword http://www.nextword.com/Index.htm .  This allowed me to capture my emails (incoming and outgoing) by cut and pasting them into a tree-like hierarchy.  I did the same for nearly every document I created.  Worked well, outside of the manual cut and pasting.

 

Problem occurred when I was on a project that the client would only allow us to use their computers (due to security reasons).  Well I wasn’t going to install my program on their computer.  That is when I came across a program called Treepad http://www.treepad.com/ .  Same concept as Infotree, but the business edition allowed me to run it off of a thumb drive.  Problem solved.  Matter of fact, I had even upgraded to the Enterprise 12 GB version.  Knowing that my 8 GB stick could hold a lot of info, plus it allowed me to open 5 files at a time and search between them.  I created the following databases:

  • Client database with a tree structure for email (inbox and outbox), files, memos, status reports, issues and resolutions, risk, etc.
  • PM database with PM articles and PM templates that were instantly available to me.
  • Administrative database with info from the firm I worked at
  • Software database with particulars on the software we were implementing, usually large ERP projects.

 

Then I started playing with Microsoft OneNote (see http://www.iheartonenote.com/index.php ) the biggest OneNote fan site.  This is probably one of the most under rated products by Microsoft.  Just a fantastic program.  It allowed me to setup a Project notebook with individual folders relating to project specific needs.  But the biggest time saver was the OneNote icon in Internet Explorer and Outlook.  I could just click the icon and my email would be automatically saved, same with any page in Internet Explorer.  It also could capture audio and was easily used within the Microsoft office suite.

 

But once again, I could use it on my laptop, but not necessarily on the client’s computer.  Then I found Evernote http://evernote.com/ .  Evernote gave me the ease of copying info from Outlook, Internet Explorer, but also MS Word, it could find text in graphics and pictures.  But most important of all, it could run from my thumb drive, Internet Explorer, even an iPhone (if I had one).  When I posted the Question “OneNote versus Evernote” from a PM perspective, I received the following tweet from Stan Scott, Twitter: twitter.com/stannyc “Evernote lives everywhere (PC, Mac, Web, iPhone), not OneNote. I find ON’s hierarchy confusing. EN’s tags and notebooks work”.  From Dan Fernandez on Twitter: twitter.com/ag92 stated “At present I have only used Evernote for personal stuff. I really like OneNote’s canvas approach for content.”

 

Now the question is to you, what are your thoughts OneNote vs. Evernote for the Project Manager?  Or is it one of the other tools that I have mentioned, or something different altogether?  Now I am referring to tools for just you as the PM, not Sharepoint for the whole team.

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My PM “Piece de Resistance”

Have you ever thought back on your project management career and find that one project that just rings true?  That it was because of your efforts, ideas and fortitude that you were able to motivate the team and through a “Team Effort” bring the project to a successful completion.

Well, I looked back at a troubled project that I was brought in to rescue.  The client laughed when I asked if I could see the last 3 months of status reports, it had been months since one went out.  The project plan had not been updated in the same period of time.  I thought to myself that this is definitely a ship without a rudder.

It was time to go “Old School” on the team.  My favorite project management approach is to take brown butcher paper and tape it on a wall (or in this case I used several of the large flip chart pages taped together).  I brought the team in to the room and had them sit down.  I told them that this is a team building event.  It was up to us to bring this project in on time and together we were going to work out the details.

I told them that we were going brainstorm and come up with all the tasks that needed to be done and that I was going to write them down on multi-colored 3 inch post-it® and stick them on the wall.  A different color would represent the different process streams (e.g. light blue = functional, green = technical, purple = training, orange = communications, magenta = conversion, etc.)  Each post-it was then had a line 2/3rds the way down and then again 2/3 the way across that to form 3 sizes of boxes on each post-it®.  In the large box I would write down the task that needed to be completed.  In the second largest box I would write down the “responsible party” – this is the person reporting back to me on the status of the task and not necessarily the person or team doing the task).  In the small box I would ask for the duration of the task and not the effort.  Knowing that many of the people on the project had “other” work to do, I was more concerned with how many days a task would take to complete (e.g. an 8 hour task being done in 3 days due to other obligations).

After the team brainstormed all of the multicolored tasks, I put a yellow post-it® on a 90 degree angle on the left side of the assembled flip chart paper and wrote the word “Start” and another on the right side of the paper and wrote “Finish”.  I looked at all of the colored notes and asked the question “if we were to start today, what would be the very first thing we could do?”  After hearing a couple of the responses that represented different process streams, I took each of those notes and placed them to the right of the “Start”.  I then drew lines from the “Start” task to these tasks.  I asked “are there any other tasks that could be started.  And a few more suggestions went up.  I then repeatedly asked “what is next?”  I would put the task up on the sheet and draw the appropriate lines.  Of course, one task could have several lines drawn from it to represent the one-to-many relationships or the possibility of many task lines to one task (many-to-one).

At first I saw some confused faces, I could tell that they did not know exactly what we were doing, but before long, I had several people up and putting the tasks on the board and drawing lines to make the connections.  I had them write on the lines if the relationships between the tasks are F/S (Finish to Start), S/S (Start to Start), or F/F (Finish to Finish).  Before long we had our network diagram completed.

I then had everyone leave while I then put the network diagram that we just completed into MS Project to determine the critical path as well as the estimated completion date.  We then met the next day and I had the project plan up on the projector with the critical path highlighted.  I said this part will require some more attention to detail.  Our “plan” had us finishing in over 60 days and I told them our goal is to compress the plan to what is truly realizable.  We looked at the critical path at the largest duration task.  I asked if we could make this in 10 days versus 13 days.  The conversion team agreed to this.  Recomputed the plan and now we took a look at the next biggest duration task . . .and so on and so on.  We finally got the plan down to 45 days and we all agreed that this was realistic.  With big smiles, we had our plan and I managed to that plan.

 Everyone enjoyed the experience, they felt committed to the project, and we used that same process for the detailed cutover plan.  We put the cutover plan on the wall of the “War Room” and would put a “/” through the post-it® when we started the task and an “X” when we completed the task.  Everyone could visually see where we stood on the cutover process, what the next task to be done and if we were on schedule.  This type of planning works and I try to use it on all of my projects. 

I was proud of the project, the team, and myself to make it the success story that it was.

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