The Basics of Earned Value Management

 

Managing projects, whether it's related to construction, energy, retail, manufacturing and information technology, can be a quite tedious process, especially when delays and cost overruns  are a common complaint among project managers and stakeholder. For example, constructing the International Space Station was initially pegged at $36.75 billion, although final project costs ballooned to a whopping $105 billion once it was completed! This explains why monitoring performance and timelines is crucial, because no project manager or stakeholder wants to disastrously stray off course. Here's a look at why a process called earned value management is a must for small, medium and large projects.

 

What EVM is All About

And, since no project manager, engineer, scheduler or even laborer wants to be at the helm of projects that disastrously stray off course and balloon to a budget that is way off the mark, this is when they turn to the project management discipline to find an intelligent way out. Here's where the concept earned value management (EVM) can be of great help.

 

For starters, EVM is defined as a project management methodology which helps integrate schedule, cost and scope to effectively measure project performance. It predicts the future and enables project managers to adjust accordingly, based on planned and actual values.

 

EVM systems also refer to software, processes, tools and templates that are utilized for earned value management. Oh by the way, let's look at the colorful history of EVM first. In the 1960s, a set of guidelines or criteria were drafted for the US government's contractor management systems to follow.

 

In the 1990s, an agency called the American National Standard Institute and the Electronics Industries Association developed the original 35 criteria for earned value management systems, which resulted in the ANSI/EIA 748 standard.

 

For systems and technologies used in government agencies like the Department of Defense and the National Aeronautics and Space Administration or NASA, the ANSI/EIA 748 standard is now considered the gold standard in project or contractor management systems.

 

What's nice is that (according to the ones who use the system) the ANSI/EIA 748 standard metrics  are actually so straightforward, and the EVM processes can be implemented or rolled out with as much or as little rigor and stress as your particular projects require.   

 

What Are the Perks of EVM?

Now, let's discuss the major benefits of earned value management. First, EVM is a very powerful tool that helps you map work with costs, and reduce the unknowns into more quantifiable factors. Second, you can also compare and benchmark the current status against the project baseline, and identify critical paths along the way.

 

Next, earned value management helps create a data-based framework for taking actions and making decisions for the future. It enables project managers and planners to intervene quickly and ahead of time.  

 

For instance, you can easily tweak the project scope and budget, or rollbacks a couple of functionalities, procure additional resources, set customer expectations and invest in new technologies.

 

Finally, earned value management helps provide insight into the big picture at both project and portfolio levels.