6 Reasons Your Favorable Performance May Be Too Good To Be True

You know the scenario well: it’s the end of the period and now you eagerly await the results of the latest schedule status.  Will the status align with the planned and actual costs?  You process the data and the results spit out of your EVM software.  Ta-da!  Your SPI or CPI are stellar!  Congrats!  But wait…a savvy PM knows when favorable variances and trends are deceiving.  The issue is much more complicated than just overestimating the percent complete progress for a few activities.  It emphasizes importance of true data analysis and non-complacency in relying on the numbers all the time.  Do you know how to spot deceivingly favorable performance?

While positive performance is generally a good thing, there are times it can come back to bite you…eventually.  Let’s take a look at the lesser known causes of deceiving performance numbers so we can determine how to best avoid them:

1. Poor Scheduling.  I doubt this one is much of a surprise, but it confounds me how many projects have schedules so poorly developed and thought through.  Activities out of sequence, as well as shoddy durations, man-hours, or materials estimates can all cause positive variances that are false in any given period, and may continue for several.
2. Devious Scheduling. This is different from poor scheduling in that it is done on purpose.  Specifically, this is done by baselining activities too conservatively (too long, too many hours, too far into the future), and doesn’t come close enough to reality.  Perhaps the PM did this on purpose to look like a hero by coming in well ahead of schedule or under budget.  The danger is that it also hinders the ability to really measure progress.  
3. CPI/SPI Out of Sync.  Sure, maybe you worked fewer hours overall, but you also didn’t get some of the work done.  How can this cause false positive performance, when you can’t earn value on work not done, you ask?  One answer is Level of Effort activities.  LOE will earn value whether staff is working or not.  Another answer is skeleton crews.  An example would be when excavation is still underway (using a crew of 3, instead of 5), and the 4th and 5th members are on vacation—along with most of the office staff (who are budgeted as LOE) for the holidays.  The forecast may show a favorable trend with a decline in total cost, but this disappears when everyone comes back to work in January and then puts in overtime to make up the work that wasn’t done over the holidays!
4. Wrong Tasks Progressing.  This is where Critical Path analysis (CPM) is important, as it reviews the mix of performance in the Control Accounts.  If activities are being work out of sequence, it might look favorable for now, especially if the working activities have a higher budget than the original planned activities for this time period.  However, it could result in added time/cost later.  This is your classic case of the cart before the horse.  A common example is developing too much training material before the final product is done, which then causes rework.  
5. Crashing the Schedule.  It doesn’t have to be a full-on crash, in fact it could be just a few activities with larger budget on them.  The SPI will show the project is ahead of schedule (either current period or cumulatively), because you threw more resources at these activities, although now the EAC is sky-high.  But hey, you’re gittin’ it done!  Here’s a tip: you should ALWAYS review your CPI and SPI in relation to each other.  
6. EV Method Misalignment Between the Baseline and Active Plan. Most commonly this crops up in the form of a negative variance, but it can be found to cause positive variances too.  For example, the baseline is level loaded (linearly) for a 4 period task, but the scheduler mistakenly statuses it as 50/50.  The 1st period will have huge positive variances since you earned much more than planned.  But then it will be followed by 2 periods of negative variances, until it catches up in the 4th period—where reports will finally show whether you were truly efficient or not.  

Ultimately, deceivingly positive performance boils down to either false information, or an anomaly that cannot be sustained.  Experienced, knowledgeable Project Managers know these are some of the reasons you cannot work in a vacuum with EVM.  Performance must be assessed in relation to individual tasks, groups of tasks, the entire schedule, the baseline time-phasing, the EAC, as well as the current period and cumulative to date information.  It’s a symphony of data—a system, and can only be effectively managed when treated as such.  Incidentally, this is one reason your EVM software is so important—a good package will offer many ways to easily slice the data so you can see these issues, because sometimes you have to dig pretty deep to find them.

Obviously not all positive performance is caused by these things!  Sure enough, your project MAY be excelling.  But you’d better know the difference.

Do you have any other examples of false favorable conditions?  Please feel free to leave a comment, and check out the next blog, “How to Truly Measure Work Accomplished”.

- Melissa Duncan (About Melissa)

Editors Note: We generally post twice a month, for December we will be posting only once and return to twice a month in January 2015.   

Read the previous posting - The Alternative to Earned Value Management: it’s called being FIRED!

Subscribe to Earned Value Exposed

Earned Value legend as there may be a few of us that don’t yet have this memorized…
CA=Control Accounts
CAM=Control Account Manager
CPI=Cost Performance Index
EAC=Estimate At Completion  

EVM=Earned Value Management

EVMS=Earned Value Management System
EAC=Estimate At Completion 

IPMR=Integrated Program Management Report
LOE=Level of Effort
OBS=Organizational Breakdown Structure
OTB=Over Target Baseline
PC=Project Controls
PM=Project Manager
PMB=Performance Measurement Baseline
RAM=Responsibility Assignment Matrix
SPI=Schedule Performance Index
WBS=Work Breakdown Structure

The Alternative to Earned Value Management: it’s called being FIRED!

How does a large corporation, filled with thousands of people and multi-million dollar projects, manage their projects successfully without using Earned Value Management?  What is this wonderful alternative to EVM that allows them to effectively manage projects and measure performance?  Let’s face it, EVM can be terribly cumbersome depending on your contract requirements and system design, so it only makes sense to seek a less painful alternative.  This is my number one question I ask when interviewing for a new job or consulting with a new client.  And the answer is usually the same: they’re simply a bit delusional when defining project success and failure—that is, they don’t even know the criteria for successful project management, let alone how to measure it!  

The danger here is that they are so arrogant that they think they know.  They think it is the same criteria that they use for the rest of their business management.  If a manager is excelling at functional management, that should translate to excelling at project management right?  It’s all management in the end, so why would it not work?  They view earned value software as a necessary (or rather, an unnecessary, but contractually required) evil, instead of a useful tool to help manage projects and add visibility into performance.  For Pete’s sake, these are the same people who think there is nothing wrong with keeping their project costs separate from their schedules!

These companies have been successful with other aspects of their business and they’re riding on the coattails of that success. It seems as if they are operating with their heads in the sand when it comes to new management models for projects. They use traditional business models to manage their projects and then are shocked when it doesn't work as expected.  Once senior management starts paying attention to this problem, the project manager is often removed or fired.  This is their way of holding someone accountable, which they love to do.  Ironically, most of those senior managers fail to see that THEY have not held themselves accountable; they haven’t provided the tools to effectively manage projects.  They don’t understand why comparing the budget to actual cost is NOT sufficient for project management or why additional tools, such as procedures, processes, and earned value software are needed.  They are completely missing the value of the work that was completed, yet isn't progress the number one, consistent requirement of project completion?  Yet, in many organizations I've encountered, the old adages of "that's the way we've always done it" and "why fix it if it isn't broken" are so heavily at play, you'd think it was their official vision statement or mantra!  Doesn't it seem odd to not measure progress?

The problem is that it IS broken but they cannot see it until it is too late.  Comparing the budget to actual cost simply yields a spending variance.  They focus on minimizing expenses and maximizing profit margin—both of which end up being heavily impacted by the project management effectiveness.  However, what is the true cost of poor project management?  Poor client relationships and lost future work, confusion and burnout within the team, inadequate resource allocation and funding requests, unnecessary beatings of the wrong manager, missed opportunities to forecast and course correct early in the project, and lack of visibility into true performance resulting in blind decision making—just to name a few.  In an immature, non-learning organization, this does not bode well for the project manager and his/her job is at stake, as well as their reputation in the project management community.  There is a reason project management is now finally recognized with its own degree program at savvy universities.  It’s a science and an art, separate, but related to business management.

Part of the resistance to implementing EVM is the time and cost of setting up the system.  Especially in government projects that require a certified EVMS.  While it is true that implementing all 32 criteria from the ANSI/EIA-748 can be overwhelming and even a little overkill, even a rudimentary EVMS would allow better project visibility and performance.  The “all or nothing” attitude regarding EVMS does it a terrible injustice.  It CAN be sized according to your needs.  The real role of senior managers is to provide employees with the right tools for their jobs, remove roadblocks to success, and then stay the heck out of the way!

So don’t throw the baby out with the bathwater—EVM is the “it” tool for better project performance.  It’s been around for 60+ years, and continues to prove its success.  There is no viable proven alternative, but you CAN lose your job if you choose not to use it.

Have you ever searched for an alternative to Earned Value Management, and if so, what were your results?  Why do you think many companies resist using EVM in some form?  Check out my next blog, “If it looks too good to be true, it probably IS!!”

- Melissa Duncan (About Melissa)

Editors Note: We generally post twice a month, however for November and December we will be posting once a month and return to twice a month in January 2015.   

Read the previous posting -  5 Points of Failure for an EVMS

Subscribe to Blog  

Earned Value legend as there may be a few of us that don’t yet have this memorized…

CA=Control Accounts
CAM=Control Account Manager
CPI=Cost Performance Index
EAC=Estimate At Completion  

EVM=Earned Value Management

EVMS=Earned Value Management System
EAC=Estimate At Completion 

IPMR=Integrated Program Management Report
LOE=Level of Effort
OBS=Organizational Breakdown Structure
OTB=Over Target Baseline
PC=Project Controls
PM=Project Manager
PMB=Performance Measurement Baseline
RAM=Responsibility Assignment Matrix
SPI=Schedule Performance Index
WBS=Work Breakdown Structure

Beware of the Five Points of Failure for an EVMS

Does your organization have a successful EVMS running already?  If you answered “yes”, how can you tell it’s truly successful?  You already know that success is not as simple as collecting data and reporting every month.  Success also means using the data to make decisions and course correct the project when needed.  However, even if you’re using your EVMS appropriately, it doesn’t mean it isn’t sick.  Perhaps your EVMS is diseased and you don’t even know it, until it begins exhibiting symptoms later down the road.  What went wrong?  How can you tell if your EVMS is diseased when all appears to be going well?

If your contract requires a certified EVMS, then you have one powerful weapon in your arsenal to fight an insidious disease that could cripple your EVMS.  In fact, having a customer require a successful EVMS is perhaps one of the greatest vaccines against a diseased system.  However, if you aren’t required to have a certified EVMS, or if you’ve contracted an EVMS infection, your system can still get very sick and die.  Let’s take a look at five major illnesses that can cause your EVMS to fail:

1. Management isn’t driving your EVMS.  The lack of passion and commitment to a strong EVMS by management is the number one virus I see in sick systems.  No matter how much effort you’ve put into your EVMS, you can still end up with a slow, flesh-eating virus in the form of senior management’s lack of commitment.  Let’s face it, a successful EVMS needs to be driven by management; they are leading the show and they have the ultimate power.  It’s a corporate culture issue, and one that needs to be corrected, pronto!  Symptoms of this virus include: management doesn’t understand the EVMS, see its value, use it for decision making, appreciate its difficulty and complexity, take it seriously, or give it appropriate time/resources to implement and maintain, etc.  If management does not drive it, then it will be seen as an “add-on”; something that is only for show.  It won’t be used to manage projects, and it becomes only something that generates pretty pictures, or perhaps just something those project controls folks make you do.  This virus is so rampant and destructive in some organizations that I encourage you to check out How to Get Management to Not Only Buy-In to EVM, but Drive It…

2. Your EVMS cannot generate useful data.  Despite spending gobs of time and money designing it, sometimes the EVMS doesn’t yield useful information.  This mistake is like the common cold; you can function for a while, but if you don’t tend to it, you’ll end up in worse shape.  You’ll know you’re in this situation if you’re doing too many things manually, or having to change key elements—such as the WBS—in mid stride.  The cause of this common problem includes choosing the wrong EVM software for your needs, lack of focus on integration of systems when designing the EVMS, and hiring the wrong people to implement and run the EVMS.  If you find yourself in this situation, it’s time to stop and fix it before it becomes a bigger problem.  At this point, you may wish to hire an outside firm to assist, because clearly, the people who designed and implemented your current EVMS were not totally successful.  Sometimes that is due to internal conflicts and an outside firm can have more clout with internal stakeholders.

3. Mid to lower level management and CAMs don’t support or accept the EVMS.  While this is related to item #1, it is in a class by itself as well.  Even if senior level managers drive EVMS, if your organization is too top heavy, you may end up finding that the message from senior management is watered down by the time it reaches the trenches.  If you have a manager that doesn’t take the EVMS seriously, or even degrades it, you’ve got a real problem on your hands.  This is the kind of person that can “infect” others with their mentality by constantly complaining about the EVMS.  They are the cancer of your EVMS.  These folks may see it only as a necessary evil, and certainly nothing that will make their management skills any better.  They fear getting caught in their lack of performance and tend to blame the system.  They need to be removed from this position as soon as possible.

4. Your EVMS begins dying a slow death and momentum is lost.  You’ve just won a new contract and everyone is running around like a chicken with their heads cut off in order to get the EVMS up and running, and certified.  The whole team is running on adrenaline and it seems everyone is excited for a while and then….the focus begins to shift.  Some people quit, new people come in, time goes on, and eventually the EVMS is running on autopilot.  It feels old and stale.  However, this also points back to issue #1.  Why?  Well, if senior management was really passionate about it and used the information in the EVMS to make decisions, then it would stay at the top of everyone’s priority list.

5. The critical users of the EVMS are inexperienced and untrained.  I’ve witnessed the disaster caused by organizations that hire the wrong people to design, implement, and maintain the EVMS.  Hiring an accountant to run the EVMS isn’t going to work!  Earned value isn’t an overly complicated concept, but there are plenty of complex problems that can arise from various scheduling elements, settings in the EVM software, calculations to understand, etc.  Then there are plenty of CAMs who don’t understand how to write variances, as well as managers who can’t read a project status report or IPMR.  There are so many variables that can affect the data—so be sure you have people who understand it forwards and backwards.  The EVMS cannot survive when the inputs, outputs, and users are lacking.  It’s the equivalent of having pneumonia.  So find an EVM software that is user-friendly and can integrate with your other systems, write procedures that make sense, and then train, train, train!  

Half the battle is in knowing that you have a problem.  So take some time to really assess the health of your EVMS and make changes where needed—before it dies a slow death.  And if you have had any experience with these diseases, or any others that have killed an EVMS, please leave a comment below!  Next week we will take a look at The Alternative to Earned Value Management, It’s Called “Being Fired!”

- Melissa Duncan (About Melissa)

Editors Note: We generally post twice a month, however for November and December we will be posting once a month and return to twice a month in January 2015.   

Read the previous posting - Finding EV Software with a Low PITA Factor

Subscribe to Blog  

Earned Value legend as there may be a few of us that don’t yet have this memorized…

CA=Control Accounts
CAM=Control Account Manager
CPI=Cost Performance Index
EAC=Estimate At Completion  

EVM=Earned Value Management

EVMS=Earned Value Management System
EAC=Estimate At Completion 

IPMR=Integrated Program Management Report
LOE=Level of Effort
OBS=Organizational Breakdown Structure
OTB=Over Target Baseline
PC=Project Controls
PM=Project Manager
PMB=Performance Measurement Baseline
RAM=Responsibility Assignment Matrix
SPI=Schedule Performance Index
WBS=Work Breakdown Structure

Finding EV Software with a Low PITA Factor

There is really only one thing you need to keep in the forefront of your mind when looking for EV software with a low PITA factor.  

It’s the same thing that has made the Apple iPhone hugely successful, despite all its competitors.   However, when we begin listing the requirements for our EV software, sometimes we lose sight of the one thing that is going to make or break the success of the software you thought was going to make your life easier.  We start focusing on all the bells and whistles and we begin dreaming of a future with all this wonderful information about our projects—if we buy this really cool software.

Can you guess what it is yet?  If you ask a devoted Apple iPhone user why they love their

cell phone, you’ll likely hear about the iPhone “experience” or perhaps the friendly and intuitive user-interface.  Boil it down in a nutshell and the answer becomes “ease of use” via the simplistic design.  Sure there are others that have more features, yet the iPhone has a very loyal following that its competitors can’t break.  Keep that in mind.

What does that really mean when we talk about EV software?  It is a much broader concept than you might initially think.  It transcends every item on your list of software requirements.  Let’s take a look at some of the requirements you may have for your EV software and consider some ease of use aspects that may make a huge difference in your work life.

1. Robust enough to handle thousands of activities and resources.  OK, so you have some humongous schedules with a massive listing of resources.  If your software is too cumbersome to operate, it doesn’t matter if it could handle billions of activities.  Cumbersome EV software either takes an army to manage, or a lot of time for those few people who understand how it works.  That’s going to cost you time and money, and possibly some very burned out resources.
2. Fast processing and reporting.  Even if it takes only one second to process your data or produce a report, what were the steps or headaches required beforehand?  How many different screens or options do you have to go through before you get to that lightning speed?  Even if there were NO prior headaches and your software is insanely fast, I guarantee if it is too difficult to understand or use after the fact, you'll be grumbling.
3. Reliable information.  Granted, if the information within and generated by your EV software is fraught with errors, you’re going to chuck it out the window pretty quickly.  Most of the time this is caused by “dirty” information going in to the system, or by various settings within the software that affect how the data is processed or reported.  But, let’s say it is doing something to your data—similar to autocorrect or auto-formatting—anything that you don’t want and you can’t turn off….then you’ll be beating your head against a brick wall, because frankly, that will be LESS painful.  This includes putting data in places you don’t want, such as the wrong period or at the wrong level of the WBS.  You’d be surprised how often this happens.  If you hear, “UGH!  Why is it DOING that??!!”, then that’s a good indication that you’ve got an ease of use problem affecting the reliability, or at least the usability of your data.
4. Useful reporting and charts.  Perhaps you desire reports and charts that don’t require some third-party software to generate them.  Eliminating additional software needed because your current EV software doesn’t yield reports you can use is a common reason for wanting new EV software.  But even if it does produce wonderful reports, how easy was it to generate them?  How difficult is it for project managers to access and run a report for themselves?  If you DO need to load it into a third party software, how hard is it to set up the interface, or is it all done manually?

So the next time you go looking for software to make your life easier, make sure it really does make it easier.  I know it sounds like such an intuitive and simple concept, but so many people lose sight of it.  And to help you even further, here is a list of questions you should ask when reviewing potential EV software programs:

• Does it take a small army to setup and run each month?
• Can anyone be trained to use it within one day?
• Is the software so complicated that the developers have created a setup or processing wizard?
• Do you have to enter the same data in more than one place?
• How many manual steps are created or eliminated by this software?
• Are other tools needed to analyze the data in the software, and if so, how many or how often?
• Is the data generated consistent across datasets and does it provide valuable, reliable project performance information?
• How many steps do you have to take to drill down into your data?

Do you have any other tips for finding easy to use EV software?  Or how about complaints of your existing software—how is it not so easy to use?  Check out our blog next time, when we will discuss the "5 Points of Failure for an EVMS."

- Melissa Duncan (About Melissa)

Read the previous posting - Right Sizing: A Common Point of EVMS Failure - Revisions and Data Maintenance"

Subscribe to Blog  

Earned Value legend as there may be a few of us that don’t yet have this memorized…

CA=Control Accounts
CAM=Control Account Manager
CPI=Cost Performance Index
EAC=Estimate At Completion  

EVM=Earned Value Management

EVMS=Earned Value Management System
EAC=Estimate At Completion 

IPMR=Integrated Program Management Report
LOE=Level of Effort
OBS=Organizational Breakdown Structure
OTB=Over Target Baseline
PC=Project Controls
PM=Project Manager
PMB=Performance Measurement Baseline
RAM=Responsibility Assignment Matrix
SPI=Schedule Performance Index
WBS=Work Breakdown Structure

Right Sizing: A Common Point of EVMS Failure - Revisions and Data Maintenance

This week we review the last set of criteria in the ANSI/EIA-748: Revisions and Data Maintenance

Have you ever seen or implemented a complicated, convoluted, nobody-can-understand-it-but-the-originator baseline change proposal?  The kind that makes you go cross-eyed just trying to sort out the pieces?  These beasts make it difficult to produce all the backup information; many times there are just too many renditions of before/after scenarios before the “right” one was found.  Scope was added and removed, resources and rates changed, the WBS and OBS were restructured, logic was refined, and then management took 10% right off the top!    In the end, no one remembers how they got from A to Z, but you’re still responsible for reconciling it, eh?  If you’re lucky, your EV software is friendly enough to aid you in your quest.  Even if it isn’t, the revisions and data maintenance criteria in the ANSI/EIA-748 will help prevent such a nightmare.

Revisions and data maintenance are common areas for the failure of an EVMS.  Why?  Well, to be frank, one reason is because the management of revisions and data maintenance is not fun and can be a pain in the rear (i.e. high PITA factor).  It can be time consuming and doesn’t “yield” any additional benefit beyond what is initially gained from the criteria in the other four frameworks of your EVMS.  It is a necessary evil—something you have to do in order to have valid EVMS data.  People don’t like spending time and money on things that don’t directly provide added benefit, so they tend to slack on the maintenance of the data.  This is a huge mistake, because it undermines your entire EVMS.  If you spent time and money to implement your EVMS, why not take care of it so it can continue to meet your needs in the future?

When it comes to implementing aspects of the ANSI/EIA-748 in a non-certified EVMS, you’ll find that really ALL of the criteria in this framework are necessary for your program.  The level of rigidity needed in their application is where you’ll find wiggle room.  Less formal programs may not need the strict guidelines that a formal program may need, but they still need the basics.  Either way, you can customize the methods and execution of the criteria through your procedures and implementation of them, including various approval levels for baseline changes.  Let’s take a look at the criteria and why they’re needed for any EVMS:

1. Incorporate authorized changes in a timely manner.  This maintains integrity of your Performance Measurement Baseline (PMB) and allows you to measure and report earned value based on reality (as much as possible).  It also helps ensure work, budget, schedule are aligned with each other.  Ask yourself, “Does it make sense to wait for a year to implement an authorized change?”  Imagine having several baseline changes that have been hanging out there for a year.  It suddenly becomes easy to see how this will make your analysis more difficult and compromise the integrity of the baseline.
2. Reconcile the new budgets with prior budgets - changes should only be made via baseline change requests that are authorized and have formal documentation and backup for traceability.  This is how you VERIFY the integrity of the PMB.
3. Control retroactive changes.  Ever heard the term “Don’t change history”?  Retroactive changes can mask variance trends and limit the ability to use Earned Value to forecast.  Controlling these changes protects the integrity and accuracy of the PMB and EV.  The exception would be data entry corrections or routine accounting adjustments.
4. Prevent revisions except for authorized changes.  Once again, the integrity of your PMB is at stake and you risk having an Over-Target Baseline (OTB) after the fact.  It’s always best to know if the proposed changes would create an OTB condition, before you implement it.  Additionally, implementing revisions that are unauthorized can make your project management technique the equivalent of Whack-A-Mole; complete with moving targets and ensuing frustration.
5. Document Changes thoroughly.  It may sound easy but proper documentation sometimes slips by when you’re in a rush.  Or, you may think you documented everything in sufficient detail within your before/after schedules, timephased budgets, etc., but then a new manager walks in and wants to know some tiny detail that you didn’t document.  And you can’t remember.  That’s not a good feeling!  I’ve also taken over projects where there was a total lack of documentation of changes and no one can figure out how the project got to that point.  This isn’t fun, and it’s taking away precious time that could be used to manage the project better.  So, the bottom line is: make sure any lunatic can follow your logic and come up with the same result.  A baseline change proposal should be a stand-alone document.

See a trend yet?  The main issue here is traceability and integrity of the PMB, supported by adequate documentation.  Never undermine your EVMS by delaying or reducing project performance visibility through improper change control and data maintenance. The tools you’ll need to successfully manage and implement the 5 criteria listed above can include: change control logs, change management procedures, an active change control board, documentation showing impacts on budget, schedule, and scope.  And, if able, use your EV software to print reports that show exactly what changed—which is fabulous for reconciling the before and after scenarios.  The rule of thumb for revisions and data maintenance is “proceed with caution and leave a clear trail of breadcrumbs”.

Do you have any war stories cause by inadequate management of revisions and data maintenance?  Please share in the comments!  Stay tuned for my next blog where I’ll discuss Finding EV Software with a Low PITA Factor.  

- Melissa Duncan (About Melissa)

Read the previous posting - Right Sizing:  Analysis and Management Reports Showcase Your EVMS

Subscribe to Blog  

Earned Value legend as there may be a few of us that don’t yet have this memorized…

CA=Control Accounts
CAM=Control Account Manager
CPI=Cost Performance Index
EAC=Estimate At Completion  

EVM=Earned Value Management

EVMS=Earned Value Management System
EAC=Estimate At Completion 

IPMR=Integrated Program Management Report
LOE=Level of Effort
OBS=Organizational Breakdown Structure
OTB=Over Target Baseline
PC=Project Controls
PM=Project Manager
PMB=Performance Measurement Baseline
RAM=Responsibility Assignment Matrix
SPI=Schedule Performance Index
WBS=Work Breakdown Structure

Right Sizing: Analysis and Management Reports Showcase Your EVMS

This week we tackle the fourth of five in our five essential frameworks discussion; we will review the Analysis and Management Reports from the ANSI/EIA-748 guidance.

The analysis and reporting aspects of your EVMS are where the rubber meets the road.  They are your crystal ball that allows you to “see” into the future and make course corrections in your projects.  In this way, they are the very essence of Earned Value Management; they are the reason it exists in its current form.  The other criteria in the standard are set up to support the EVMS framework, but the analysis and reporting criteria are where you actually use the tool to better manage your projects.  Not surprisingly, selecting an Earned Value Management software that can generate the information you need—quickly and easily, becomes crucial.  I started my career as a very spoiled Project Controls Engineer and then became a very unspoiled Project Manager; so I can tell you firsthand, easy access your EV data can be a luxury.  So do your due diligence and take the time to find the reports and software that fits your needs.

Speaking of needs, what exactly do you need for analysis and reporting in your EVMS?  If you’re operating under a certified EVMS, then you have some prescribed analysis techniques and reports that must be completed for your customer (and your organization).  However, if you’re NOT required to be certified, where do you start?  There are so many different reports and ways to analyze the data—how do you know what’s right?  Let’s dive into the criteria contained in the ANSI standard and see which items are most critical to your success.

1. At least on a monthly basis, review variances.  Compare your planned work against your earned work to obtain the schedule variance.  Then compare your earned work against the actual cost of that work to obtain the cost variance.  If you have control accounts, compare the numbers at this level; if you don’t, compare the numbers at a level that makes most sense—in some cases, this will be at a level that will cause the most pain if not completed as planned.  Use your WBS and/or OBS (if you have one) to summarize or slice and dice the data for better visibility.
2. Highlight the significant variances and provide explanations for each one.  This will give you, your project team, management, and your customer a feel for the current status of the project.  You’re identifying potential problems and the reasons they exist.  But take note: the prerequisite for this action is to explicitly define your thresholds (keep them relatively simple) and make sure everyone knows what “significant” is, by communicating the thresholds.
3. Develop and implement corrective actions.  This is your chance to course correct the project.  Why review the variances if you’re not going to do anything about them, right? Also, corrective actions should be agreed upon by the management team.  This is one reason it is so important that they have the same reports you’re giving to the customer, and it’s also why they should be getting your EV reporting data on a periodic basis.  Remember that large course corrections must be performed before the project is 30% complete to affect the end result, which means reviewing performance and taking action early on.
4. Review and revise your EAC (Estimate At Completion) as necessary to reflect reality.  Things happen.  People and circumstances change.  The more reality you pour into your EAC, the better to see potential future problems.  You can use your performance to date to enhance your predictability, and as the project marches on, the more accurately you can adjust your EAC based on risks and opportunities.  It’s really best if you perform this exercise at least monthly—otherwise the effort can get overwhelming and feel like a rebaseline.
5. Put all of the above information into a report.  This formalizes your EVMS process and your data, and allows you to distribute it to the right people for more effective communication.

You may have noticed I left out the analysis and reporting of indirect costs.  In a non-certified EVMS, the indirect costs tend to be a bit of an afterthought.  It’s still important, but the department or program manager can work with accounting to look into any variances easily enough, so I personally wouldn’t put too much energy into it.

A bit of caution: it is common for the untrained manager to want to jump straight to analysis and reporting without properly setting up the framework for an EVMS.  Then they scratch their heads when the analysis doesn’t make any sense, and decide that Earned Value has no value.  That’s a shame.  He or she needs to be educated, because—as with many valuable tools, you get what you put into it.  This is also a fancy way of saying (GIGO) Garbage In Garbage Out. 

All of the items I mentioned can be done “offline”, in MS Excel or Word, but that’s a bit cumbersome and creates room for additional errors as well as making only a select few responsible for maintenance (i.e. no vacation for them…).   When considering an EV software solution, look for how it helps you track the project and what it does to make your life easier.  Allow the EV software do the work for you, such as creating graphs, project status reports, and variance analysis reports. That will allow you to focus on the more important things, like managing the project.

How do you perform analysis and reporting on your project?  Do you have any favorite or dearly hated reports?  Please share in the comments.  And check out my next blog, where I’ll take a peek at the most beneficial ANSI criteria for Revisions and Data Maintenance.

- Melissa Duncan (About Melissa)

Read the previous posting - Right Sizing: Finding the balance between Accounting’s "numbers" and Your EVMS

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Earned Value legend as there may be a few of us that don’t yet have this memorized…

CA=Control Accounts
CAM=Control Account Manager
CPI=Cost Performance Index
EAC=Estimate At Completion  

EVM=Earned Value Management

EVMS=Earned Value Management System

EAC=Estimate At Completion 
IPMR=Integrated Program Management Report
LOE=Level of Effort
OBS=Organizational Breakdown Structure
PC=Project Controls
PM=Project Manager
RAM=Responsibility Assignment Matrix
SPI=Schedule Performance Index
WBS=Work Breakdown Structure

Right Sizing: Finding the balance between Accounting’s "numbers" and Your EVMS

This week we tackle the third of five in our five essential frameworks discussion, we will review the Accounting Considerations from the ANSI/EIA-748 guidance.

If you’re actively using Earned Value as a management tool, then it’s very likely you have a love/hate relationship with the accounting folks.  You love them when they provide details and data you need to answer variances, and they serve as a bit of a watchdog for your project costs.  However, you hate them when their systems or processes are not set up correctly to effectively manage projects.  That wouldn’t be so bad, except in many cases they are reluctant to change the setup, or complain it’s too difficult.  Remember that people are a bit more willing to change if you offer to do most of the work for them, and in this case, it behooves you to do it because it will make for more effective and less painful project management.  While integrating the accounting software with your Earned Value Software can be challenging, it is well worth your time.

So, what can you do right now, to guide or change the direction of the accounting system setup so it is Earned Value friendly?  Take a look at the requirements for a certified EVMS in the ANSI/EIA-748 and implement the basic framework so your organization can grow into a certified system when, or if, the time comes.  It’s a solid framework that will only help you manage your projects, whether you need to be certified or not.  If you’re working with an existing setup, map out a crosswalk showing how to go from the old setup to the new setup.  This may include using different software, but most likely it will just be changes to codes and processes, since most accounting systems are robust enough to handle an EV friendly design.  

What are the accounting considerations from ANSI/EIA-748 we should consider?

1. Record direct costs in a manner consistent with the budgets in your accounting system.  This sounds relatively simple, right?  Here’s the part that most people miss: they fail to collect their actual cost in the same manner as the budget.  If you budgeted for 5 tons of gravel to be “earned” upon delivery under control account XYZ, then record the actual costs upon delivery as well (in the same control account), instead of when it is ordered or under control account ABC.  This sounds like common sense, but it is all too common to record actual cost in a way that’s different than how it was budgeted, or under a different control account.  Make sure you formalize the process to aid in consistency each month.
2. At a minimum, your project costs must be reconcilable with the accounting system.  Costs associated with your project should have a charge code pointing them to the correct control account, or at least to the correct project.  If you are using control accounts and charge codes, it’s extremely important that they are only pointed to one corresponding WBS element.  Double counting the costs or having to determine how to split the costs between the applicable WBS elements is just a headache waiting to happen!  This also means that the WBS you’re using to account for the costs will roll up to the parent WBS successfully.  I have seen people attempt to point costs to a level 5 WBS element, and then also at level 2 or 3.  If you’re WBS is set up correctly, and you’re only allocating costs to one element, this won’t be a problem.
3. Everything described in item 2 above, is also applicable to the OBS; that is, control accounts and charge codes must correspond to only one OBS element for accurate performance reporting.  This also helps you hold the correct departments/groups responsible for their work on the project.
4. If material or unit costs are applicable, make sure your processes are consistent in how you budget and account for them between the accounting system and the project.  This will help you measure performance for these items on the project.
5. The standard also discusses allocated indirect costs to the project.  However, for organizations that aren’t required to have a certified EVMS, I think this one can be less rigid, or even skipped altogether.  You can still manage the project well enough without spending a lot of time on the indirect costs—let the department responsible for the project handle it. 

For this section of the ANSI/EIA-748, you can easily see that consistency in planning and costing (including taking credit for performance) is key.  The right earned value software can make it easier to be consistent in planning and costing, as well as making it easier to be consistent between the accounting system and the project.  Let these rules be your guiding principles with the accounting considerations for an EVMS, and you’ll be well on your way to a headache free framework that yields the highest results for the least amount of effort!

Have you experienced any headaches with aligning your project or accounting system with EVMS principles?  Please share your story in the comments.  Stay tuned for the next blog; we’ll discuss the most crucial Analysis and Reports criteria of an EVMS.

- Melissa Duncan (About Melissa)

Read the previous posting Right Sizing: Shrink to Fit - One Size Does Not Fit All

Subscribe to Blog  

Earned Value legend as there may be a few of us that don’t yet have this memorized…

CA=Control Accounts
CAM=Control Account Manager
CPI=Cost Performance Index

EVM=Earned Value Management

EVMS=Earned Value Management System

EAC=Estimate At Completion 
IPMR=Integrated Program Management Report
LOE=Level of Effort
OBS=Organizational Breakdown Structure
PC=Project Controls
PM=Project Manager
RAM=Responsibility Assignment Matrix
SPI=Schedule Performance Index
WBS=Work Breakdown Structure

Right Sizing: Shrink to Fit - One Size Does Not Fit All

The second of five essential frameworks (ANSI/EIA 748) is Planning, Scheduling, and Budgeting as it relates to Earned Value. (see first essential framework of five)

Isn’t it ironic that the groups responsible for planning and budgeting in an organization often don’t succeed in their own planning and budgeting the implementation of their EVMS?  Project controls and project managers are the experts in this field, so we would expect their planning and execution to be flawless, right?  Yet, many times these professionals fail because they succumb to daily distractions and time/budget constraints set by management—as many people do.  However, if they don’t adequately design and plan their EVMS project for their company’s needs, they can end up looking like a buffoon!  

So it is no surprise that we need to review and discuss the ANSI/EIA-748 area for planning, budgeting, and scheduling.  These requirements for a certified EVMS can be grueling and painful, but you’re in luck if you’re not required to be certified.  The trick to this effort is to review the criteria in the standard and take a look at it from a macro perspective.  Ask yourself, “What is the overall intention with these 10 criteria?”  Grouping them together and summarizing the results is how we’ll convert the Ferrari EVMS to a Ford EVMS:

1. Create realistic schedules for your projects and use sensible logic ties.  Despite the added complexity, you must load resources on activities for an accurate timephased budget.  At a minimum, apply resources by cost element (such as labor, materials, overhead, etc.).  To aid integration with other systems, add your WBS to your schedule.  This allows you to roll it up as needed, which allows you to easily check the WBS for mistakes.  Finally, status your schedule at least monthly; any frequency less than that won’t allow you to manage project performance adequately.

It’s a good time to pause and ironically say “Simple right?”  Actually this is the hardest part, as invariably, there will be someone who does not want to resource load the schedule in order to keep budget separate from schedule.  That is a great way to blindfold the Project Manager and line management.  They’ll be running around in circles yelling at people trying to determine the true performance of the project.  I can’t even begin to tell you how archaic and ignorant this practice is on a project.  Just don’t go there.  If you’re already set up this way, find a way to fix it.

More tips: Use common sense for the level of detail you need in order to see variances that could derail the project.  Remember not to schedule down to the gnat’s behind, but don’t make a four line summary schedule either.  Your schedule should add up to the total budget; therefore you must account for all work and materials in the schedule.  Many organizations fail here; their schedules don’t add up to the total project cost.  They keep that “separate”, which adds unnecessary potential for errors and difficulties into the visibility of project performance.  If you choose to keep overheads separately, at least maintain the unburdened, direct cost balance in the schedule.  This way, at any given point, you should be able to take your unburdened cost and add the overheads to calculate the total project cost for authorized work.

2. Add major milestones to the schedule and limit the number of Level Of Effort (LOE) activities so you can measure performance as objectively as possible.  If you not familiar with different types of earning methods, percent complete will be good enough for now. 

3. While Control Accounts are not mandatory for a non-certified EVMS, at least develop charge codes assigned to a single WBS element and use the OBS (or the groups or department responsible for that work) to put someone in charge of managing those accounts.

4. Set up a reserve budget for each project based on risk, which will be used for unknown scope that could be added to finish the project.  You may also want to have a contingency fund at the department level for those events when the project needs additional funding beyond the project budget.  Reconcile the sum of all budgets by WBS, OBS (or group responsible), cost element, and work package (if you have them).  This includes the indirect costs as well.  Reconciling budgets will assist you in slicing and dicing the data a multitude of ways. 

You can see I’m not as passionate about these last three items as I am about the resource loaded, logic driven schedule.  It isn’t because they aren’t important.  It’s because without that kind of schedule, these areas become almost a moot point.  I’ve seen very intelligent, complex organizations completely skip the integration of budget and schedule.  They ALWAYS end up having problems managing their projects on schedule, within budget, while performing high quality work scope.  Unfortunately, this can lead to people and scope getting jerked around to stay the course, which is unfair and unnecessary.  Here’s the bottom line: planning, scheduling, and budgeting is tantamount to project success - it is the Holy Grail of project management, so be sure to give it the effort it deserves.  

Please comment if you’ve had experience in these areas; I’d love to hear success stories (or miserable failures), and I’ll even take some major griping if you’ve experienced the pain of not implementing the above recommendations.

Stay tuned for my next article, where I’ll break down the Accounting section of the ANSI/EIA-748 and show you the elements, and ways to implement them, for a bigger bang for your buck. 

- Melissa Duncan (About Melissa)

Read the previous posting Shrink to Fit - How to Scale your EVMS

Subscribe to Blog  

Earned Value legend as there may be a few of us that don’t yet have this memorized…

CA=Control Accounts
CAM=Control Account Manager
CPI=Cost Performance Index

EVM=Earned Value Management

EVMS=Earned Value Management System

EAC=Estimate At Completion 
IPMR=Integrated Program Management Report
LOE=Level of Effort
OBS=Organizational Breakdown Structure
PC=Project Controls
PM=Project Manager
RAM=Responsibility Assignment Matrix
SPI=Schedule Performance Index
WBS=Work Breakdown Structure