The Three Secrets to Long Term Earned Value Success

Have you ever been in an organization or on a project that implemented the use of Earned Value, only to throw it away after a period of time? Perhaps the system they implemented just lost steam and suffered a slow death, or maybe it was a manager that cut the cord. Either way, the organization clearly did not implement some key elements for maintaining Earned Value success in the long term. Earned Value Management Systems can be quite costly to design and implement, so it’s in your best interest to create a system that can stand the test of time. 

There are three main areas that will greatly affect the long term success of your EVMS. If you think of your EVMS as a pirate ship, these three areas would be: the map used for navigation (strategy), the crew on board the ship (personnel), and the tools made available for propelling and steering the ship—such as the sail or oars (software). Let’s break down these specific areas and see how they affect your EVMS success over the long haul: 

Strategy. The map used by the pirates must not be torn, held upside down, or illegible. How can you get to your destination if your map is garbage? The strategy is the design and implementation of the EVMS, as well as the procedures for how to use and maintain the system. A poor strategy will kill the EVMS—just think of all the headaches you may have if your system doesn't have the appropriate interfaces and you’re updating too much manually. That’s a ripe condition for human error and a massive waste of time for little value added. The design of your system needs to be fully planned and mapped. Identify your requirements, then design your steps and interfaces in support of the requirements. Look for ways you can automate tasks, or reduce the production and revision cycles. Also consider: your strategy will determine the reliability of the data in the system because it manages your inputs and outputs. This is your basic “junk in, junk out” scenario. Why is this so important for long term EVMS success? Well, if you’re a manager looking at junk on a project performance report, are you going to rely on those numbers? Are you going to trust the people who generated it? Nope. Hence the death of your EVMS. 

Personnel. The crew on your ship includes everyone from the captain to the cook. First, let’s examine the captain, or “management”. If management does not support the EVMS wholeheartedly, then it is setup for failure from the beginning. You see, long term EVMS success requires not just a commitment by management, but also a belief in its value—so much so that they live and breathe the EVMS. It needs to be fully saturated and ingrained in the corporate culture. Why? If they don’t believe in it, they won’t use the outputs for decision making. Then, at some point they will stop providing funding and support for managing it simply because they don’t see the value in it. That affects the project managers, because they may be trying to use the data to show project performance and get management support, but their case won’t have any “teeth”. They won’t be able to use authority to get activities done, especially activities in other departments in a matrix or functional organizational structure. In these scenarios, the EVMS becomes a token or a show, not a real tool—and tokens don’t get funding. 

The other crucial aspect of personnel involves having the right people doing the right jobs.  Too many times, companies will use a finance person to manage the EVMS (especially smaller companies, or those new to Earned Value). The problem is that most finance folks do not have the understanding or respect of Earned Value inputs and outputs. They end up having difficulties during monthly status but even more so during baseline changes. Likewise, some companies will use a scheduler to perform cost activities, or cost engineers to create and maintain schedules. These ill fitted placements mean more mistakes and inaccurate data. To stretch this idea even further, consider how a manager with a very traditional business sense may see project performance versus someone well versed in project management and Earned Value. The traditional manager may try to use the EV data to beat up the project manager and team, because he doesn’t fully understand Earned Value. This will cause the team to hide their performance on the reports, and then the concept of an EVMS is undermined. A manager seasoned in EV will know that the data is to be used as early warning indicators for improved decision making and management support, not for hanging people. So make sure the right people are in the right jobs, and the results will improve your EVMS instead of hampering it. 

Tools. Our pirate ship uses sails, oars, cannons, guns, etc. to get where they need to go and kill their enemies. In the realm of EVMS, your most important tool is your software. This includes your software for scheduling, accounting, EV processing, change management, reporting, work management, and so on. Also in this category is the ease of interfaces between these tools. The simple answer is to find software that is logical, intuitive, and can easily “talk” to all of your systems. If you purchase EV software that is complex and cumbersome, you’re going to have problems with users and likely interfaces. People tend to use things that are easy and “feel good”. If your software requires 37 steps each month for statusing and reporting, then the user may get frustrated, miss a step, complete the steps out of order, etc., all of which impact the timeliness and reliability of your data. Simplicity is key, and you don’t have to sacrifice flexibility and power for ease of use. Just do your research and ask around. Remember, even if you have a great strategy and your management lives and breathes the EVMS, you can still fail if you don’t have the right tools. However, if management really is committed, then they will quickly figure out that the software is a problem and will find the money to buy the right software, and possibly bring in consultants to design, implement, test, train, etc. 

Ultimately, for long term success, Earned Value has to be an integral part of managing projects within the organization. If you keep that idea in your mind, the three areas of focus, strategy, personnel, and tools, will fall into place easily. Do you have any experience with the success or failure of an EVMS? 

- Melissa Duncan (About Melissa)

Read the previous posting - Passing the Snicker Test: 5 Tips for Improving the Measurement of Work Performed

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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

EVT=Earned Value Techniques

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

Passing the Snicker Test: 5 Tips for Improving the Measurement of Work Performed - Part 2

Surprise!  Your EVMS has just been selected for an audit by the client.  Are you nervous?  

You should be, if there is any chance your earned value data doesn’t align with the real status of your projects.  It’s rather embarrassing to report work as being finished, only to walk out in the field with the client and SEE that it isn’t done.  Unfortunately, the technique used to measure earned value on that activity cannot prevent such a scenario.  Earning techniques can be thought of as administrative controls to enhance the reliability of earned value data.  That’s all fine and dandy, but administrative controls are simply not enough to ensure your EV is on target.  Even if you have employed the best earned value technique for each activity in your schedule, your earned value data may not pass the snicker test.  Projects are dynamic; they require the addition of common sense sprinkled with the school of hard knocks to add reliability to the earned value measurement.

While earned value software is typically blamed for incorrect data, more often than not the problem is with the humans using it.   It isn’t any secret that your EVMS is only as good as the data you put into it.  Lack of employing some practical tips to improve earned value measurement is like contracting a deadly disease: your project can become very sick over time.  However, there ARE some things you can do to increase or enhance the reliability of the earned value data.  After all, you and your management are making critical decisions about the project based on this information, so you had better find some dependable ways to measure EV. 

Some of these practical tips are intuitive, others not so much.  Let’s take a look at some examples: 

TIP 1: Get the project manager, CAMs, and schedulers out in the field or workspace to see progress for themselves.  Frequency depends on the project and how often the schedule is statused.  Generally speaking, they should put their eyes on the work before each status update.  This is probably the number one key to enhancing the reliability of the earned value data, yet it is also where many fail.   Visiting the field, looking at drawings, or reviewing a software update are activities that are often put on the back burner because there is “real work” to be done.  However, seeing progress and talking to workers can make the difference between success and failure.  Get out of your chair and go look at progress for yourself.

TIP 2: Review every work package or control account and see where you can add periodic and objective deliverables.  This can even work for program management and support.  For example, a PM will likely have a status report due each month, period, or quarter. That’s a deliverable.  It has scope with a start and finish that can be defined and measured.  Digging a hole for the next 4 months?  Measure the cubic yards of dirt extracted, or how deep the hole is—make them weighted milestones if needed.  The point is, expand your definition of a deliverable and you’ll find you can objectively measure more than you thought.  Other common methods of increasing objectivity include using gates, milestones, and breaking up long duration tasks into shorter, more manageable ones, preferably with a tangible deliverable as its output.

TIP 3: Limit LOE tasks.  We all know LOE is the ugly redheaded stepchild of EV techniques.  But it has its purpose as well.  In addition to finding measureable deliverables in the land of support tasks, you can increase your confidence in your EV by limiting LOE to 10-15% of the overall project budget.  This is a common general rule of thumb, and I bet there are folks who have done similar projects with a cap on LOE.  Talk to those people.  What did they do to reduce LOE tasks or convert them to objective and measurable deliverables? 

TIP 4: Plan for rework.  Rework is a huge drain on the project’s earned value.  If you didn’t plan for enough rework, you’re going to be spending a lot of effort on things that aren’t yielding ANY performance and are eating up your margin.  Suddenly your positive cost variance tanks.  Some rework is inevitable—so research similar projects and see how much rework was needed.  Plan for it as best you can and document your strategy and assumptions for rework upfront.  That’s right, plan for it.  Just as you would contingency.  In fact, sometimes the project risk matrix will give you a heads up as to the areas at greatest risk for rework.  Remember to include the risk of the effects of out of sequence work and cancelled work, both of which can cause rework.  

TIP 5: Make vendors prove their progress.  If a vendor or subcontractor is performing work offsite, visit their facility or work site if possible.  See progress with your own eyes.  If you cannot visit their work site, require them to take pictures or videos of progress as part of their periodic progress report or hire an auditor to be your eyes.  Otherwise it becomes too easy for them to lie to you during conference calls and in emails.  They’ll say they are getting close to completion.  Then they have to push out the completion date for some unforeseen issue….over and over and over again.  So make evidence based progress reports a deliverable in their contract, and build payments around progress and performance.  You can also incentive them with bonuses for performance.  

Bonus Tip: There’s one major tip for improving your earned value measurement that I have left out because I believe it to be obvious.  However, it is so paramount to project success that I can’t skip over it completely.  That is: develop a realistic project plan.  This includes using lessons learned from other similar projects and engaging the entire team during the planning process.  After all, earned value is performance measured against the plan, so a poor plan will yield poor earned value data as well.  

Do you have other tips for improving the measurement of earned value?  Please feel free to leave a comment.  Upcoming next month: Secrets of Long Term Earned Value Success.  Subscribe so you don’t miss it!

- Melissa Duncan (About Melissa)

Read the previous posting - It’s Harder Than You Think!  Measuring Work Performed Successfully Part 1

Subscribe to Earned Value Exposed 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

EVT=Earned Value Techniques

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

     

It’s Harder Than You Think! Measuring Work Performed Successfully Part 1

We can’t really “expose” all the secrets of Earned Value without discussing the heart of it all: how to actually measure work accomplished.  Frankly, one of the reasons Earned Value Management is not more widely used is because it can be somewhat complicated and cumbersome to understand—let alone set up a useable and high quality system.  The fundamental principle of measuring work performed and then comparing to the planned work and the actual costs is straightforward.  As with many systems, the devil is in the details.  It turns out there are a number of different ways to measure work accomplished and each has advantages and disadvantages.  

Some of you may be thinking, “Yeah yeah yeah, I know all about Earned Value Techniques”.  But have you really stopped to think about the impacts of one method over another?  Have you thought about the variances that could be inadvertently caused by the wrong choice?  Knowing the different ways earned value is measured will help you determine the methods best suited for your organization and projects.  So, let’s take a look at some commonly used Earned Value Techniques (EVT) and their use:

Fixed Formula:  This method applies a predetermined percentage of the activity’s Budget At Completion (BAC) to be earned at the start and end of the activity.  The most common percentages used are 0/100, 50/50, 25/75, but you can create your own, such as 10/90, if desired.  That’s perfectly acceptable and your Earned Value software should allow for this customization easily.  Do NOT mistakenly use this on long duration activities unless you want to be beaten up during variance reviews!

Percent Complete: Perhaps the most common EVT, percent complete, is also very subjective.  The person statusing the schedule estimates how much of the activity has been performed and that value is multiplied by the activity’s BAC to generate the EV.  The accuracy of this measurement is highly dependent on the person’s knowledge (and honesty) of the effort to complete the activity.  And if they are too lazy to truly find out how much work was done, the PM could look like a fool, or worse, a liar.

Weighted Milestones:  This method applies budget to milestones, instead of activities, to allow for more objective measurement.  It divides the work into segments with a milestone at the end of each segment.  It’s great for work packages with periodic tangible deliverables. This prevents the overestimation of work completed because nothing can be earned until a milestone is met.

Weighted Milestones with % Complete:  This is a hybrid EVT as the name suggests.  Milestones hold the budget as described above, but instead of waiting until the milestone is met to earn anything, partial credit is given to the milestone for work that is in progress.  It’s well liked by clients because of the tangible milestones, but also by the contractor because they get credit for work partially done.

Units Complete: If you have units of the same budget value, such as cubic yards of soil, then it’s “easy” to determine how many units were completed against the plan.  This is a common technique in production environments, and is seen in large construction projects as well.  I’ve seen measurement of units turn into science projects; so determine how to measure units before you trek down this path.

LOE: Level of Effort activities are typically used on tasks without tangible outcomes, such as Project Management Support.  It assumes that you’re earning whatever was planned--basically if you’re there and breathing, you’re earning.  Since it is based on time instead of objective measurements, it can skew EV numbers and metrics, so minimize LOE type activities as much as possible.

The wrong technique can cause massive headaches on a monthly basis, as well as when incorporating a baseline change.  So be careful; choose the one that best illustrates how the work will be done.  And be consistent!  Don’t choose 0/100 for one drawing and percent complete for the next; that’s crazymaking!

Do you have any insight into EVT selection?  Please leave a comment and share with us.  And stay tuned for Part 2 of this series on measuring work performed, where we will discuss tips and tricks for improving the measurement of earned value.

- Melissa Duncan (About Melissa)

Read the previous posting - 6 Reasons Your Favorable Performance May Be Too Good To Be True

Subscribe to Earned Value Exposed 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

EVT=Earned Value Techniques

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