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

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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