How to use Earned Value Management?

You’re running blind once you start a project, no matter how much planning you undertake. At least, that’s how it feels. You have the project all set out on paper, but how do you know whether everything is going as planned?

When the planning is no longer theoretical, you’ll most likely find out during the execution phase. And, when the project unfolds in the real world, keeping track of the project’s performance and progress is one of the more challenging things to do when you’re being tugged in a hundred other directions.

Dealing with issues is a necessary aspect of the job, but there is no employment if the project fails due to a lack of proper monitoring to keep it on course. Thankfully, project management techniques for measuring project performance and progress have been established. Earned value management (EVM) is one such technique that may effectively foresee difficulties in a single integrated system, allowing you to better manage project performance.

What Is Earned Value Management?

As previously stated, EVM is a tool used by project managers to track their project’s performance versus project baselines. Often, the status of a project is simply defined as ahead of schedule or behind schedule, and over or under budget. What if, on the other hand, you’re ahead of time but your costs are more than expected? What if you’re running late yet your costs are lower than you anticipated?

This is when understanding the acquired value comes in handy. It can give you more details about your project. It’s also vital to realize that there are three terminologies related to earned value, each of which is slightly different.

1. Earned Value Analysis (EVA): This method of project management is quantitative. It assesses project performance by determining the project’s likely outcomes. It achieves so by comparing the projected work’s progress and budget to the actual expenditures.
2. Earned Value Management (EVM): This methodology uses an integrated schedule and budget based on the project work breakdown structure (WBS) to assess project performance.
3. Earned Valued Management System (EVMS): This is a set of tools, templates, processes, and procedures that a company employs to perform EVM.

Calculations for Earned Value Management

To execute EVM, there are some computations that may be done quickly and easily. You’ll need to know the following to do so:

• Planned Value (PV): Budgeted amount through the current reporting period
• Actual Cost (AC): Actual cost to date
• Earned Value (EV): Total project budget multiplied by the percentage of the project is complete

Once you have those numbers, you may perform the following calculations:

• Schedule Performance Index (SPI): To calculate the schedule performance index, divide the EV by the PV and compare the progress made to where you expected to be at a given point. If your answer is less than 1.0, it signifies you’ve done less work than you anticipated for this stage. A score greater than 1.0 indicates that you have accomplished more than you had expected.
• Cost Performance Index (CPI): To make this estimate, divide EV by AC to determine the value of finished work vs its actual cost. If you get a number less than 1.0, your costs are more than anticipated. A score greater than 1.0 indicates that the costs are lower than anticipated.
• Estimated At Completion (EAC): You divide the overall project budget by the CPI value you calculated earlier in this computation.

Want to know more about Earned Value Management? Enroll in a PMP course Mississauga today!